Direct stock plans are only offered by brokerage firms.
When you're ready to begin trading stocks, a brokerage will be your gateway to the stock market. Brokerage firms are companies that help you execute your trades, and they can be huge multinational full-service firms, tiny specialized small businesses, and everything in between. The quality of your broker and your brokerage firm are crucial to a successful experience in investing. Whether you choose a stockbroker , commodities broker, futures broker, bond broker, or an all-purpose brokerage firm, it's important to know how to select professionals who are going to help you reach your goals.
Direct Stock Purchase Plan (DSPP)
Some companies that offer DSPPs make the plans directly available to retail investors while others use transfer agents or other third-party administrators to handle these transactions. Such plans offer low fees and sometimes the ability to purchase shares at a discount. Not all companies offer DSPPs; and these plans may come with restrictions about when an individual may purchase shares. Such plans have lost some of their appeal over the last two decades as investing through online brokers has become less expensive and more convenient, though DSPPs still offer advantage for the long-term investor who doesn't have much money to get started.
A DSPP allows individual investors to establish and account in which to make deposits for the purpose of purchasing shares directly from a given company.
They investor makes a monthly deposit usually by ACH and the company applies that amount towards purchasing shares. Each month the plan purchase new stock shares, or fractions of them, based on money available from deposits or dividend payouts if any. This mechanism makes it easy and automatic to slowly accumulate shares from a given company. Because these plans often have very low fees and sometimes no fees , it makes DSPPs an inexpensive way for first-time investors to enter the financial markets.
DRIPs allow investors to reinvest their cash dividends into additional shares or fractional shares of the underlying stock on the dividend payment date. As a result these plans generally function best for investors with a long-term investment strategy. As much as direct purchase plans can benefit investors, they also can be worthwhile to the company that offers them. DSPPs may bring in new investors who otherwise might not have been able to invest in the company. Companies that offer DSPPs usually cite information about the plans on their websites, under the investor relations, shareholder services, or frequently asked questions FAQ sections.
Here, you will find details about account minimums, investment minimums, any fees applicable to their offerings, trading details, and the like. So, although the mechanism for investing in DSPPs is slightly different from going through a broker, the risks of buying stock are equally present regardless of how the stock is purchased.
Dividend Stocks. Real Estate Investing. Your Money. Personal Finance. Your Practice. Popular Courses. Investing Investing Essentials. DSPPs require very little money to get started. Some DSPPs have no fees, but most have small fees. These programs allow long-term investors a simple and automatic way to acquire shares over time. An Investment Product Past its Prime? But as online investing has become cheaper over time, some of the original positive factors of DSPPs have faded.
Uncertainty about Trade Date and Stock Price. When you make a new purchase through a DSPP, regardless of whether you make a one-time purchase or sign up to invest monthly, typically you will not have any control over the respective trade date, hence the share price. This is because when you use a transfer company the transaction may not happen for a number of weeks, so the purchase goes through at whatever the stock price happens to be at that time.
A cardinal precept of investing is to diversify your investments. In fact, just about any individual stock purchase, whether direct or broker transacted, runs this same risk. You need to diversify. No Fees, Really?
Many charge initial setup fees, and some charge for each purchase transaction, as well as sales fees. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. What Is the Definition of a Fractional Share? A fractional share is a share of equity that is less than one full share, which may occur as a result of stock splits, mergers, or acquisitions.
Automatic Investment Plan AIP Definition An automatic investment plan is an investment program that allows investors to contribute funds to an investment account in regular intervals. Money Market Definition The money market is the trade in short-term debt.
These investments are characterized by a high degree of safety and relatively low rates of return. Learn more about REITs. Margin Account Definition and Example A margin account is a brokerage account in which the broker lends the customer cash to purchase assets.
When trading on margin, gains and losses are magnified. Partner Links. Related Articles.
