Buy direct stock
Direct Stock Buy is a way of getting the shares of the company directly. The shares of listed companies are freely traded at the stock exchange and a person can easily buy or sell these shares. When a person buys shares from the stock market, he is required to pay brokerage, commission etc to the broker that has facilitated the stock buy deal. But in case of direct stock buy, the person is not at all required to pay any brokerage or commission etc as the shares are bought directly from the company. Let us now discuss the various features of direct stock buy.
FEATURES OF DIRECT STOCK BUY
There are many features of direct stock buy that need to be understood. First of all, the company allows a person to buy the shares directly from it by way of a special plan called as DSP or the Direct Stock Plan. There are many companies that allow a person to buy shares by means of DSP. The direct stock buy is quite famous in North American countries like United States etc. In France also, this way is adopted to provide the shares of the company to the public. The shares obtained by way of direct stock buy are tradable at the stock exchange and thus, a person can easily sell them whenever he is gaining advantage. There are two ways in which the shares of the company can be obtained directly. These are the DSP, as discussed above and DRIP, the Dividend Reinvestment Plan. The DRIP allows a person to reinvest his dividends in the company in the form of shares rather than getting cash dividends. Let us now discuss the various aspects related to these two next.
RELATED ASPECTS OF DIRECT STOCK BUYThere are some related aspects of direct stock buy that need to be understood. As said above also, there are many companies that go for the DSP plan in order to provide shares to the public. In such circumstances, there is no brokerage or commission that is to be paid by a person. However, a person is required to pay a fee for using the plan services of the company. There are also many companies that require a person to make an initial deposit first. The amount is generally $500. A person is required to pay a transaction fee for the direct buy of shares, which is generally $10. All the brokerage, commission, fee etc regarding the DSP is paid by the company only. There are also some companies that require a person to own the stocks before he can go for the direct stock buy plan. There are also many companies that require a person to be employed with it in order to get the shares under the direct stock buy plan.
There are many benefits of direct stock buy. First of all, a person can easily invest small amounts, as he is not required to buy the entire share. Thus, it allows him to build his portfolio by investing smaller amounts. In such cases, the checking amount of the person is debited on a regular basis by a specific dollar amount as specified by him. There are some companies that require a person to maintain some minimum balance in the account so that the debits can easily be made in the account. The other benefit of direct stock buy is that a person saves some money by not paying for the brokerage or the commission for buying of shares. It is to be noted here that though the person can trade in the shares obtained by way of direct stock buy, there are some companies that does allow a person to buy or even sell the shares at a specific market price or at any specific time so that the market plans of the company are not affected. The company, in such cases, purchase the shares at established times. For example, there are many companies that sell and buy shares directly at weekly, daily or monthly basis and a person can easily participate in these programs to buy or sell the shares of the company. The price at which the shares are sold or bought by the company is the average market price. A person can easily go through the disclosure documents in order to know when the company would sell or buy the shares and how the company determines the price. A person may also be required to transfer the shares to his broker as per the plan in order to sell them. Normally, a person is required to pay a nominal fee for the plan.
As far as the DRIP is concerned, this plan allows a person to take advantage of the ?compounding power?. A person can buy shares of a company instead of getting cash dividends by reinvesting the dividend. A person is required to sign an agreement for the same with the company and if he is having a brokerage or a mutual fun account, he should check whether the firm is having a DRIP or not. He should also see for the charges for the services provided.
It is to be understood here that in most of the cases, the direct stock buy plan is carried out by a company with the help of a transfer agent. A transfer agent is a company that arranges for the direct stock plan and all the activities are carried out by this transfer agent only. It manages the list of the shareholders and in case of any discrepancy; a person is required to contact this transfer agent only. The name of transfer agent is generally provided in the advertisements regarding the direct stock buy plan announced by the company. A person is not required to pay any brokerage etc to this transfer agent, as the same is paid by the company only. The transfer agent takes care of all the aspects regarding to the direct stock buy plan of the company and acts on the behalf of the company.
SO, GO FOR DIRECT STOCK BUYIf you come to know about any company going for the direct stock buy, you should go for it, as there are many benefits that are obtained by means of above program. However, the financial stability and credential of the companies should be ascertained before a person goes for the plan.
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