Direct buyout programs allow the public to purchase shares directly from companies without a broker, with no minimum purchase or brokerage costs. The SEC’s rule changes in the 1990s led to the growth of direct buyout programs, and today, thousands of companies offer them. Employee purchase programs allow employees to purchase shares as part of an investment plan, often with additional contributions from the employer. While direct buy programs may be tempting to avoid brokerage fees, thorough research is recommended before investing.
A direct buyout program is a program devised by companies to make shares available for sale to the general public, directly, without going through a broker. It is considered one of the easiest ways to get involved in buying stocks because there are usually no minimum purchase or brokerage costs. However, there may be some small setup fees for creating an account.
At first, those interested in a direct purchase program had to look for a public utility as these were the only types of companies that could offer such a program. However, rule changes by the Securities and Exchange Commission (SEC) in the 1990s led to the growth of direct buyout programs among other companies. Today, there are thousands of companies offering a direct buy program.
A direct buyout program is similar to a dividend reinvestment plan. However, in a dividend reinvestment plan, investors must already own shares in the company. With a Buy Direct program, no prior ownership is required.
A variant of the direct purchase program is the employee purchase program. Many companies may offer this as a benefit to their employees. It allows employees to purchase shares of stock as part of an investment plan. In some cases, this stock can be purchased not only with cash from the employee, but with additional contributions from the employer. This type of direct buyout program allows the employee to have a small ownership stake in the company and is often a selling point for companies, both with employee recruitment and among customers, who may feel that employee ownership employees lead to a better product.
Those looking for a direct buy program may need to do a bit of research. These SEC-regulated programs cannot be advertised and therefore are harder to find. However, there are a number of websites that offer listings of those companies that offer a direct buy program. These websites may even offer a means through which a purchase can be made for a small fee.
While it may be tempting to use a direct buy program simply to avoid brokerage fees, this isn’t a wise strategy, say financial analysts. While there are good companies out there offering shares directly, there are also some that may not do so well in future years. Therefore, a thorough study is recommended before making any type of investment. Unlike savings accounts and other types of bank accounts, stock investments are not guaranteed and can go up or down.
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