Be your own stockbroker. Read further here about how to buy stocks online without a broker. Investing in a either a mutual fund, exchange-traded funds or stocks would be one of the wisest things to do for anyone. But before you start buying stocks, you must think of your investment goals ahead.
Many investors, especially beginners, start their investment journey by securing a full-service broker or an online broker. Though, this can be limited by not aligning yourself with the advice of a particular brokerage.
A brokerage account and a broker that will handle the buying and selling of a stock investment is a good choice, but some investors are wondering how they can create their own portfolio and buy stocks without a broker. Well, buying stocks without a broker is not as complicated as you may have thought.
Thanks to the internet and applications available, investors can now purchase stocks directly online without the need for a full-service brokerage or a broker to handle the trade.
4 Ways To Buy Stocks Without A Broker
1. Direct Stock Purchase Plan
One of the best options if you are going solo in your investment strategy is buying stocks directly from the company. This strategy is known as a Direct Stock Purchase Plan. With a Direct Stock Purchase Plan, an investor can directly purchase shares of stock from the business. With a minimal amount of investment, you will become one of the stockholders of the business.
Most companies offer discounts which range from 1% to 10% to attract more investors to purchase a stock. A Direct Stock Purchase Plan would be a great start for beginning investors, but you must stretch to understand more about DSPP.
As a starting point, you can start at around $100-$500 to make a stock purchase. There are other companies where you can buy a stock at $25 plus recurring charges. So, how will you know if the company allows direct stock purchase plan? Visit the company’s website and search for the Investor Relations area to see if they offer a Shareholder Investment Program.
This strategy will work well for investors who wants to have a direct ownership of their investment because there is no need for an intermediary or a middleman to handle the trade. It can also work if an investor would like to focus on this type of investment long term.
This method can also save you quite a sum of money since you do not need to hire a full-service broker. But with technology like the internet and apps, stocks have benefited many investors now.
Though buying stocks is possible without a broker, there is still some consequence. For example, there are stocks that you cannot buy without a broker, such as companies like Facebook, Apple, Amazon, Netflix and Google. These major companies require a brokerage account to make a stock purchase.
Use a Transfer Agent, a third party that represents the company. It may be a bank, a trust company or a similar organization. Computershare (LINK AND AFF IF POSSIBLE ) may be the most legitimate transfer agent service online. You can visit the website and read informative content about stock trading. You can browse through different companies and study where you would invest your money.
Here is a list of companies partaking in the service…
Big Businesses.
1. Exxon Mobil Corporation
2. The Coca-Cola Company
3. Walmart, Inc.
4. AT&T Inc.
5. Verizon Communications Inc.
6. Ford Motor Company
7. IBM
8. McDonalds Corporation
9. Intel Corporation
Businesses not requiring a purchase fee.
1. California Water Service Group (CWT)
2. Comerica Incorporated (CMA)
3. Conoco Phillips (COP)
4. Emerson Electric Co (EMR)
5. Lincoln Electric Holdings, Inc. (LECO)
6. Rli Corp (RLI)
7. Townebank (TOWN)
8. Ugi Corporation (UGI)
2. Dividend Reinvestment Plan
DRiP is another strategy to purchase stocks directly without a broker. Most companies that offer Direct Stock Purchase Plan also offers DRiP. Most companies who do well with their business give dividends to their stockholders in a monthly, quarterly or annual basis. Since a dividend can be considered as an income, it is not actually therefore free of tax.
Dividend Reinvestment Plan or DRiP offers an option for investors/stockholders to claim the cash dividend or use the money to buy more stocks that can be reinvested in the company. If the investor decides on the latter, the company will deduct the tax from the dividends earned and the money left will be added to the stockholder’s share.
If you wish to enroll in a Dividend Reinvestment Plan, study the reinvest options of the company. There are companies that offer full or partial reinvestment plans. Under a partial reinvestment plan, a certain portion of the dividend can be given to you and the remaining will be used to buy additional shares of the company. While on the other hand, full reinvestment plans use all the dividends you earn to buy additional stocks for the company.
3. Employee Stock Purchase Plan
The graveyard. Don’t let your money and effort go there, while spending time at some company you may work for. Consider an ESPP instead! It’s a way to put money into action, while working somewhere.
This by far is the simplest form of buying stocks today. The Employee Stock Purchase Plan allows employees to buy a share of their employer’s stock and payment of it can be done by payroll deduction. The company sells shares of their stocks at a discounted price compared to its market value. An employee can take advantage of it and earn additional income without much effort exerted.
The good thing about the ESPP is that it allows employees to sell their stock before retirement, removing them from any weight in the company’s share.
