What Companies Can You Directly Invest In?

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At one time the only way to buy most stocks was to go through a broker. In recent years many top companies have introduced direct stock purchase plans, or DSPPs, that allow people to avoid the commissions and fees brokers charge. This article tells you some of the companies you can directly invest in, how to find out whether a company has a direct stock purchase program, and how these plans work.

Identification

  • A DSPP is a program that lets you open an account to buy shares in a particular company. These plans are usually administered by a third-party firm called a transfer agent. The transfer agent charges a fee for each transaction, but it's much less than the cost of buying the same stock through a broker. Equally important for many people, the minimum investments are far lower, enabling people with limited funds to invest in the stock.

Function

  • DSPPs require low initial investments, ranging from $250 to $500. Most plans allow you to spread this out over several months by setting up a monthly automatic debit (usually $50 minimum) from your bank account. This makes it even easier to get started. Additional investments can be scheduled on an ongoing basis by automatic debiting, or you can add to your account at your discretion. Additional investments minimums are $25-50, depending on the company. Fees are low. Most plans have a one-time set-up fee of $10-20 and charge a nominal amount ($1-2) per transaction with automatic debiting. Some plans also charge 3-5 cents per share. A few companies (Exxon Mobile is one) pay these purchase fees for you, so investing costs you nothing. Companies want you to keep your stock long-term, so fees for sales are higher, ranging from $10-30 per transaction plus 5-15 cents per share.

Features

  • DSPPs offer attractive options that vary depending on the individual company. Common options include automatic reinvestment of dividends at no charge, safekeeping of stock certificates (also free) and the ability to transfer ownership of shares to another person. Many plans can be set up as traditional or Roth IRAs or as Coverdell Educational Savings Accounts. When checking out a plan, keep an eye out for special features. For example, McDonald's allows you to open a plan in a child's name for a $100 initial investment.

Types

  • Companies that act as transfer agents include Computershare Inc., Wells Fargo and Bank of New York Mellon. You can contact any of these for a list of the corporations who have DSPPs with them (a link to one list is under Resources below). Here's a few more of the well-known companies with DSPPs to get you started: Bank of America, Capitol One, Casio Electronics, Dolby Laboratories, Fairchild Semiconductor, Fannie Mae, Duke Energy, Radio Shack and Samsonite Corp.

Considerations

  • If you don't find the company you want on a transfer agent list, go to the Investor Relations page of the company web site. If the company has a DSPP, it will be featured there. Realize that having a DSPP isn't enough to make a company a good investment. Get the company's annual report, review its current status and future plans, and check it out with independent sources such as The Wall Street Journal before investing your money.

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