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How do you buy stock on a company?

Posted: Jan 18, 2010

Do you go through the bank? A financial advisor? Can I just take 50.00 from each paycheck and say "hey - I want however much this will buy in this company"? Do they charge fees? How much?

TIA!

;

It depends - Ann

[ In Reply To ..]
on the company.

Some companies have direct stock purchase plans, and you can purchase the stock directly from the company and, if they have one, enroll in the dividend reinvestment program. DRP programs reinvest dividends in more stock. You will have to go to the websites of each company you are interested in to find the ones that have direct stock purchase plans. The information will be in the Investor Relations section.

If a company does not offer a direct stock purchase plan, you will need to go through a broker. If you already know what stock you want to purchase, you can use a low-cost on-line broker. There are several to choose from. You can do a Google search on "on-line stock brokers" or something similar to start your research.

Since you only have $50 a month to invest, you might want to look into mutual funds (Google "mutual funds" to start your research).

Direct stock purchase plans and mutual funds generally have minimum first-time investment requirements (generally ranging from $250-5000, depending on the stock/mutual fund), but some will accept a much lower initial investment if you sign up for monthly automatic investments. You'll have to read all the info on each stock's or mutual fund's website to find out what's available. You can also purchase mutual funds through a broker, but you'll still need to research the available mutual funds to decide what you want.

If you purchase stock from a broker, you will have to purchase in whole-share increments and pay the broker's fee. The increments can be as little as one share, and on-line broker's fees can be as little as $10 (some are a few dollars less), but if you're only purchasing one share at a time, those fees can really eat into the value of your portfolio, so choose and purchase carefully. If you purchase through a dirct purchase plan, there will be a minimum investment amount after the initial purchase (sometimes as little as $10, but usually $25-$50 each time. There is often no fee after the initial purchase, but lately many companies have begun to assess a fee for direct purchases, though usually lower than a broker's fee would be. However, again, fees will eat into the value of stocks purchased in small increments.

There is a hybrid option for purchasing shares in individual companies but not in whole-share increments, Sharebuilder. It works like a stockbroker, but you invest set amounts, which can be good if you want stock in a company whose shares are fairly expensive (something like Google, or Apple, for example). (This is not an endorsement of Sharebuilder, and there may be other companies that offer a similar service that has better terms. I'm just mentioning Sharebuilder because it is the only one of this model that I am aware of). Sharebuilder's fees can be high in relationship to the purchase value of the stocks you buy through them if you only have a small amount to invest at a time. While their model offers folks with small amounts to invest an entree into shareowning, it can be too expensive to be beneficial if you are investing very small amounts. You will need to do a cost-benefit analysis of that type of program compared with using a broker, direct purchase plan, or other investment method.

The MSN Money website, I believe, has information for novice investors, so that might be a good place to start. Go to MSN, click on Money from the options across the top of the page, and look at the options along the left side of the page. I think that's where it is. Yahoo Money and CNN Money probably offer similar information sources as do probably countless other reputable websites.

In any event, don't invest anything until you have researched all of your options and understand the fees involved in each option and other rules such as those governing redemption or sale of your investments. And never, ever invest money you can't afford to lose. As we have seen recently, the stock market can be a roller coaster. While in general, investments in good companies can be expected to grow over time, always remember that they can also lose value, sometimes quite dramatically.

Good Luck!

Ann - Have no clue

[ In Reply To ..]
You're awesome. I went to the company's website and there it was - investor relations. Clicked on it and then clicked some more and got where I needed to be to buy direct from the company. The first time buy is 250.00, which is fine, and then after that you can buy a minimum of 25.00 and it has a maximum (I assume to prevent a takeover) you can buy as well. I'm excited. Thank you very much for your help!!!

You're very welcome - Ann

[ In Reply To ..]
I'm glad the company you were interested in has a direct stock purchase program. That is generally the most cost-effective way of investing in a company in small increments.

Be sure to read andd save all the statements and communications you get once you start participating in the program. If you ever need to sell your shares, you will need to be able to figure your cost basis for each share sold for tax purposes. Your statements (usually quarterly but some companies send monthly statements) will have the information you need.

If the company is taken over by another company, they will send you information about how to exchange your shares for the new company's shares, so be sure to read everything!

I made a few grand on ing.com this year. - ETFs are the way to go. nm

[ In Reply To ..]
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