Independent, Fee-Only Financial Advisor
Tuesday, April 21, 2015
How To Buy A Stock Directly
The other day, a friend asked me how to buy a stock. I do this for a living, and I am always excited to help someone else get started! There are a few ways to buy stocks, this is how to buy them directly from the company. Beware, though, this is the least advisable way to buy stock, which just happens to have most novelty value.
Many companies offer direct purchase plan or a dividend reinvestment plan through a transfer agent. The transfer agent, such as Computershare, AST or Broadridge, maintains records relating to ownership of the stock. To find your favorite company’s transfer agent, check the investor relations section of the company website. For this example, let’s look at Disney.
Disney’s transfer agent is Broadridge. To buy shares, you will have to open an account on stockplans.broadridge.com. The application will need your personal information and bank information to transfer funds to purchase the stock.
The exact process will depend on the company you are trying to invest in, but many large companies typically allow you to invest any day. Some companies restrict it to once a month, but the transfer agent will handle the trade.
Fees are unique to the company as well. In our Disney example, there will be a $20 account opening fee, plus $20 for each purchase order. Besides the tedium of opening accounts for each investment, fees are the biggest drawback of buying stock this way.
Once your money is invested, you may have the option to order a paper certificate. This is the ultimate novelty in investing and is actually a lot of trouble to handle. If you really want to be able to hold a piece of a company in your hands, this is the only way to do it!
Again, I do not actually advise buying stock in this manner except for the novelty value. Additionally, do not buy a stock unless you have done your own research into the risks and potential rewards that it offers. I will follow up with more practical and effective ways to buy stock.