Many people are interested in investing in stocks but step back due to the high brokerage costs. Compared to opening simple savings account the brokerage fees can seem unreasonable.
Though hard to believe, some of the most profitable stocks of America can be purchased without opening a brokerage account at all. This helps you keep more of your hard-earned money for yourself.
Buying Stocks Without Using a Brokerage
Once the companies list themselves on the stock exchange; they employ the services of a transfer agent. This agent handles all the administration work related to the share transactions. Most of the registered companies use Computershare for getting these details. One of the services provided by Computershare is the direct purchasing of stock for those companies who are interested in selling them directly instead of hiring a broker service.
Direct stock purchase means buying stocks of a certain company through a transfer agent instead of a broker. This means you save the money you would’ve spent on the middle man.
Unfortunately, the downside is not all companies listed on the stock exchange like to sell their stock directly.
Features of Direct Stock Purchase Plans
- The minimum investment amounts range from $25 to $2500 and this amount can be adjusted to suit your needs.
- Payment can be made either through automatic bank debit or through a check.
- The purchase of stocks can be scheduled for a weekly or monthly purchase. This allows one to reduce potential risk.
- Option to invest in small amounts rather than several shares is possible. If the amount invested is less than the share amount then, fractional shares can be purchased.
- The dividends received can be reinvested.
- If the company pays the fee, the plans can be cost-effective.
The fee that is charged for:
· The account setting cost is $5 to $20.
· The transaction fee for every share purchased is $0.03 to $010.
· For reinvesting the dividends, a transaction fee of $ 15 to $20 is charged.
· For selling the shares, a transaction fee of $25 to and an additional $0.12 per share is charged.
· But, there are also a few companies that do not charge any fee for purchasing the stock and some do not even take a dividend and reinvestment fee either.
Companies with Direct Stock Purchase Plans
Below are five companies that have direct stock purchase options:
The Coca-Cola Company. If you are investing for the first time then, you can either invest $500 as a one-time investment or you can invest $50 for 10 separate purchases. Once the account is set, $10 is deducted as an initial investment fee and $ 0.03 is taken as a processing fee for every share purchased. The total stock purchase is limited to $250,000 per year. If you are reinvesting the dividends, a 5% charge is incurred.
Exxon Mobil. A minimum one-time investment of $250 is needed. Alternatively, an ongoing $50 can be invested for five consecutive payments. There is no fee charged for reinvestment or investment of dividends. The limit is $250,000 per year for stock purchases.
Johnson & Johnson. This is considered the most popular plan. Only $25 is required to start purchasing stocks here. There is no account set-up fee or processing fee. Dividends can also be reinvested at no cost. Maximum purchase is limited to $50,000 every year. If you have very little money then this is the best plan for you.
Walmart. Here, a minimum amount of $250 is required or one can also invest in 10 ongoing automatic payments of $25. The set-up fee is $20 which is high compared to other plans, and the share processing fee is$0.05 which is above average. But, there is no reinvestment fee for the dividends. The purchase is limited to $150,000 per year.
Altria Group. A minimum of $500 which is a one-time payment is required or an ongoing automatic investment of $50 – of which there should be at least five consecutive purchases – is needed. The cost for the initial setup cost is $10, and the share purchase processing fee of $0.03 per share. Dividends can be reinvested and 5% of the amount invested, limited to $3 is the charges for that. The maximum purchase can be $250,000 per year.
Whenever you chose to buy stocks or any other form of investment the most important thing is to analyze the company carefully. Investments should always be aligned with the risk and tolerance levels. Investing in direct stocks is always more profitable than going through a stockbroker.
Finally, as the old saying goes “never put all your eggs in the same basket”. Investments should always be diverse so don’t put all your cash in one company.