How to Buy Direct Purchase Stock Shares

by Mike Parker

There are plenty of reasons to invest in the stock market, including the opportunity for capital appreciation and dividend income. There are also numerous ways to invest in stocks, such as placing an order with your investment broker or purchasing shares of a stock mutual fund. You can bypass the middle man and buy stock directly from many companies that offer direct investment plans.

Contact the investor relations department of the company you are interested in to ask if it offers a direct investment plan. Not all companies do, and some that offer such plans may limit investments to their employees or existing stockholders. Request an annual report and a prospectus for the plan. Read both documents to ensure the plan meets your investment objectives and temperament.

Enroll in the plan. Each company has its own application, but most will require you to provide your name, address, contact information, Social Security number and the name of a beneficiary in the event of your death. Some plans may allow you to complete your enrollment online while others may only offer enrollment through hard copy applications.

Make your initial investment. Different plans have different minimum investment requirements. Some plans may offer a lower initial minimum investment if you agree to make regular investments through a bank draft. You can usually make your investment through check, money order, bank draft or electronic funds transfer.

Inform the plan's administrator regarding how you want any dividends or other distributions handled. Some plans will allow you to take your distributions in cash, to have your distributions automatically reinvested in additional shares of stock, or a combination of the two.

Tip

  • You can reduce your average cost per share of stock in your direct investment plan by making regular investments of the same amount. This process, called dollar cost averaging, will result in buying fewer shares of stock when the price is high and more shares when the price is low.

Warning

  • All investments in the stock market involve some level of risk. Past performance is never a guarantee of future results. You may lose some or all of your investment

About the Author

Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.

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