Pinterest Stumbleupon Whatsapp
Ads by Google

So you’ve decided to start investing How to Start Investing in Stocks Even if You're a Total Beginner How to Start Investing in Stocks Even if You're a Total Beginner Entering the world of investing isn't easy, but thanks to new algorithm-based online tools you can get involved even if you're a beginner. Here are six of the best. Read More , and you’re ready to buy. You call up a broker and find out that there are commissions, maintenance fees, account set-up fees, and per-trade fees of $150, $200, or even $400. You see your potential earnings quickly fading . . . and decide that it’s time to invest without a broker.

There are a number of ways to do this. Of course, you’re giving up a number of useful resources that a broker can provide, like personalized investing advice FutureAdvisor: Personal Investment Advisor Online FutureAdvisor: Personal Investment Advisor Online Read More , access to just about any stock out there, and years of experience. However, if you’re ready to go it on your own, you have options. Here are four ways you can buy stock online without a broker.

Direct Stock Purchase Plans

Direct stock purchase plans (DSPPs) allow investors to buy stocks directly from a company. They often have lower commissions than brokers, which could save you a lot of money over the course of a few years. They also have the big advantage of allowing you to invest in a specific dollar amount instead of choosing a number of shares. This allows you to own fractional shares, which still earn dividends.

These dividends can also be immediately reinvested (often for free) with a dividend reinvestment plan (DRIP), helping you to further increase your holdings in the company. Over 20 or 30 years, this can add up to a significant increase in the value of your investments—plenty of time to make a big difference in your retirement savings Are You Saving Enough for Retirement? Find Out With These 9 Tools Are You Saving Enough for Retirement? Find Out With These 9 Tools Saving for retirement is one of the most important things you can do - but how do you know if you've saved enough? Here's 9 tools to help you find out. Read More .

stocks-graph

Some companies will allow anyone to purchase direct shares, but many require that you already own a share of their stock to invest in this manner. To become eligible, you can buy a single share through a broker, through a gift service like OneShare (see below), or through the Temper of the Times service.

Ads by Google

After that, you’ll need to find the shareholder services page of the company’s website. There you’ll be able to find details on fees and other information in the direct stock investment prospectus. In looking for DSPP / DRIP details on the Coca-Cola website, I found a link to Computershare, the group that administers their plan, where I found information on the plan, including fees, requirements, and limits.

coca-cola-dspp

Each company has their own regulations, so be sure to do as much research as possible 8 "Best Online Investing Websites" to Improve Your Gains 8 "Best Online Investing Websites" to Improve Your Gains Investing right is a lot about timeliness. That’s where the right information bolstered by real-time data is the need of the second. The good websites on investment advice go beyond ticker tapes. When you have... Read More before enrolling in a direct stock purchase plan. It’s also a good idea to read up on direct investing so you know what the advantages are, what to look for when investing, and how to go about doing it. Here are a few resources to get you started:

Buying Mutual Funds Directly

Some mutual funds can be purchased through brokers without a transaction fee, letting you avoid the potentially very expensive brokerage costs inherent in investing in mutual funds. However, if you already know which mutual fund you want to invest in, there’s a good chance that you can invest in it directly from the fund provider.

mutual-funds

Buying directly from the mutual fund company often doesn’t have a commission, which can save a lot of money in the long run. You’re getting the same shares in mutual funds without paying a broker—it doesn’t get much better than that. Many mutual fund providers offer direct purchases, but not all of them, so you’ll need to check with the one that you’re looking to buy.

To buy into a mutual fund directly, you’ll need to go to the website of the mutual fund company and open an account. After that, just follow the instructions on the company’s website to make a purchase. There’s often a minimum initial investment of $1,000 or more, but some companies will allow you to make a smaller investment if you set up an automatic monthly investment from your bank account.

Using a Stock Gift Service

There are a number of stock gift services that let you buy single shares of companies—they’ll often send you a framed stock certificate, too, which is pretty cool (and can cost up to $500 from a brokerage). You don’t need a broker to do it, and you can buy these shares either as gifts or for yourself.

spark-gift

The best way to use a stock gift service is to buy a single share to make yourself eligible for a direct stock purchase plan or a dividend reinvestment plan. Most DSPPs require that you own a single share, and buying one from a stock gift service will get you in the door. Some require more than that, in which case you might want to go through a broker or an online service.

OneShare, UniqueStockGift, GiveaShare, and SparkGift can all help you buy a single share to get on a DSPP or DRIP.

