The most common and well known way to buy stocks is through an online discount broker. Many online brokers offer great commission rates, often well below $10 per trade. Most accounts are easy to open and allow the investor to manage their own investments.
One alternative to investing through a broker are direct stock purchase plans (DSPP). These plans allow investors to buy stock directly from the company or a third party transfer agent. While there are a few disadvantages to this method, buying stocks online from a DSPP has plenty to offer an investor.
5 Advantages of Direct Stock Purchase Plans
- Lower Costs – Investing through a DSPP may lower the commission and fees that would have been charged by your broker. Some of these plans do not charge any commissions, while others charged a small amount of fees to invest. Even if a plan charges fees to invest, it is probably still cheaper than investing through a broker.
- Automated Investing – Automated investment plans are great for the busy investor. Most direct stock purchase plans have an option to automatically invest each month by pulling funds from a bank account. This saves time and ensures the investor is constantly investing as money becomes available.
- Fractional Shares – Most company’s that offer these types of plans will allow investors to buy fractional shares – which is great for the small investor. Buying fractional shares ensures that all your investment money is being used as opposed to purchasing whole shares with funds leftover.
- Dividend Reinvestment – Investors looking to compound their earnings can choose to reinvest their dividends back into additional shares of stock. Most online brokers offer this service to their customers as well as those investing through a DSPP. If you want to grow your money faster, then a dividend reinvestment plan is a must.
- Discounted Shares – Some company’s offer discounted prices to their investors who buy directly from them. Investors purchasing stock through a DSPP may be offered a lower price per share than if they were purchasing the same thing from a discount broker.
To learn more about direct stock purchase plans and other investment topics, visit Buy Stocks Online.