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Trading in the stock market can be a challenging but financially rewarding and exciting endeavor. If you are just starting out or don't have a large amount of funds to invest, you may want to eliminate the middleman and purchase stocks on your own, without hiring a broker. This guide on how to buy stocks without a broker will provide you with some strategies to get started buying and selling stocks.
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Disclaimer
The content in this page is not a substitute for professional financial advice. Please contact your financial adviser before using the information presented here.-
Introduction
- Thanks in part to the internet, the business of buying and selling stocks no longer requires hiring a broker to trade stocks for you. If you don't need access to the advice and research reports that a relationship with a stock broker can provide, this may be an appropriate investment option for you. Acting on your own permits you to not only avoid paying costly brokerage fees, but to also learn a great deal more about the market and have greater control over your investments by buying and selling stocks on your own.
- Depending on how much you have to invest and what companies you are looking to invest in, there are several methods with which to buy stocks without having to employ a broker.
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Buy Through an Online Trading Company
- There are several brokerage companies, such as TD Ameritrade and Charles Schwab, that allow you to buy and sell stocks directly online.
- Keep in mind that these brokerage companies will charge fees for most transactions, so do some research into the different firms to see which one is the best fit for your goals.
- Once you have selected a company to use, you will have to establish an account with them and then transfer funds into the account.
- After your account is set up, you are ready to begin buying and selling the stocks of your choice.
Buy Direct From the Company
- If you already know which company you want to invest in, inquire as to whether they offer a Direct Payment Plan (DPP) that will allow you to buy stocks directly from the company.
- All companies do not offer this as an option, but if the company you are interested in investing with does, it can be a cost efficient means of purchasing shares.
- The methods for purchasing stocks directly vary from company to company: some will allow you to purchase directly online, while others require that you fill out an application form or invest a minimum amount.
- When buying directly, your purchases and sales will usually be handled by a transfer agent who may or may not charge a fee of their own.
- The transfer agent will buy the appropriate amount of shares you requested on a date specified by the company, so you won't have the flexibility of timing your purchase.YouTube Video: Stock Investment Tips : How to Buy Stocks Without a Broker (Time: 2:19)
- Company employees may be able to purchase stock directly through an ESOP (Employee Stock Purchase Plan), which generally sells the stock at a slight discount as an employee benefit.
Set up a Dividend Reinvestment Plan
- A Dividend Reinvestment Plan (DRP or DRIP) is a longer-term investment plan. You will still be conducting business directly with the company or their transfer agent, but will be making regular investments over a period of time. To enroll in a DRP plan, you may first have to purchase at least one share in the company. After you have established a DRP plan, an agent acting on your behalf will purchase shares in the company for you each time you send a regular payment.
DRP plans come with two advantages:
- Your regular investment will be used to purchase both full and partial shares in the company
- You will be taking advantage of dollar-cost averaging, meaning that your investment will be used to purchase the maximum amount of shares at the current market price. Therefore, the amount of shares you purchase will vary, but you will be buying more shares when the price is low and fewer if the price is higher
Conclusion
- Buying and selling stocks without going through a broker may be a good choice if you are planning on investing small amounts in the market, since you will pay substantially less in transaction fees. If you want to invest regularly in one or two companies, establishing DRP accounts may be a good choice for you. However, if you are looking to learn more about the market and want control over each transaction, consider establishing an account through an online brokerage firm.
