How do I Invest in Stocks Without a Broker?
When you use a broker to buy stocks, you put your trust in someone else. Stories of broker fraud only boost those fears. The good news is, you can purchase stocks in a company directly, without help from a broker, saving money on commissions and leaving the control in your hands. You just have to know how to participate in a direct stock purchase plan.
You can invest in companies directly through a direct stock purchase plan, using a site like Computershare. You can also use discount brokers or participate in a dividend reinvestment plan to enjoy reduced costs.
Buy Stocks Without a Broker
The key to buying stocks without a broker is a direct stock purchase plan. With a DSPP, a company uses a transfer agent like Computershare to move ownership from the company to investors. You simply choose a stock from the many companies that use the service, pay nominal fees and invest the minimum amount per transaction.
The biggest benefit of going through a DSPP is cost savings. A full-service broker typically charges around $150 per transaction, whereas you can find fees as low as $10-$15 when you go through a DSPP. You can also make an investment as low as $25, or agree to recurring investments for as little as $10.
Dividend Reinvestment Plans
If you already own cash dividends in a company, a dividend reinvestment plan is another way to trade directly. If you participate in this type of plan, on the payment date, your money will go back into the company in the form of full or fractional shares. However, in order to participate in one of these plans, you’ll have to be registered with the company as a DRIP participant, so this does require some forethought.
Even if your stock isn’t on the list of companies that sell stock directly to the public, you’ll get the benefit of directly investing if you’re part of a DRIP. The best thing about participating in a DRIP is that you’ll typically get a discount on the current price per share, as well as not having to pay fees on the purchase. However, you’ll probably see a minimum reinvestment requirement of $10.
Using Discount Brokers
If you’re dissatisfied with the list of companies that sell stock directly to the public or you simply want more convenience, a discount broker may be a better option. In an effort to remain competitive, many brokers now provide discount pricing, often through online brokerages. These brokers offer minimal fees along with the option of starting with a $0 account balance.
If you shop around, you can find an online broker that gives you access to educational tools and analytics that will guide you as you invest. Sites like E-Trade and TD Ameritrade specialize in providing a platform that’s easy for even the beginner to use. One issue with online brokers is that you’ll pay a commission, and some platforms use a tiered system that offers lower commissions for frequent traders.
Avoiding Stockbroker Fraud
Although there are cases of fraud among brokers, it isn’t as common as you may think. Still, many investors look for a list of companies that sell stock directly to the public out of fear that they’ll be scammed. There are ways you, as an investor, can reduce your risk of falling prey to an investment scam.
The best thing you can do is seek out the broker yourself, rather than responding to those who approach you. Ask friends for referrals and conduct thorough research before investing. Also avoid sales pitches for get-rich-quick schemes that sound way too good to be true.
- A company may offer either a direct stock purchase plan, or DSPP, or a dividend reinvestment plan, or DRIP. A DRIP requires you to own one or more shares of the stock before you can enroll in the plan. The plan administrator websites show both DSPP and DRIP plans.
- If you want to know whether a particular company offers a direct purchase plan, look under shareholder services on the company's investor relations webpages.
Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.