Can Someone Invests in The Stock Market Without a Broker?
Although the majority of investors buy stock’s shares through a brokerage account, many new investors wonder if they can do so without a broker.
When we think of investing in the stock market we automatically think of a stock brokerage accounts.
We’d start looking for the most affordable broker and register for an account.
It’s quite normal since the vast majority of investors buy stocks through a brokerage account.
The reason being is because it is the traditional method for investing in stocks, specially with all the access we have to technology today.
Buying stocks without a broker is very much possible but the process may seems somewhat more complicated than the regular method.
How to invest in stock without a broker
Although it is quite possible to buy your shares without a brokerage account, you do have to buy through another platform for most of the companies.
However, direct stock purchase plans are the best methods to purchase stocks without a broker.
Nonetheless, it’s easier said than done as the process may be a little complex for some individuals.
What’s a direct stock purchase plan (DSPP)?
According to the U.S Securities and Exchange Commission,
Some companies allow you to purchase or sell stock directly through them without you having to use or pay commissions to a broker. But you may have to pay a fee for using the plan’s services.
Some companies require that you already own stock in the company or are employed by the company before you may participate in their direct stock plans.
You may be able to buy stock by investing a specific dollar amount rather than having to pay for an entire share. In that case, you could have your checking account debited on a regular basis to make investments in the plan.
Some plans require a minimum amount of investment or require you to maintain specific minimums in your account
Who should utilize a DSPP?
It’s for investors who prefer long-term investing, shares are most likely to cost more than the low cost stocks.
Also, as you’ve just read, you may required to get your checking account debited monthly, and also have a required minimum amount of money in there.
If you plan to hold stocks for many years, DSPPs are a solid choice, not only for holding your stocks, but also for taking advantage of automatic dividend reinvestment to increase your holdings.
With that being said, this option would work for you if you are planning on buying blue-chip stocks.
Direct Stock Purchase Plans (DSPP) discount
Many companies that provide the option for their stocks to be bought through DSPP also give a discount to their buyers.
This discount serves as an incentive to attract buyers to their stock, and it can be very helpful to those buying.
As a buyer, you can receive anywhere from 1-10% discount when buying shares from a company with this discount option.
Buying back your shares
There are a few number of companies that usually buy back shares from their shareholders.
How does this happen? Here’s how this question is answered by Troy Segal, from Investopedia.
With stock buybacks, aka share buybacks, the company can purchase the stock on the open market or from its shareholders directly.
In recent decades, share buybacks have overtaken dividends as a preferred way to return cash to shareholders Though smaller companies may choose to exercise buybacks, blue-chips companies are much more likely to do so because of the cost involved.
Why companies buyback shares?
Companies have many reasons to buyback their shares from shareholders.
One reason is to help them counter the potential undervaluing of the company’s stock.
When their stock’s share price falls too low, buying back shares from shareholders can improve the value of the company, which in turn will increase their share price.
Therefore, buyback is a great option, not only for companies, it also help investors as their shares value will increase afterwards.
According to Rebecca Lake, from SmartAsset:
A key upside of buybacks shares for investors is the reduction in the supply of shares. When there are fewer shares to go around, that can trigger a rise in prices.
So after a buyback, you may own fewer shares but the shares you own are now more money.
Buyback shares is not bad at all if you would ask me. If it’s possible to bring benefits not only to the company, but to its shareholders as well, then it’s definitely a great idea.
Buying stocks without a broker is possible and it’s being done by many investors today.
However, if you want to trade solely in the penny stock market you may not have the option to buy your shares straight from the company.
Whenever you choose to invest in a company always look to see if there are any signs of it being profitable.
You don’t want to buy shares from a company just to know that you’re a shareholder, you buy in to make profits; therefore, you have to make some efforts to know what you’re putting your money into.