How Can I Buy Stocks Directly

Many people would like to invest in the stock market by purchasing stocks directly from the issuing company rather than through a broker. This is advantageous for a number of reasons, mainly because utilizing a broker means large commission fees that can take away from the net return. Most companies that allow you to purchase their stocks directly don't charge any kind of commission, and if they do, its much lower than buying stocks through a broker.

Direct purchase is a good option for people who want to buy a small number of stocks without spending a lot of money on fees. In addition, it's also optimal for younger investors or those just getting acquainted with the stock market. There are a number of ways you can buy stocks directly, including:

• 401k. One of the best ways to begin buying stocks is via your company's 401k plan, if offered. This works when your employer automatically deducts your paycheck and invests the money for you, usually into either equity mutual funds or company stocks themselves. These are an excellent way to plan for your retirement. However, as with any stock venture, they can be risky - should your company go bankrupt and your 401k money is invested in that stock, you will most likely lose that money.
• Direct Stock Purchase Plan. In this case, the issuing company will allow investors to purchase their stocks directly, as individual investors, without a broker. You can also be a first-time buyer with a Direct Purchase Plan.
• DRIP. A Dividend Retirement Plan (DRIP) is another way to invest in and buy stocks directly. Publicly-traded companies set up DRIPs for a number of reasons, mainly to draw small investors, which tend more loyal than larger companies. People who go with a DRIP do not need a broker; instead, they send a check to purchase stock or use automatic withdrawal, and no fees or commissions are associated with this. Many large companies, such as Wal-Mart and Sony, use DRIPs. However, unlike a Direct Purchase Plan, you must already own stock in order to reinvest it.
• Employee Stock Purchase Plans. Also known as stock options, this allows employees who work for a publicly-traded company to purchase their company stocks at a substantial discount. The price paid is usually 85% of the market value of the stock at the time the employee is given the stock options. After a certain amount of time, an employee can elect to cash in his stock options. The idea behind this is that the stock price will have gone up during that amount of time, so the employee will be able to sell them at a higher price, thus yielding a profit. Most employers will have these options automatically deducted from paychecks
• Mutual Funds. Considered safer than the stocks themselves, mutual funds invest the total funds of thousands of investors. Mutual funds hold hundreds of stocks in their portfolios, allowing for lower risk of money lost. Those who invest in mutual funds are buying shares from the mutual-fund company itself. Most mutual funds, however, require a minimum amount of funds to purchase, sometimes as much as $3,000. After that, however, you can typically purchase more funds in much smaller increments, usually around $100.

Buying stocks directly is a good option for any investor as it eliminates costly brokerage commission fees.