Answer – False Direct stock purchase plans (DSPPs) are not offered by brokerage firms; they are offered by companies. The company may. Compare direct stock purchase plans (DSPPs) to online brokerages when it DSPPs are a solid choice, not only for holding your stocks, but also for lists of hundreds of companies offering direct stock purchase plans.
Why Zacks? Learn to Be a Better Investor. Forgot Password. When you use a broker to buy stocks, you put your trust in someone else.
And not only are there different platforms offering commission-free trading, but they can also be found in different nooks and crannies of the financial industry. One of the purest ways to buy stocks online for free is through direct stock purchase plans.
Federal government websites often end in. The site is secure.
How to Buy Stocks Online For Free
You may be the sort of person who likes to cut out the middleman in any transaction and so you're asking if you can get stock in a company without going through a broker. Many publicly traded companies offer direct stock purchase plans. A DSPP is an investment account you use to buy stock directly from the company. DSPPs have some real advantages for small investors. They have some disadvantages as well, so you need to think things through before jumping into this form of investing. Basically, a DSPP is an investment account dedicated to the stock of a single corporation.
Direct Stock Purchase Plans – Pros & Cons of Buying Stock Directly from the Company
Some companies that offer DSPPs make the plans directly available to retail investors while others use transfer agents or other third-party administrators to handle these transactions. Such plans offer low fees and sometimes the ability to purchase shares at a discount. Not all companies offer DSPPs; and these plans may come with restrictions about when an individual may purchase shares. Such plans have lost some of their appeal over the last two decades as investing through online brokers has become less expensive and more convenient, though DSPPs still offer advantage for the long-term investor who doesn't have much money to get started. A DSPP allows individual investors to establish and account in which to make deposits for the purpose of purchasing shares directly from a given company. They investor makes a monthly deposit usually by ACH and the company applies that amount towards purchasing shares. Each month the plan purchase new stock shares, or fractions of them, based on money available from deposits or dividend payouts if any. This mechanism makes it easy and automatic to slowly accumulate shares from a given company.
Investing wth DSPPs is a low-cost way to invest directly with a publicly traded company. These plans are generally set up directly with the company or are administered through a third party transfer agent.
While many investors choose to buy and sell investments through a brokerage account , some investors may wonder how they can buy stocks without a broker. Direct investment plans offer the brokerage alternative that those investors are seeking. If your primary investing goal is to acquire a single company's stock as directly as possible, one of these plans can help you achieve that goal, but be aware of the drawbacks that come with avoiding brokerage services before you abandon them completely.
Member Sign In
Advertiser Disclosure: The credit card and banking offers that appear on this site are from credit card companies and banks from which MoneyCrashers. This compensation may impact how and where products appear on this site, including, for example, the order in which they appear on category pages. Advertiser partners include American Express, Chase, U. Bank, and Barclaycard, among others. Do high brokerage costs deter you from investing in stocks of financially stable, profitable companies? Once companies list on a stock exchange, they employ the services of a transfer agent, who handles all administration related to share transactions — most listed companies use Computershare to provide these services. And one of the many services Computershare provides is the administrating of direct stock purchase plans for companies who want to sell their shares to the public without engaging a stockbroker. A direct stock purchase plan allows you to buy shares of a company through its transfer agent instead of through a broker. In essence, you cut out the middleman and save yourself a pretty penny in the process. Listed below are five well-known companies that have the most active direct stock purchase plans:. Whenever you choose any investment, analyze the company and the industry carefully in terms of profitability, future outlook, and whether the investment is in line with your goals and risk tolerance. If you choose to invest in individual companies, be sure to invest across a range of industries for a diversified portfolio. All Rights Reserved. Sign in.
Direct Investment Plans: Buying Stock Directly from the Company
Company Filings More Search Options. Many companies allow you to buy or sell shares directly through a direct stock plan DSP. You can also have the cash dividends you receive from the company automatically reinvested into more shares through a dividend reinvestment plan DRIP. Direct Stock Plans — Some companies allow you to purchase or sell stock directly through them without your having to use or pay commissions to a broker. But you may have to pay a fee for using the plan's services.
