How To Buy Stock Directly

Buying stock direct can be a real game changer when it comes to investing in and growing your portfolio. But how do you do it? Direct Stock Plans (DSPs) and Dividend Reinvestment Plans (DRIPs) are two effective ways you may want to consider if you’re looking to expand your investment reach.  


Learn everything you need to know about DSPs and DRIPs here. If the idea of being able to buy stocks directly from companies sounds exciting to you, you want to know everything you can about this type of investment opportunity. 


Read on to learn what DSP and DRIP plans really are, the advantages and disadvantages of each, and how you can find companies that offer them. 


What Are Direct Stock Plans (DSP)?

A direct stock plan (DSP) allows investors to buy stocks directly from companies. Companies can offer this direct investment stock to anyone interested in investing in the company. The investor buying stock direct transfers funds from a checking or saving account using an electronic funds transfer (EFT), which is like writing a digital check.


What Are Dividend Reinvestment Plans (DRIP)?

Dividend reinvestment plans (DRIPs) can be offered by companies to allow existing shareholders to waive dividend payments, instead of using the earned dividend money to invest in more shares in the company. DRIP plans can be useful for investors looking to accumulate more shares over time by letting their dividends re-invest.


Many company-sponsored retirement plans that contribute shares through employee stock ownership plans (ESOPs) to employees’ retirement accounts also offer DRIP plans. These benefits help keep good employees while building loyalty in the company. Employees may accumulate significant share ownership value in the company they work for by working for several years and participating in these plans.


Advantages of Direct Investing Plans

Years ago, when trading fees existed to buy stock, a DSP investment could save money by avoiding fees. This was helpful especially if the investments made were small because the trading fee was a large amount in comparison. Now, major brokerage firms like Schwab and E-Trade have no-fee stock trades, so this advantage somewhat disappeared for any who trades stock through a no-fee broker.


Nevertheless, DSPs still have some advantages. Institutional investors that buy large blocks of stock can do so with direct investing. This investment method may have less impact on the publicly traded share price. Some companies have special discount programs for large institutional investors that give them a better deal.


Advantages of DSP Plans:


  • Most DSP programs allow investors to buy fractional shares. This fractional-share buying is helpful for smaller investors, particularly in cases when a single share’s price is very high or when a new investor is still learning how to buy stocks directly.
  • Investors can set up automatic payments to a company to invest in some shares regularly, for example, at the end of each month or on every payday.
  • The DSP automatic investment can buy the shares on behalf of an investment retirement account to build up tax-deferred value.
  • The DSP investment program can be set up and then let run automatically, which may make it easier to create a valuable portfolio over time.

Disadvantages of Direct Investing Plans

One main disadvantage of DSP plans is that investments are in a single company. Also, it may be more difficult to sell shares acquired through a DSP program. You’re not allowed to short sell any shares acquired through a DSP program.


Disadvantages of DSP Plans:


  • It may cause too much concentration of ownership in one stock for a diversified portfolio.
  • Hard to sell shares bought through DSP programs.
  • Can be difficult and there can be a delay in EFT transfers to pay for shares.
  • Some companies have minimum investment requirements and charge fees to set up and use a DSP account.

Finding a Company That Offers Direct Investing

If a company offers a DSP or DRIP program, it will typically say so on the website in the investor relations section. Examples of companies that offer direct investment plans include some of the biggest companies.


Here is a partial list of companies that sell stock directly to the public:

  • Altria
  • Amazon
  • Apple
  • Campbell Soup
  • Coca-Cola
  • Disney
  • Home Depot
  • Intel
  • ExxonMobil
  • Johnson & Johnson
  • Pfizer
  • Starbucks
  • Walmart

There are hundreds of more companies that have direct stock purchase plans and dividend reinvestment plans. You can find the ones that offer DSPs on the database listings of computershare.com


Final Thoughts

Investing wisely is important if you want to build a solid, lucrative portfolio that pays you back. Buying stock directly can be one way to do this. DSP and DRIP plans can offer you access to opportunities that you may not ever find anywhere else. 


Knowing how to invest directly with companies is important for any investor. The Connect Invest blog can be your resource for alternative and other investment opportunities that can really help you move the needle when it comes to your portfolio.

Back to articles