Use an Online Brokerage Service

Making a stock purchase through an online brokerage service, while technically still going through a broker, is a lot cheaper than going through a standard, full-service broker. In essence, you’re becoming your own stock broker and using the service as an interface to the market where you’re making the purchase.

online-investing

There are many different online brokerage services: TD Ameritrade, E-trade, Capital One Investing, Scottrade, and OptionsHouse are some of the most well-known, but there are a lot of others out there as well.

These services don’t offer nearly as much in the way of investing advice, but they’re a lot cheaper. You’ll have to read up on financial news The 6 Best Sites for Keeping Up-To-Date with Financial News The 6 Best Sites for Keeping Up-To-Date with Financial News Keeping on top of financial news is a necessary chore for almost everyone. We take a look at six of the best sites to keep you abreast of breaking stories. Read More on your own, and make sure to keep a close eye on stock prices, The 10 Best Ways to Check Stock Prices Online The 10 Best Ways to Check Stock Prices Online You always need to keep a close eye on how your stocks are doing. Here are some of the best websites, tools, and tickers that'll keep you up to speed. Read More  especially if you’re looking to do some short-term trading (it may be a better idea to stick to long-term trading with online services like these, though).

Choosing an online broker can be difficult, but using a comparison tool like the one offered by StockBrokers.com can help you determine which is best for you.

Do Your Own Investing

Whether you’re just learning to invest 10 YouTube Channels To Learn How To Invest Money 10 YouTube Channels To Learn How To Invest Money Read More  or you’re an old pro, bypassing a broker and buying stocks on your own can be a great way to start or improve your portfolio. Make sure to do your research, and consider taking a beginner’s investing course Everything You Need To Know About Finance And Investing, $99 (90% Discount) Everything You Need To Know About Finance And Investing, $99 (90% Discount) Read More . After that, dive right in!

Have you used any of these methods to invest? Do you use a online brokerage firm? What have your experiences been? Share in the comments below!

Image credits: lassedesignen via Shutterstock.com, JohnKwan via Shutterstock.com, Microworks via Shutterstock.com.

  1. Bob E
    September 11, 2015 at 1:11 am

    I hesitated to comment on this, but ...

    First, the information about DSPPs and DRiPs is good to have out there. Although I have known about them for decades, I have found that a lot of investors are unaware of those options. Kudos for including that.

    Second, for fcd76218 and anyone else selling shares accumulated through DRiP investments, regarding "My Schedule D had 120 separate transactions listed." Please note that I am NOT a tax attorney or CPA. However, I have in a number of years sold such stocks. My Schedule D (or D-1) has ONE line for each such sale: date acquired = various; date sold = sell date; cost = total of costs for the shares; etc. I have never had an audit based on such a submission. Further, if you are using a broker for those transactions, the broker should provide you with such a summary and will be giving you a single line.

    Third, I have been with Fidelity for a number of years. I use them only as a broker - preferring to do my own stock selections. By personal policy, I NEVER recommend any kind of financial service, so please take this as a REPORT, rather than a RECOMMENDATION. One of the things that attracted me to Fidelity was that they have a low-fee online investment option. Another (relevant to the DRiP discussion) is that they will reinvest (at your option, of course) and dividends - at NO fee, and regardless of whether or not the dividend-providing company has a formal DRiP program. (Not all companies do so.)

    Fourth, I endorse the comments about sticking to index funds rather than 'managed funds.' The management fees are lower and generally speaking, over all, one gives up nothing in performance - especially when the fees are factored in. I would add to buy ONLY no-load funds and never one with a 12b-1 fee. However, read on ...

    Fifth, over 25 years ago, I discovered an organization (NAIC) that is now called BetterInvesting (http://betterinvesting.org/public/default.htm). They have a methodology that has been around for over 50 years and is an excellent basis for making investment decisions in STOCKS. Since then, I have made no new investments in mutual funds and have moved (nearly) all the money I had in funds into individual stocks. BI has courses available in using their methodology and also software to support it. (I do not use that software as I had implemented the methodology in spreadsheets before it was available, so cannot testify to it; but what I have seen looks good.) So, why stocks rather than funds? Well, as they say, YMMV, but my portfolio has over that 25 or so years, generally doubled the historical 10-11% return of the DJIA. I am unaware of any mutual fund with that kind of return - or for that matter any financial adviser. An individual investor - with the proper knowledge and the proper tools - can do better than the so-callled pros. That investor has only her/his portfolio to be concerned about and NO potential conflict of interest. DISCLAIMER: Other than being a member of BI and using the methodology, I have no connection to that organization.

