Direct stock purchase plans (DSPPs) provide an easy method for long-term investing with reputable companies. Investors can purchase shares of a stock directly from the company or through a financial institution.
Many investors benefit by buying a small share of a stock while having a fixed amount automatically withdrawn from their checking or savings accounts into the stock for monthly investments, allowing for dollar-cost averaging investments over time.
The technique helps investors buy more shares when the stock has low prices and fewer shares when the price goes up, explains ValuePenguin.
One-time purchases are available with minimum deposits. Investing on a regular basis usually requires a minimum initial purchase from $50 to $1,000, depending on the company.
People can check on a stock on their own through a company’s website page or through a transfer agent, such as Computershare, which offer lists of companies with direct stock purchase plans. Minimum initial investments and plan summaries for each company are available for review.
Buying stock directly from the company by yourself is as simple as going to the company’s website and looking for an FAQ section or link, notes J.D. Roth at GetRichSlowly. If the company offers a DSPP, information usually includes:
- Fees involved.
- Minimum amount to open an account.
- Minimum monthly contributions.
- Personal and financial information on the investor.
- Withdrawal amount and possibly dividends paid or reinvested.
Investing in a direct stock purchase plan “may be the smartest and most thrifty way” for small investors to buy shares of a company they like, according to Roth.
DSPPs generally have a higher investment account value than those bought through online brokerages, based on such factors as fees per trade, processing fees, and costs to purchase shares, he says.
Direct stock purchase plans are ideal for new investors who may not have minimum requirements to invest in funds from some brokerages. Costs are kept low because brokers are not involved in the transactions, Investopedia points out. Shareholders manage their own accounts.
DSPPs are regulated by the Securities and Exchange Commission (SEC), but the risks involved are the same as with investing in general.
New investors, however, have more of a hands-on approach when investing directly, a long-term strategy for investing, and a way to learn more about buying and selling stocks.
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