4. Use A 0% Commission Broker
This is like going without a brokerage altogether. Zero is the new normal when it comes to stock trading commissions nowadays. This idea opened a door for investors who would not want to splurge on buying stocks without some assistance of a stockbroker. In 2019, major online brokerages including Schwab and TD Ameritrade have gone through zero commission route for standard online-initiated stock trading.
As an investor, there may be a lot of questions in your mind. You might also be wondering how brokers can afford to do this. Are there any hidden charges? Will the investment suffer in the long run?
First, brokers changed the traditional commission-based trade to free from commission to attract more clients. Brokerage companies don’t want to lose more investors since there is lots of competition in the market. Also, online investors have become more knowledgeable in doing direct trade.
Second, brokers do not entirely get their revenue from commissions. There are other ways or sources for them to be able to continue operation. So they have adjusted unto differing methods.
Advantages And Disadvantages With No Broker Involved
Advantages
• Cost-Efficient – If you decide on buying stocks online without a broker, it will save you quite a sum of money since you do not have to pay a stockbroker for their service.
• Full control of the investment – Since you manage your investment, you will have the full control on how to handle the trade. You have the sole responsibility on how you will make it grow. Therefore, you need to stretch your learning some to learn the stock market industry.
• Discipline – Dividends take some realization time before you see the benefit of putting a long-term investment into the specific stock to see it grow. Some investors get so addicted to buying and selling stocks, so they may make immature trades and miss out on profits. Try to let time grow things instead.
• Availability of technology – There are lots of websites and apps on the internet that are available for investors. You need to maximize the use of these tools to make a good decision about your investments.
• Strategical – Having full control of your investment can also help you learn the dos and don’ts in the stock market industry. You will also learn the proper time to buy or sell stocks. To be successful in this industry, you must learn much.
• Self-learning – You may be questioning whether this is an advantage or not. Self-learning can be very beneficial for every investor. Having an investment is risky, so you must learn whether the time is right to make a purchase or sell stocks. There is no assurance for the positive condition of the stock market. That’s why knowledge and experience will become your best teacher in this industry.
Disadvantages
• Long-term investment – If you are not the kind of investor who waits for the share of a company’s stock to make profit before you see the benefit, then probably the options above will not work for you. DSPP and DiP both require a long period of time to see the profit you made from the initial investment.
• Limited-options – If you are enrolled in a DSPP, there are companies tied up with a DRiP but there are others that are not. So if you want to see the full potential, look beforehand if the company where you will be investing offers both at the same time.
• No investment is tax free – Dividends for example, are an income. Whether you decide to take the cash or reinvest it from the company that provided the dividend, you still need to have bookkeeping of all the transactions and pay taxes.
• High upfront cost – There are DSPPs that requires a certain amount as initial investment. Monthly recurring fee also add up to the higher upfront cost of purchasing stocks directly online.
• No human interaction – One of the problems of going solo in stock trading is you do not have a personal interaction with an expert in the field. You cannot ask anyone whether you are taking the right or wrong move. For a beginning investor, it is quite hard to decide on making the first buy of a stock and whether you are placing your investment in the right company.
• Losing the thrill of trading – For some investors, the thrill of buying and selling stocks is what makes this industry rewarding. To see which stocks should be dumped and which stocks should you invest more in, could be a great experience. If you want this, doing that without a broker could be very bad.
• Hard to sell stocks – This is one of the greatest downsides of buying stocks without a broker, finding a buyer for a slow-moving stock would be hard since you have limited or no access to any stock exchange. This is the reason why some investors need a brokerage account – to have full accessibility to exchanges that will enable them to sell stocks almost instantly to any possible buyer.
Key Takeaways
Buying stocks online without a broker can have great potential for investment growth. But if you are not confident, you might want to take some time and study the market and trading industry. The content of this article should be able to help you make the right decision on how to handle your investments and how you can make a win-win situation with the different strategies available.
Before making any stock purchase, the biggest thing you need to ask yourself is this… what kind of investor would you like to become? Are you the risk-taker that can tolerate high risk opportunities and benefit from bigger profit earning? Or are you the play-it-safe type of investor that will go for less risk and be satisfied with a lower return?
Call to mind that not all the time is the economy great. There are lots of factors that may shake the stock market industry, so you must be ready for how to withstand those circumstances.
Your investment strategy can carry you a long way in managing your financial objective. To just begin is a step toward financial freedom. The key for becoming a successful investor is having a goal and looking into the future. Use whatever resources and technology you can benefit from that can help you reach that path.
Leave a Reply