Learn to manage your money well.
Many people believe that you should have a substantial amount of money to be able to purchase a stock listed on the stock exchange. Nothing could be further from the truth. With some careful planning, research and discipline you can purchase that company stock that you’ve had your eye on.
Most U.S. companies offer their current, individual shareholders the opportunity to purchase more of their company shares directly from the company through a program known as a Dividend Reinvestment Plan or DRIP. But what if you are not a shareholder because you lack the resources to buy the 100 shares or even 50 shares of a company? You are in luck: A lesser-known method called Direct Stock Purchase Plan (DSP) allows retail investors to buy into a company’s stock a few shares at a time.
To buy company stock through the Direct Stock Purchase Plan (DSP), individuals who are not current shareholders must set up an account with the desired company. Most companies charge an enrollment fee (usually between $10 and $50) to set up the account, with an initial minimum required investment of $100.00 to $250.00 in their stock. Other fees may apply, depending on which transfer agent a company employs to handle these stock buy transactions.
Over one-thousand U.S. companies participate in the Direct Stock Purchase Plan. These companies can be found on the major stock exchanges. Here are two ways you can proceed to get started with a company’s Direct Stock Purchase Plan:
Once the account is established, an investor can buy more company stock when money is available, or set up his/her account for automatic withdrawal out of a bank account. Additionally, as a stock receives dividends, those dividends can be reinvested back into the company through their Dividend Reinvestment Plan to boost stock-buying power even more!
Direct Stock Purchase Plans puts you, the investor, in control of your stock purchasing power, and gives you direct ownership of your stock shares – you receive monthly or quarterly statements directly from the company or their agent. The Direct Stock Purchase Plan is the way for the average retail investor to take financial control of the future.
A note of caution
While it is true that both DRIP and DSP plans provide financial savings to individual investors by allowing them to purchase directly from the company (forgoing commissions and stockbroker & adviser fees), the Kansas Securities Commissioner’s Office must point out certain disadvantages to individuals who invest without professional advice:
When there is no professional assistance for suitability or “best interests” advice, the entire financial risk is assumed by the individual. Additionally, individual investors may find themselves limited in their knowledge of specific stocks, and limited in diversification of their financial portfolio. These limitations could pose significant risks to the overall health of the investment.
This article is published on KansasMoney.gov. Find more information by contacting these state agencies: