What is Direct Stock Plan?

Nowadays there are many companies that allow investors to purchase stocks from the company directly. According to the Securities & Exchange Commission it is perfectly okay. This is also referred to as DSPP. Most of the companies would require the information that you already have stocks through employment with the company.

The Direct Stock Plan operates in a different way than buying stock through a broker. There is no commission charged for these stock plans, but there can be a small fee. The other variation is that the company buys and sells the stock at a given time. The investor cannot sell or trade stocks at will. The investor may turn the stocks over to a broker to sell, but the broker cannot charge a commission. You may be charged a fee by the company. It depends on your contract.

If you have a preferred company, like the Walt Disney Company, Coca Cola or other brand names in the United State you may be able to execute a Direct Stock Plan to purchase stocks on a regular basis. You can review the list of stocks in your local library or check out the company you are concerned in by accessing the company web site.

Another method of investing direct in a company is by way of the Direct Dividend Reinvestment Plan. It is commonly called a DRIP. The good part of this type of plan is that instead of receiving the dividends you agree to reinvest the dividends in more stock in the company. It is a regular Direct Stock Plan with a reinvestment agreement. You may do the same reinvestment plan with your other stocks and mutual funds even if you have a broker.

The advantage to contacting the individual company yourself is that it allows you to use your preferences and then do a small amount of leg work. The company representative will give you the necessary forms and give you with individual advice on how to set up pay roll judgment. In turn you can contact your banking institution, employer human resources or bill payer and set up the account.

It will astound you the number of very good companies that will allow you to buy stocks direct by setting up a plan. The range of possibilities includes, utility companies, fast food stocks, entertainment and retail stocks.

If you have a firm company that has shown solid performance this may be a good choice for investing.
The only thing you have to lose is your time. The time it takes in gathering the information has a big payoff. It will save you commission fees and provide you with a long term connection with your favorite company.