Many investors choose to buy and sell investments through a brokerage account, but you may wonder how to do this without a broker. In this case, you might want to consider a direct investment plan.
What are Direct Stock Plans?
The simplest way to buy stocks without a broker is usually through the company’s direct stock plan. These plans were established years ago as a way for companies to allow smaller investors to buy shares directly from the company. Investors enroll by transferring funds from their checking or savings account.
What are Dividend Reinvestment Plans?
Companies may also offer a Dividend Reinvestment Plan (DRIP). These plans are similar to direct stock plans, except they have an automatic process for buying more shares over the years. DRIP plans use the cash dividends paid by the company to purchase additional shares. Pricing schedules depend on the plan’s details, and this service may be free or have a small fee.
Advantages of Direct Plans
The main advantage of buying directly from the company instead of a broker is simplicity. Apps and brokerage sites have changed the trading experience, but you still need to select the securities and determine what type of order you’ll place for those investments. Direct stock plans and dividend reinvestment plans can be even simpler: all you need to do is send money to the right place, and you’ll be enrolled in the plan.
Disadvantages of Direct Plans
The simplicity of direct plans may also be their biggest disadvantage. For example, if you enroll in Home Depot’s direct stock purchase plan, you will only have the option to purchase Home Depot shares.
Frequently Asked Questions (FAQs)
– How do I know if a company has a direct stock plan?
To find out if a specific company has a direct stock plan, look for the investor relations page on the company’s website. This page usually contains information on how and where you can invest. You can also search a site like Computershare using a filter for direct stock purchase plans.
– How can I enroll in a Dividend Reinvestment Plan?
If the company offers a DRIP option, you will need to sign an agreement indicating that you wish to reinvest dividends instead of receiving them.
Source: https://www.thebalancemoney.com/buying-stock-without-a-broker-356075
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