Many investors go through a broker for a conventional, easy, and hassle-free way to buy stocks. But you indeed have to pay a certain fee on the stocks to enjoy liquidity and flexibility. But many smart investors also opt for non-conventional ways to buy stocks directly. With access to e-commerce, it is now possible to buy stocks online without a broker from anywhere worldwide. It has some potential benefits and compromises. We will get to the insights later in the article.
1. Buying with Direct Stock Purchase (DSP) Plan
With the intervention of modern-day technologies, large business groups have let the algorithms manage the administration for the proper regulation of buying and selling of shares. Companies having stocks listed on stock exchanges employ a transfer agent who administers this whole process. This enables the buyers to directly purchase the stocks without the intervention of any broker agent. Companies have their shares listed among their websites from where you can instantly buy or inquire about them.
DSP allows the buyer to skip the in-between middle man, following up by sans commission on each step between the company and buyer. Though not all companies listed on the stock exchange offer this facility, most profound organizations like Coca-Cola, Exxon MobilJohnson & Johnson, and Walmart offer DSP plans. Some companies provide buyig of shares through DSP by deducting its charges from employee’s pay, allowing an individual to buy stocks directly.
2. What are the merits and demerits of buying stocks without a broker online?
As mentioned above, there are some advantages and disadvantages of using direct stock purchase plans. We will discuss each of them. Let’s talk about advantages first.
- The most significant advantage of all is sans commission. You won’t have to pay any commission to the broker since there will be no middle man in the process. This increases your potential ability to buy more stocks and earn more subsequently.
- For investors, buying stocks through Direct Stock Plans makes a lot more sense because they hold stocks for the long term, and the longer you keep the stocks, the more benefit you will have.
- Dividend Reinvestment Plans(DRIP) provides the basis for the compounding effect. The compounding effect is when you hold the interested driver from stocks and reinvest it to buy more stocks. It comprehends the step mentioned above and goes through DRIP, and it will yield high profits. This has been the way of dealings for many investors, including Hetty Green, aka the witch of the wall street.
We have had enough of the advantages, and by far, these are enough to persuade a person to buy shares without a broker online, but we are not here to allure you. There are some potential demerits too, let’s discuss disadvantages now.
- Broker accounts enhance your stocks’ liquidity and flexibility, and it will be a lot easy to sell them. That’s the prime reason frequent traders use broker accounts because they want high liquidity.
- You have to make sure about your investment when buying stocks without a broker because you cannot dump the low-performance shares. You are solely responsible and are on your own, so it is dearly advised to put your stocks in the right place.