How To Buy Stocks Without A Broker

The majority of people who invest in stock do so through an online broker. Online brokers allow ordinary investors to buy and sell shares for low fees. While brokers are a low cost investing option, they are not the cheapest option to buy stocks. A lot of investors are unaware of the fact that you can buy stocks without a broker through a DSPP.

Invest In Stocks Through A Direct Stock Purchase Plan

Direct Stock Purchase Plan (DSPP) allows an investor to avoid a broker and buy stock directly from a publicly traded company. DSPP’s eliminate the middleman enabling you to save money on transaction fees. Brokers charge fees every time you buy or sell shares in a company. A direct stock purchase plan is a low cost way for an investor to build a large position in an individual company. It’s the cheapest way to buy stock in one company.

Here’s how a direct stock purchase plan works. DSPP’s charge a one-time enrollment fee to participate in the plan. The enrollment fee is typically between $10 -$20 to enroll in a DSPP. After enrollment, investors can buy shares for free or for a nominal fee like 99 cents per purchase. Some DSPP’s charge absolutely nothing for purchase transactions. Even dividends are reinvested automatically.

How Do I Enroll In A DSPP?

Companies use transfer agents to handle DSPP enrollment. Transfer agents handle all purchase and sale transactions. They also keep all financial records and statements. Transfer agents handle all mailings as well. In order to find the company’s transfer agent, simply visit the corporate website of the company that you wish to buy. Scroll to the Investor Relations section and look for the Stock Information section. You can typically locate the transfer agent by reading the Frequently Asked Questions. For example, the Disney website, lists its transfer agent under the FAQ’s in Investor Relations. You can then visit the transfer agent’s website an sign up

Enrolling in a DSPP is simple. You just fill out your personal information (name, mailing address, social security number, birth date, etc) and fund your purchase. The minimum investment to enroll in a DSPP varies based on the company. Some companies allow you to enroll with a $50 minimum purchase whereas some companies require a minimum of $1,000 to enroll in a DSPP. Read the plan prospectus thoroughly to understand the minimum investment required and how the plan works.

You can make additional contributions to a DSPP whenever you choose to or set up automatic investment. The minimum additional purchase amount for subsequent investments varies based on the plan. The typical additional purchase amount ranges from $25 to $50. You can purchase shares in a DSPP and manage your account online.

Best Stock Transfer Agents

Computershare, American Stock Transfer & Trust, and EQ Shareowner Services are three of the largest transfer agents who manage direct stock purchase plans. I have purchased shares in several large cap stocks over the years using the three transfer agents listed above. I started with one share and built my position over time through regular monthly investments. It also enabled me to engage in dollar cost averaging which can lower your overall purchase price.

Remember that all companies do not offer direct stock purchase plans. Typically, DSPP”s are offered by only large cap well-established companies who pay dividends. They are the most likely candidates to have direct stock purchase plans.