How do I Invest in Stocks Without a Broker?

Most of the investors start their investment journey with the help of a broker and some buy and sell stocks themselves. Direct investment offers an alternative to the brokerage account. If you want to acquire stocks of a single company, there are several plans that can help you achieve your goal. 

Buying stock without a broker is not an easy task; one has to learn a lot of things before that. However, with the advent of technology, we can now easily invest in stocks using online investment apps through which investment becomes much easier. If you are investing without taking any help from a broker, be aware of the drawbacks of it.

In this article, we have elucidated some of the ways to buy stocks without having any helping hand which will help you to get your desired stocks without any broker.

Full-Service Brokers

Whenever you think about friendly, effective investing, full-service brokers come into existence. These are known as traditional stockbrokers who take time to know you personally along with your financial status. There are several factors to consider such as risk tolerance, marital status, lifestyle, age, income, debts etc. The full-service brokers help you in creating a long term financial plan by getting known as much as they can.

These brokers not only help you achieve your investment needs but also provide assistance related to estate planning, retirement planning, tax advice, budgeting and several other types of financial advice. They help you in managing all the financial needs not just now but in future also and for those investors who want to grab all in one package. Full-service brokers are more expensive than discount brokers in terms of fees but are well worth the additional costs when you have a professional investment advisor by your side.

Direct Stock Plans – Direct Stock Purchase Plan

One of the easiest methods to buy stocks without any brokerage account is by participating in a direct stock plan of a company. These plans (Direct Stock Purchase Plan) came into existence long ago to help small investors purchase ownership from the company directly. Investors do purchase by transferring money from their savings account. The company will introduce the minimum investment amount for both the initial and subsequent purchases. Most of the time, these mandatory minimum investments are lower than the single stock price, it allows investors to purchase fractional shares of a company without much capital.

The managers collect the cash from all the participating banks in the direct stock purchase plan which is used to purchase shares of the company at regular intervals of time. Whenever you get a bank statement, the direct stock purchase plan creates important financial information along with the statement such as a listing of the shares you own, received dividends and purchases you made.

DSPP Advantages

  • Direct stock plans have certain advantages and disadvantages such as they save you a huge amount of brokerage fees and commissions. 
  • DSPP is also considered good for passive investment opportunity within the reach of the investors as they can implement an automatic investment plan which will withdraw the money from a savings account to buy stocks

DSPP Disadvantages

  • You will have to pay the initial set up fee which is charged by most companies from the investors to open an account. 
  • The automatic investment fees is another disadvantage, as it varies from company to company.
  • Lack of diversification

Discount Brokers

These brokers are basically order takers and do not offer any investment advice related to your investments. When compared with full-service brokers, they are less expensive as there is no office to visit and no professional advisors to advise you. The cost is usually on the basis of per transaction, you can open an account with no money on the internet. Once you are settled with an online broker account, just log on to its official website to proceed with the purchase of the stocks.

These types of brokers provide no investment advice, stock tips and other types of investments, you will manage your investments. The only best part is that you will receive technical support. On the other hand, if you go with online brokers you can get useful investment-related links, resources and research that can be useful. There are many online brokers available, for instance, Groww is one of the top online investment platforms among others and has the best user-friendly interface which helps an investor to easily select the best stocks to invest as per convenience. If you think that you are capable enough to take on the responsibilities to manage your own investments.

Dividend reinvestment program 

One of the best ways to buy stock without a broker is to Enroll in a stock’s dividend reinvestment program or DRIP.  This program allows you to take cash dividends paid out by the company you own and put them back into buying more shares, with either nominal fees or nothing at all depending upon the specifics of the individual plan. For a typical stock, which pays the dividend four times a year, there will be a lot of transactions over 25 or 50 years on which you aren’t paying commissions.

On a closing note

The selection of a broker is very important, it should be based on your individual needs. If you go for full-service brokers, these are great for those who pay a premium for others to look after their finances. Whereas discount brokers are great for all those people who have little start-up money and those who would like to take risks and rewards of investing without any professional assistance. 

If you are a beginner, it is usually not advisable to go without a broker as you may not have the required experience and specialized knowledge to guide you in making the right decisions. On the other hand, you have higher chances of getting higher ROI (return of investment) and a fulfilling experience of your financial goals if you go for top brokers in the market.