Direct Purchase Stock Plans

For small investors or those just starting out, there are many discount brokerages and online investing sites to help you get start investing. Before all of these new investing firms popped up, many corporations allowed you to invest in their stock directly through them. In most cases, this was restricted to the larger firms, such as General Electric and AT&T. Surprisingly, many of these direct stock purchase plans still exist today and are a great way for you to invest in small, incremental amounts for little to no cost. And, with the internet, it makes investing in these plans that much easier!

long term investing goals

There is one main transfer agent for most of the direct stock purchase plans available. You can visit ComputerShare to see all of the plans they offer. This firm is the largest transfer agent for direct stock purchase plans. You can also check out BNY Mellon as they handle plans as well, just not as many.

How to Get Started

To get started investing, you are going to need a small lump sum of money, usually between $250-$500. From there, you are free to invest any amount you wish, as long as it meets the minimum. This minimum is usually around $50. Most plans also have maximum amounts you can invest annually as well, but the maximum is usually about $100,000.

The great thing about these plans is that you can buy fractional shares, which you cannot do if you invest though most online discount brokers. Additionally, you can elect to re-invest any dividends to buy more shares, also something that many online discount brokers do not allow.

When I first started investing, this was the route I took. I saved up enough money to open an account and buy shares of General Electric. Then, after doing chores around the house for my allowance, I would save the money and use it to buy more shares. It was great to be able to invest in the stock market.

Considerations

Before you go clicking on the ComputerShare or the BNY Mellon link above, there are a few caveats to tell you about. The first is that not all companies use these transfer agents. Just because a company isn’t listed here, does not mean they do not offer a direct stock purchase plan. For example, Proctor & Gamble allows you to invest directly with them from their website, so be sure to visit the company website if you don’t see them on either of the sites above. You can either search for “company name + direct stock purchase plan” or go to the investor relations section of their website. Usually the information is found in the FAQs.

The second caveat is to be conscious of fees. Each company determines the fees for their plan and the fees wary widely. For example, Proctor & Gamble has virtually no fees whereas AT&T charges you set up fees, purchase fees, re-investment fees, and sales fees. Basically, it makes it not worth it to invest in the stock this way because all of those fees add up.

My recommendation is to avoid all plans with set up, purchase and re-investment fees. Sales fees are acceptable given that most are capped at a dollar amount that is not restrictive. You will find many companies that only charge a sales fee as well as some that charge no fees at all.

Overall, direct stock purchase plans are a great way for small investors or those just starting out to get into the stock market. It allows you to invest in small amounts and re-invest dividends for little or no cost. If you are looking for a way to start investing, be certain to include these plans into your comparison.

7 Responses to Direct Purchase Stock Plans

  1. Great article! I have been wondering how I could start investing in stocks without going through a brokerage and paying $$ in fees. Especially since I won’t be investing lots of money…maybe $50 a month.
    What companies do you have through computershare?

  2. One of my bosses did this and used the earnings to pay for his kids’ college education!

  3. Having an account with the transfer agent is a good way to go if you plan on holding the stock for years and you simply want to reinvest the dividends. Don’t try ordering a stock certificate though. DTCC has greatly increased the fees and they’ll try to charge you more than $200 for a single cert. Holding the shares in book-entry is what I’d suggest.

  4. I am a forex trader and recently added stock trading in my portfolio. I was only familiar with investing through brokers in stock trading but direct purchasing stock is new for me. I want to start stock trading with less amount so it will be right choice for me. Don, great thanks to share informative and useful article about direct stock purchasing. It is much helpful for me.

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