Even discount brokers charge you commissions and fees to execute stock trades. However, you can buy stock in many companies without a trading fee. These are companies that offer investors direct stock purchase plans (DSPP) through which you purchase shares from the company’s transfer agent with no other middleman. You pay only minimal transaction-processing costs – and some companies even pay those for you, at least for purchases. In addition, minimum investments are low. You can usually start a DSPP account with an investment of just $25 to $50 per month.
1. Look on the website of a company you are interested in to see if it offers a DSPP. Go to the investor relations webpage. Usually you will find a statement in the frequently asked questions section that provides a link to the company transfer agent if a DSPP is available.
2. Browse the websites of transfer-agent companies. Some firms that provide transfer-agent services for many corporations maintain online listings of clients who offer direct stock purchase plans. Bank of New York Mellon and Computershare are two examples. This is a good way to locate DSPP plans if you don’t have a specific company in mind as an investment.
3. Download and read the disclosure document for the DSPP of any company before you invest. Sometimes called a plan brochure or prospectus, this document describes the terms and conditions of the plan, its fee structure and any special features the plan offers.
4. Open an account. You can usually do this online or by downloading an application, completing it and mailing it in with a check or money order for your initial investment. Typically, you can start with $250 to $500 with the option of reducing this to $25 to $50 if you set up automatic debits from your checking or savings account.
5. Select the optional plan features that suit your needs. Some common options include having your stock certificates stored at no charge and automatic reinvestment of dividends with no fees. Many plans may be set up as IRA accounts as well.
- Direct stock purchase plans aren’t right for every investor. They are designed for long-term investing, not short-term trading. Sales fees are usually higher than purchase fees, and you can only trade the stock of one company with each DSPP account.
- Always research any company carefully before you invest. Saving on trading fees is all well and good, but it won’t help if the company’s stock doesn’t perform well.