    • Dann Albright
      September 11, 2015 at 10:08 pm

      Thanks for your extensive comment! Fidelity sounds like a good choice for investors who are interested in going with a larger broker; fees can make up a large portion of investing expenses, and if they're lower with a specific firm, going with that firm seems like an obvious choice (especially if you're doing your own stock selection).

      Also, if I remember correctly, you commented on another post about stocks with info about BI. Glad to hear that it's still going well! That could be a very valuable resource for beginning investors.

      • Bob E
        September 12, 2015 at 1:35 am

        I may well have mentioned BI in a previous post on MakeUseOf. I know I have mentioned it on other forums. As for "it’s still going well" ... it has been doing so for well over 50 years. I don't expect it to go away - or go downhill in my (or your) lifetime!

  2. hildyblog
    September 9, 2015 at 9:28 pm

    I, too, use TD Ameritrade. In addition to normal brokerage services, it has an extensive library of educational materials. Before TD, I used Fidelity which offers dis acount brokerage services as well as mutual funds.

    Like fcd76218, I would strongly advise beginning (actually all) investors to stay away from individual stocks and be wary of actively managed mutual funds. In addition to low fee index mutual funds, there are low fee Exchange Traded Funds (ETFs) which you should look into. Depending on the fund and the brokerage, these may be commission free as well as low fee.

    To paraphrase Caddyshack, you should strive to 'be the market'. There are many markets - an American market and various foreign markets - and these can be divided by the size (or capitalization) of the companies - big cap, mid cap, and small cap.

    My advice, which is worth more than you're paying for it and is echoed by many, is to start with an index fund that tracks the Standard & Poors 500 (S&P 500) index which tracks 500 large cap US stocks (or equities). As you build up your investments, put some of your money into other sectors. Mine is currently split four ways between US large cap, mid cap, and small cap and foreign large cap.

    Good luck.

    • Dann Albright
      September 11, 2015 at 10:06 pm

      Thanks for your comment! I've heard that index funds and ETFs are both good for beginning investors, especially if they have low (or no) fees—it's nice to hear that corroborated by someone who's done it.

  3. fcd76218
    September 9, 2015 at 8:56 pm

    The one big, royal PITA of DRIPs is reporting the sale of a large quantity of shares acquired in small increments over an extended period of time. I once had to report the sale of shares acquired through a DRIP over 10 years. My Schedule D had 120 separate transactions listed. It took me couple of hours just to enter the data into TurboTax. Thankfully TurboTax did all the necessary calculations. I would not want to that for a retirement account with multiple DRIPs.

    There are basically two types of funds: Passively managed (index) funds and actively managed funds. Index funds track various stock indices (S&P 500, Wilshire 5000, etc.) and invest in stocks listed in those indices. Individual stocks are bought and sold by index funds only when the stocks are added to or are deleted from a particular index. Index funds charge maintenance fees of between .01% to .5%.

    Actively managed funds have a management staff that actively manages (buys and sells stocks) throughout the year. The commission costs are passed on to the fund holders (you). Actively managed funds charge annual maintenance fees of 1.0% to 8.0%, meaning that you start out each year with up to an 8% loss. Actively managed funds sometimes also have exit fees (paid when you sell your shares) which erode your gains further. If you are lucky to have invested in Fidelity Magellan Fund and your fund manager happens to be Peter Lynch, his astute transactions more than make up for any fees. The problem with actively managed funds is that 90% lose money. In an effort to make money, their managers jump in and out of stocks, especially at the of a quarter and end of year.

    Any beginning investor should stick to buying low-fee index funds to maximize their money.

    I have been using TD Ameritrade for over 30 years. They do not have the rock-bottom fees among the discount brokers but they have not given me any reason to switch. In the time I've been with them, I have set up Educational IRA accounts for my kids, retirement accounts for my wife and myself, credit card and checking accounts backed by my brokerage account. As far as I am concerned, there is no difference in services provided between TD and a "full service" broker as as Merrill Lynch or Morgan Stanley, except I get mine at a much lower price.

    "Personalized investment advice" is for those with accounts large enough not to notice how much that advice costs.

    • Dann Albright
      September 11, 2015 at 10:04 pm

      Thanks for sharing your experiences! That's very interesting about actively managed funds and index funds—I've heard quite a few times that index funds are good for beginning investors, and your explanation makes it pretty clear why that's the case. They sound like a pretty sound investment. Glad to hear that you've had a good experience with TD Ameritrade, too. It's hard to tell the actual differences between all of the different online brokerages, but having someone who has experience with one chime in is very valuable.

      Thanks for your comment!

Leave a Reply

Your email address will not be published. Required fields are marked *