Direct purchase programs allow the public to buy shares without a broker, with no minimum purchase or broker fees. There are now thousands of companies that offer this, including employee purchase programs. Careful research is recommended before investing.
A direct purchase program is a program designed by companies to make shares available for sale to the general public, without having to go through a broker. It is considered one of the easiest ways to get involved in buying stocks because there is usually no minimum purchase or broker fees. However, there may be some small setup fees when establishing an account.
Initially, those interested in a direct purchase program had to find a utility company, as these were the only types of companies that could offer such a program. However, changes in the Securities and Exchange Commission (SEC) rules in the 1990s led to the growth of direct purchase programs between other companies. Today, there are thousands of companies that offer a direct purchase program.
A direct purchase program is similar to a dividend reinvestment plan. However, in a dividend reinvestment plan, investors must already own shares of the company. With a direct purchase program, no prior ownership is necessary.
A variation of the direct purchase program is the employee purchase program. Many companies may offer this as a benefit to their employees. Allows employees to purchase shares of stock as part of an investment plan. In some cases, these shares can be purchased not only with employee money, but with supplemental contributions from the employer. This type of direct purchase program allows the employee to have a small amount of ownership in the company, and is often a selling point for companies, both with employee recruiting and with customers, who may feel that the Employee ownership leads to a better product.
Those looking for a direct purchase program may have to do some research. These SEC-regulated programs cannot be advertised and are therefore more difficult to find. However, there are several websites that offer lists of those companies that offer a direct purchase 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 purchase program simply to avoid brokerage fees, this is not a smart strategy, financial analysts say. While there are good companies that offer shares directly, there are also some that may not perform well in the coming years. Therefore, a careful study is recommended before making any type of investment. Unlike savings accounts and some other types of bank accounts, stock investments are not guaranteed and can go down as well as up.
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