In most cases, the buying and selling of stocks takes place through an intermediary agent known as a broker. For a fee, the stockbroker listens to your wants and needs, gives stock market investment advice, and then takes your financial capital and buys or sells stocks to try and help you make the most out of your investments. For most investors, this method works just fine. However, for one reason or another, some people prefer to buy stocks without a broker. For example, non broker intermediated transactions may have cheaper or no commissions. If you’ve been considering going it alone, you might now know what your options are. There are actually three ways methods of buying stock without a stockbroker.
See also: stock trading definitions
1. How to Buy Stocks Online Without a Broker?
The rise of the internet has affected just about every single aspect of life, and financial trading is no exception. In the past twenty years or so, online stock purchasing has grown into a multi-billion dollar venture, with many companies leading the way. This has happened because these online trading companies have made buying stocks incredibly easy and affordable. Most of them have graphs and charts to help you do your own research, they give you advice as well, and best of all: they charge a very minimal fee, usually amounting to nothing more than a few dollars per trade. With so much information at your fingertips, it’s easy to see why online trading has become a large part of today’s financial market.
Online trading is mainly for the self directed investor. Although the online broker may seem to act like a traditional broker, most of the buy and sell matching is done via computer without human intervention. Most online brokers also offer traditional human brokers that you can call or meet for a more hands on investment experience.
See also: how to invest in stock market
2. Using a DSPP
A DSPP, or Direct Stock Purchasing Plan, is a simple way to buy stock without a broker. With a DSPP, you choose a company to invest with. Every month, you pay a set amount of money to the company in exchange for however much stock that happens to buy at that time. This transaction is automatic. Not all companies offer DSPPs, and those that do usually have a minimum monthly amount of somewhere between $100 and $500, so it’s important to do research and read the fine print before setting this up. However, if you’re looking for a way to “set it and forget it” when investing, a DSPP is a quick and easy way to invest with a minimum amount of effort, and no broker fees to worry about.
3. Using a DRIP
A DRIP, or Dividend Reinvestment Plan, is another way to buy stocks without a broker, and in many respects it is similar to a DSPP. With a DRIP, though, rather than using capital to purchase stocks, you are using the dividends paid out from the stock you already own. So, if you own stock in Company X, rather than collecting the dividends and putting them in your bank account, you simply direct them back into the company and use them to buy more stock. Like DSPPs, you can set these up to happen automatically, which results in less hassle on your end.
As you can see, there are several different methods of buying stock without a broker. Whichever one you choose, however, make sure you do you research to look at the advantages and disadvantages of each.