How to Purchase Stocks Without a Broker

Stock prices for many listed and over-the-counter companies are listed in financial news publications.

American investors have been trading stocks since at least 1792, when a small group of New York stockbrokers gathered under a buttonwood tree on Wall Street to establish some basic ground rules for trading stocks and bonds. Most stock market transactions for individual investors are handled by investment brokerage firms, but it may be possible to bypass a stockbroker and purchase stock directly from a company through a program known as direct stock plan.

Things You'll Need

• Internet, social security number, checking or savings acocunt information, other personal information

Instructions

1. Determine whether the company you wish to purchase stock from offers a direct stock plan. The easiest way to find out is contacting the company's investor relations department. Some companies will only sell stock directly to their employees, while others offer their stock directly to any investor who wishes to make a purchase. Request a company prospectus and read it to insure you are aware of the benefits and risks associated with an investment in this company.

2. Enroll in the company's direct stock plan. The information required for enrollment will vary from company to company, but all will require basic information required for tax reporting, including your name, address, Social Security number and contact information. Some companies may require you to complete a written application, while others will allow you to enroll online.

3. Make your initial purchase. Different companies have various requirements for the initial purchase. The Walt Disney Company Investment Plan, for instance, requires new plan members to make an initial investment of at least $250 or to authorize a monthly bank withdrawal of at least $50 per month. The Kellogg Company's Kellogg Direct stock purchase plan requires an initial investment of $50 or an automatic monthly investment of $25.

4. Determine whether you want your stock dividends reinvested or sent to you. Some direct stock plans, including the Kellogg Direct plan, allow investors to designate a percentage of dividends to be reinvested and receive the balance in cash. Other programs will automatically reinvest all dividends back into additional company stock.

5. Make additional stock purchases. Unlike traditional brokerage accounts that allow you to place orders anytime the market is open, direct stock plans typically make purchases on a set schedule. All funds you have deposited with the plan will be pooled with funds from all other investors in the plan, and the stock is purchased in a single transaction. Each investor receives their pro rata share of stock from the purchase, including partial shares.

Tips & Warnings

• Shares of stock purchased through direct stock plans are typically held in street name.

• Administrative fees and commissions on stock purchases are typically paid by the company.

• You will be responsible for commissions and fees when you sell your stock.

• All investments in stock involve some level of risk. Past performance is never a guarantee of future results. You may lose some or all of your investment.

References

• Securities and Exchange Commission: Direct Investment Plans: Buying Stock Directly from the Company
• Get Rich Slowly: Direct Stock Purchase Plans: A Better Way to Invest
• USA Today: Direct Stock Purchase is Cheap, but it can Cost you Dearly
• Motley Fool: Starting Direct Investment Plans
• Walt Disney Company: Investor Relations
• Kellogg Company: Direct Stock Purchase and Dividend Reinvestment Plan

Resources

• Read this Article in Spanish
• NYSE: New York Stock Exchange