Many companies, including household names such as Home Depot, General Electric and Procter & Gamble, offer direct stock purchase plans. When you bypass brokers by purchasing shares from a company, you save money on commissions. Plus, these plans typically allow you to invest with small amounts of money. If a company offers a direct stock purchase plan, it will be available through its transfer agent, a firm that handles such securities transactions for the company.
Look on the company's investor-relations website to see whether it offers a direct stock purchase plan. If it does, a description of it and contact information for the transfer agent will be listed there. Another way to find direct stock purchase plans is to look on the websites of transfer agent firms such as Bank of New York Mellon and ComputerShare. They often list the firms that offer direct stock purchase plans and provide detailed information.Step 2
Read the plan prospectus. This document, which might be referred to as a plan brochure, tells you the terms, optional features and fee structure of the direct stock purchase plan. Some companies pay the transfer agent's transaction fees for purchases. If this isn’t the case, the fees you pay generally range from $2 to $5 per transaction plus 3 to 12 cents per share. Transaction fees for selling shares are usually higher. There might be a one-time fee of $10 to $20 to set up a direct stock purchase plan account.Step 3
Complete an application to open a direct stock purchase plan account with the company’s transfer agent. Application forms are often available online in downloadable form. If not, the plan brochure will give you instructions for obtaining the form. You’ll be asked to select features you want. For example, direct stock purchase plans typically include options for dividend reinvestment, free storage of stock certificates, and setting up the account as an IRA.Step 4
Include a check or money order for the required initial investment when you mail the direct stock purchase plan application to the transfer agent. Minimum initial investments typically range from $250 to $500. You also may complete the application form online. Be sure to include your Social Security or taxpayer identification number. Online payments are made via electronic funds transfer from your bank account. You will be mailed a W-9 form that you must complete and return for tax purposes. Many companies waive the initial investment requirement if you authorize automatic monthly debits from your checking or savings account. If you choose this investment method, you’ll need to provide information on your bank account when you send in the application.
- Research any company carefully before you invest. A direct stock purchase plan is a great money-saving feature -- if a stock is a promising investment in its own right. Those savings won’t help much if the company doesn’t perform well.
Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.