Do you find yourself wishing you could bypass brokerage fees to buy and trade stocks without a broker? You’re in luck because there’s an alternative: direct stock purchase plans. Direct stock purchase plans (DSPP) let you buy stocks directly from companies or through a company’s agent without having to go through a broker. You can choose to buy stock just once or sign up for automatic investments periodically. Most DSPPs operate on schedules that allow individuals to invest on a regular basis if desired, letting you buy more when a price is low and less when the shares go up.
Many of the companies that offer DSPPs have third-party transfer agents who keep the records and buy or sell shares on behalf of that company on an agreed upon timeframe. Some of the major transfer agents you might come across include Wells Fargo Shareowner Online and ComputerShare. Learn more about the ins and outs of buying stocks without a broker before deciding if it’s right for you.
Benefits of a DSPP
The Balance notes that DSPPs typically represent the easiest ways to buy stocks without a broker. The plans themselves were created long ago as a way for small investors to buy into big businesses directly. In addition to the more streamlined approach, other benefits include the following:
- Variable minimum investment amounts can typically be adjusted as needed.
- You can make your payment using your bank debit or by check.
- You can opt to schedule your buys weekly or monthly as desired.
- You can invest small amounts of money, even if you can’t buy a full share. You’ll still earn dividends on fractional shares.
- You can reinvest those dividends.
DSPPs are cost-effective alternatives to buying stocks through brokers. But that doesn’t mean you won’t still have fees to contend with. Here are some fees you’re likely to encounter:
- Fees for setting up your account, which typically cost anywhere from $5 on up
- Transaction fees of up to $0.10 per share when you buy shares
- Fees for reinvesting your dividends that come out as percentages
- Transaction fees of around $15 plus $0.12 per share when you sell shares
Some companies don’t charge fees for setting up your account. Likewise, some don’t charge for buying stocks or reinvesting your dividends.
Companies That Offer the Option of Buying Stocks Without a Broker
All the companies that offer DSPPs have their own fee structures, minimums and other rules. Money Crashers points out that a few of the big corporations with DSPPs include:
- Walmart: The company charges a minimum and limits purchases to around $150,000 annually.
- Exxon Mobile: In addition to charging a minimum one-time investment, expect to pay a minimum for automated investments to get on board.
- Coca-Cola: New investors need to invest a minimum amount and pay a one-time setup fee.
Other Methods for Buying Stocks Without a Broker
DSPPs are one of the easier ways to trade stocks without a broker, but they’re not your only option. Other ways to do so include enrolling in a dividend reinvestment program (DRIP), which typically charges no fees or charges nominal fees. You used to be able to buy one share through a gifting service, but this has fallen from favor since paper stock certificates became obsolete. To do so now, you have to pay a nuisance fee to a stock broker, which makes it one of the less-effective options. You can also now use investment apps. Apps such as Acorn literally take all of the guesswork out of investing, and are worth looking into if a DSPP doesn’t seem like the right choice for you.