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In the last several decades, investing in the stock market has become increasingly popular and has resulted in remarkable financial gain for those participating strategically. Though the average person investing in the stock market does so with the assistance of a full-service or discount broker, it is entirely possible to enter into this arena without such help.

A stock broker is a financial professional who works on your behalf to provide insight and services related to the stock market and trading. Using a broker is a good choice if you’re new to the stock world and would like assistance with the process. While it’s more convenient to use a broker when getting involved with the stock market, it’s not a requirement and comes down to personal preference. Below is an overview of how to start buying stocks without hiring a broker.

How to Buy Stocks Without a Broker

Buying stocks independently of a broker can give you greater freedom in your investments and help you save on the costs associated with a broker. You have complete control of the stocks you invest in, and you aren’t charged a brokerage fee for every single transaction. There are several ways that you can get involved in stocks and boost your finances without going through a broker. Some steps you can follow to start trading on your own include:

  1. Choosing the best way to invest, either with Direct Stock Purchase Plans (DSPP) or Dividend Reinvestment Plans (DRIP)
  2. Researching stocks to find the best place to invest your money
  3. Funding your account
  4. Purchasing stocks

This is a general overview of the steps needed to get started, but keep in mind that you will likely do steps two through four multiple times. After you start investing, it will be in your best interest to continue researching the market and purchasing more stocks as much as your comfort level and income allows.

Choosing the Best Way to Invest

Once you’ve decided to buy stocks without a broker, you’ll need to determine which broker-free plan you want to invest in. While either plan can help you earn additional income, one plan may better meet your needs than the other. Here are brief overviews of two of the most popular plans.

Direct Stock Purchase Plans (DSPP)

Direct Stock Purchase Plans, more commonly referred to as DSPP, involve purchasing stocks directly from a company or corporation without the use of a middleman (in this case, a broker). In these situations, you would make monthly payments to the company that would, in turn, be used to purchase stocks within the company.

The process is quite simple. You select a company you want to purchase stock from (usually a major corporation that is succeeding financially), deposit the minimum amount of money the company requires for this type of plan, and then set a monthly deposit amount. Then, you are officially a shareholder in the company and will be paid dividends as they occur.

One of the greatest benefits of participating in a DSPP is the freedom you have to select the company you wish to invest in. Rather than entrusting a broker to make a financial decision on your behalf, you can select a company of your choosing that you are either personally invested in or believe carries a large profit potential.

Dividend Reinvestment Plans (DRIP)

When you’ve invested money in shares of stocks, your profit is connected to the rise and fall of the stock’s monetary value. In situations where companies attain great profit, the company may pay out dividends to their shareholders. During this process, you may receive a cash or stock dividend.

A Dividend Reinvestment Plan takes advantage of the cash dividends you receive from the company you are invested in. Rather than being compensated with the cash dividends, these dividends are automatically used to purchase more shares of stock within the company. Essentially, these plans will reinvest your earned dividends and make you a larger shareholder within the company.

This type of plan requires very little direct involvement. For the most part, you can purchase a set number of shares or deposit a certain amount of money and sit back as your dividends are automatically invested back into the company. Unless you choose to do so, no additional money is taken from your account to invest.

Researching Stocks

Once you’ve determined which investment plan is best for you, you should research the companies that offer these types of plans. No matter which of the plans mentioned above you decide to invest in, the company you purchase stocks from should be a company you have confidence in.

For example, if you’re investing $100 or more every month in a DSPP, this could be a major lomg-term investment. It would be risky to invest this much money in a stock that is historically unstable or lacking positive growth in recent history.

When researching stocks, you should be looking at the stock’s history in terms of growth over the last few months and years. It would also be a good idea to analyze the reasons behind the trends. If a stock’s value experiences an extraordinary increase every time the company releases a new product, and the company has been consistently doing so every few months, this stock may be a great investment long-term.

You should seriously consider the future of the stock. Take a look at which markets are emerging and which are declining in popularity. Look at trends in technology, read diverse industry publications to see what types of technologies or companies are becoming more necessary, and look for trends within industries that show the direction each industry is heading.

Funding Your Account

If you’re investing in a DSPP, the only account you really need is a checking account from which your monthly deposits will be paid. With that said, you need to make sure your checking account maintains a balance greater than or equal to your monthly deposit. Failure to consistently deposit your set amount can lead to issues with the company and your bank account.

If you’re investing in a DRIP, you need to create a DRIP account. Rather than going to a broker to open one of these accounts, you can go to other financial institutions to do so. Like when you purchase any stock, you need to make sure this account is fully funded to process future orders with the same company. 

Purchasing Stocks

To purchase stocks with a DSPP, the most direct route is going to the website of the company you wish to invest in or to ComputerShare. With ComputerShare, you can search for stocks that offer DSPPs and select the company you want to invest in. The website will then outline the details of the investment plan and additional fees associated with the plan. This is, by far, the easiest plan to start because there is no middleman.

In order to become involved with a DRIP, you must already be a company shareholder. If you are not already a shareholder, you can enlist the help of a transfer agent who can enroll you in a DRIP. There is also the possibility that you can purchase your stocks directly from the company rather than using a broker or transfer agent. After purchasing the stocks, you can contact the investment department of the company to pursue DRIP enrollment.

No matter which of these two plans you go with, you should be constantly monitoring the stocks and their values. Though you shouldn’t immediately sell the stocks when they begin to lose value, you should recognize when a stock is fading out and when to cut your losses.

Final Thoughts

The stock market, and stocks in general, carry great potential when it comes to income and profit, but not just anybody can benefit financially. If you’ve considered involving a broker and eventually determined that it was too expensive or lacked the control you would like to have in the process, there are two options that allow you to purchase stock without a broker. When it comes to determining your plan, you should consider these facts.

  • If you’re confident in a company’s potential and can commit a set monthly payment to purchase more shares of the company’s stock, your best option would be investing in a Direct Stock Purchase Plan.
  • If you’re invested in a company and would rather your dividends be used to purchase full or fractional shares of the company’s stock, rather than being paid cash, the better option would be to invest in a Dividend Reinvestment Plan.

After you’ve selected your ideal plan, you’ll research stocks that you wish to invest in, create and/or fund an account, and finally, purchase the stocks. If you need more help with investing on your own terms, sign up to receive our free e-book to learn more about trading.

Author: Jason Bond

Jason taught himself to trade while working as a full-time gym teacher; his trading profits grew eventually allowed him to free himself of over $250,000 in student loans!

Now a multimillionaire and a highly skilled trader and trading coach, Over 30,000 people credit Jason with teaching them how to trade and find profitable trades. Jason specializes in both swing trades and in selling options using spread trades, which balance the risk of selling options. Jason is Co-Founder of RagingBull.com and the RagingBull.com Foundation which donates trading profits to charity. So far the foundation donated over $600,000 to charity.

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