The commissions stock brokers charge are cost prohibitive for the average investor. Maximize your return by eliminating them from your path to wealth! If you’re willing to do the research and analysis and are comfortable making your own selections, you can buy stocks at a fraction of the commission cost a broker will charge.
One option is to buy using a “DPP” program. “DPP” stands for “Direct Purchase Plan”, also called a “Direct Stock Plan”. Simply put, a Direct Purchase Plan allows you to buy stock directly from the company itself, usually with a small or no commission. Over a thousand companies offer this service, including McDonald’s, Coca-Cola, Exxon, Home Depot, IBM, and Wal-Mart to name a few. Although the initial investment required by some companies can be as high as $500, subsequent purchases can be made in as little as $10 increments. To see if a company in which you’re interested offers a DPP, check out their website and look for a link called “Investor Relations”. If the company offers DPP, the details will be there.
A close cousin to the DPP is the “DRIP”, or Dividend Re-Investment Plan. Many companies pay dividends, which are a popular way for companies to return profits to the investors. DRIP plans allow you to reinvest the dividend payments by applying them to the purchase of additional shares, usually with no commissions. This is a handy way to purchase stock on a regular basis, and it happens automatically – once set up, no further action is required from you. Although the dividend payments may not seem like much at first, over time they will add up through consistent reinvestment in new shares.
Another way to get involved in the market is to use a discount broker. These services allow you to buy stock from thousands of companies that don’t offer DRP or DRIP. Discount brokers offer very low commission fees, the ability to buy fractional shares, and, most importantly, dividend reinvestment! Companies like Buy & Hold, Sharebuilder, and FolioInvesting are worth checking out.