When you decide to include stock as part of their overall savings and investment plan, you may consider purchasing it from a stockbroker. While a full-service stockbroker can guide an inexperienced and uninformed investor toward choosing a healthy mix of stocks, he charges a hefty fee for his service. Discount brokers charge significantly less, but you have to know what you want as they generally do not offer portfolio advice. If you prefer more investment dollars to work for you instead of losing a percentage in brokerage fees, then skip the stockbroker and buy company direct stock.
1. Research the stock sectors to decide which ones to include in your portfolio. Some investors spread risk by investing across all nine sectors while others choose by personal preference. The sectors are: technology, financial, consumer goods, industrial goods, utilities, basic materials, healthcare, services and conglomerates.
2. Choose healthy companies within your chosen sectors. A young investor may prefer mostly growth stocks to grow his investment quickly, while a retiree might choose dividend stocks to supplement his pension.
3. Go to a website such as Computershare, Share Builder or Stock1 to see if your chosen corporations are listed among those that sell company direct stock. This is a fast way to check multiple companies within a few minutes. If you cannot find the company listed on any of these websites, then go to its corporate website and click on the link for the investors page. The investors’ page will state whether the company sells directly to the public, or if they restrict purchases to stockbrokers or employee retirement plans.
4. Research any fees or minimum investment associated with the direct stock purchase program. The Securities and Exchange Commission advises that although a company may sell stock directly to the public without brokerage costs, that other fees may apply. Additionally, a company may insist on a minimum investment amount or a specific date that it will trade the shares. You may have to agree to direct debit from a checking account.
5. Register with the stock transfer agent and open an account. The investors' page of the corporate website should have a link to the stock transfer agent.
- You can choose to have dividends automatically reinvested to increase your holdings faster.
- If a company restricts the purchase of stock to certain days or times of the year, then you lose control of the ability to buy when the share price is at its lowest.
Items you will need
- Checking account
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