The different types of stock are what confuse most first time investors. That confusion causes people to turn away from the stock market altogether, or to make unwise investments. If you are going to play the stock market, you must know what types of stock are available and what it all means!
Common Stock is a term that you will hear quit... Read more
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The Direct Stock Plan operates differently than buying stock through a broker. There is no commission charged for these stock plans, but there can be a small fee. The other difference is that the company buys and sells the stock at a given time. The investor cannot sell or trade stocks at will. The investor may turn the stocks over to a broker to sell, but the broker cannot charge a commission. You may be charged a fee by the company. It depends on your agreement. If you have a favorite company, like the Walt Disney Company, Coca Cola or other brand names in the United State you may be able to implement a Direct Stock Plan to purchase stocks on a regular basis. You can review the list of stocks in your local library or check out the company you are interested in by accessing the company web site. Another method of investing direct in a company is by way of the Direct Dividend Reinvestment Plan. It is commonly called a DRIP. The good aspect of this type of plan is that instead of receiving the dividends you agree to reinvest the dividends in more stock in the company. It is a regular Direct Stock Plan with a reinvestment agreement. You may do the same reinvestment plan with your other stocks and mutual funds even if you have a broker. The advantage is that if the company allows a private investor to purchase stocks directly this would allow you to set up a pay check withdrawal each pay period for the purposes of the stock plan. There are various advisory services that can assist you in locating companies that offer these direct stock purchase plan. I would suggest that you find companies you are interested in a make an inquiry with investor relations. The advantage to contacting the individual company yourself is that it allows you to use your preferences and then do a small amount of leg work. The company representative will give you the necessary forms and provide you with individual advice on how to set up pay roll deduction. In turn you can contact your banking institution, employer human resources or bill payer and set up the account. It will astound you the number of very good companies that will allow you to buy stocks direct by setting up a plan. The range of possibilities include, utility companies, fast food stocks, entertainment and retail stocks. If you have a solid company that has shown solid performance this may be a good option for investing. The only thing you have to lose is your time. The time it takes in gathering the information has a big payoff. It will save you commission fees and provide you with a long term relationship with your favorite company.
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