buying stocks directly

[genchan]

I heard that it is possible to buy stocks directly from the companies and not have to pay a stock broker to do this for you. Is this true? If so, how does one go about it?

Yes, these are called DRIPs which stand for Dividend Reinvestment something...
There are only a few hundred companies that offer this plan, without you having to go through a stockbroker. There are basically two ways to join these plans: 1) sign up directly with the company. You can do this online with many - just fill out their form and send in the deposit. You'll have to send in a hefty deposit, but can make small investments later on (as little as $25 a month for some companies. 2) Some companies require you to own one stock already before you can begin the DRIP program. This means that you need a broker to buy that initial stock, and then you can manage your account with them by yourself.

Beware you do have to pay service fees with most companies, but it is less than broker's fees.

Browse some websites on this subject - I even found a book on them at my local library.

[linniec]

Yes, you can! Generally you have to buy 1-10 shares to become eligible for a Company's DRIP plan. However, some companys have what I call Fake DRIP's which charge you each time your money is reinvested But from a site called http://www.moneypaper.com , click on "Review investor-friendly plans" for a list of DRIP companies that reinvest every penny of your dividends.
Moneypaper changes a one-time small administrative fee of $30-$50 for setting up your account. It's well well worth it. I tried to set up a DRIP myself once and don't think I own that share yet.

[bruce65]

Another company that will set up accounts for you is http://www.equiserve.com/ They have a good selection of companies to choose from and some that have no fees at all. Depending on how much you want to invest each month, you may be better off going through a discount broker online and not doing a drip & keeping the shares in street name as some of these companies will charge $5 for each optional cash investment. If you can keep the fees down, you have made a wise choice for a savings vehicle. You can "pay yourself first" and the money is kept away from you so it makes it difficult to go out & spend it. Also it is fun to watch it grow over time which will also keep you from wanting to spend the money! One thing to keep in mind, doing taxes after you sell can be a pain. Make a spreadsheet for each stock with date of purchase, # of shares, & price per share so when you finally do sell the shares it will be easier to separate your short & longterm capital gains. Hope that helps.

[genchan]

Thank you for the information. I will look deeper into this. I appreciate all the opinions. Are there any of these DRIPs that are considered a better value than others?

[linniec]

Even after you're a member, some fee-driven DRIPS (such as Home Depot), charge you for the privilege of reinvesting. Each time you get a dividend of say, $10, they skim off administrative fees before reinvesting a part of what’s your’s. Isn't that lovely for them ?

In more than 600 investor-friendly DRIPS, all of your money is put to work. Not only is every penny of your dividend reinvested, but you can slip them more money to put in your account. (For example, the minimum amount that Coca Cola DRIP members can add is $10, whereas Johnson & Johnson requires $25).
Just be certain that this monthly amount is reachable.



Linnie Cunningham