Buying Stocks & Investing Without Broker

Keep your investing costs low.

If you are a long term investor, the stock market can provide an excellent vehicle for growing your money and building your wealth. Unfortunately, the costs of investing can really eat into your returns over the years, so keeping your trading costs as low as possible is a wise strategy. As an investor, you have a number of ways to buy stocks and invest without having to pay a broker.

Instructions

1. Contact your employer's human resources department and ask if the firm sponsors an employee stock purchase program, or ESPP. This program has a number of important advantages, including the ability to buy company stock without brokerage fees. In addition, an ESPP often provides a substantial discount, sometimes as high as 15% off market price.

2. Obtain an application for the ESPP and complete it carefully. Determine what percentage of your gross pay you want to allocate to the plan. Submit the completed application to your human resources department.

3. Make a list of companies that interest you as investments. These could be the companies whose products you use or just companies you feel are poised for growth. Log on to the websites of those companies and look for the investor relations link. Contact the investor relations department and ask if the firm has a direct stock purchase program in place.

4. Look for dividend reinvestment and direct stock purchase programs. Information on these programs can be found in financial publications like the Wall Street Journal, as well as financial websites like Fool.com and Yahoo! Finance.

5. Contact the dividend reinvestment or direct stock purchase plan of the company you're interested in, and request an application. Complete the application and mail it, along with your investment, to the address listed on the form.

Tips & Warnings

• Evaluate each stock based on its balance sheet and its prospects, not merely the fact that you can buy its stock without a broker. Buying a quality stock with the help of a broker is better in the long run than buying a shaky stock without one.

• Never invest short term money in the stock market. If you expect to need the money in the next five years, keep it in safe investments like savings accounts, money market accounts and certificates of deposit.

• Never invest in a stock if you do not have a clear understanding of how the firm makes money.

References

• Investopedia: Employee Stock Purchase Plan
• Wall Street: DRIP and Direct Stock Purchase Plans