How to Buy Direct Stock Without a Broker

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Most people who invest in stocks get a better return than with CDs or other bank deposits. However, a lot of people have only limited funds to invest or wish to avoid paying broker’s commissions. Fortunately, today it is possible to buy direct stock without a broker. Almost 2000 major corporations now offer direct stock purchase plans (DSPPs) through transfer agents with low minimum investments and transaction fees. You can choose from companies like Kodak, Campbell’s, Exxon Mobil, Wal-Mart and more.

Find out if a company you are interested in offers a direct stock purchase plan. Companies offering DSPPs feature them in the Investor Relations section of their websites. Alternatively, you can check transfer agent companies like ComputerShare and Sharebuilder, who have lists of the companies for which they manage DSPPs on their websites.

Open an account with the company’s transfer agent. You can either call the transfer agent and request a paper application or apply online. There is a one time fee to set up a DSPP to buy direct stock without a broker that ranges from $10 to $25, depending on the stock. The minimum investment is usually $250 or $500.

Arrange to have monthly investments automatically deducted from your checking or savings account. You can make your investments by check. However, if you use electronic funds transfer the transaction fees are lower--just $1 to $3 per transaction, pus 3 to 5 cents per share. Another advantage of using electronic debiting is that you can meet the minimum investment requirement with monthly installments of $50. Once you have invested the minimum you can add more when you wish, as long as additional investments are at least $50 each. Some companies, like Exxon Mobil, even pay the transaction fees for stock purchases so all of your money goes directly towards purchasing stock.

Choose the plan features that suit your needs. Most DSPPs provide free dividend reinvestment and safekeeping storage of your stock certificates. You can set up a direct stock purchase plan as an Individual Retirement Account (IRA). Some companies add special features. For example, McDonald’s has a program in which a minor can start a direct stock purchase plan for their stock for as little as $100.

Tips & Warnings

  • Most companies that offer direct stock purchase plans are also listed on NASDAQ or the New York Stock Exchange, so it is easy to follow the stock's performance. Transaction fees for selling stock out of a DSPP are higher than purchase fees. Typically, a sale will cost $10 to $30 plus 5 to 15 cents per share, depending on the stock Always investigate any stock before you invest. Download the company's annual report from their Investor Relations site online, check its earnings and stock performance for the last three to five years, and examine its current status as detailed in the corporate balance sheet.

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