Why You Should Invest Directly
There are some benefits to purchasing shares directly from the company rather than from an investment broker; that’s why many companies offer DRIPs.
Buying shares directly from the company will typically mean paying for transactions using a check or wire-transfers, which can be just as easy as setting up an online account with a broker. Many companies also have a mobile app for trading shares, which you can upload share certificates to.
Perhaps the biggest benefit of going direct is the possibility of paying less in transaction fees. Brokerage firms are businesses like any other, and they try to make money by charging fees. Transaction fees vary from broker to broker, so it’s a good idea to shop around to compare costs. This is the primary reason why many brokerages have incentive programs that reward you for referrals.
In any stock transaction, information is key to making informed investment decisions. If you buy the shares directly from the company, you can do the research yourself instead of relying on a broker. A lot of companies also make material information available to shareholders. It’s always a good idea to read quarterly reports with a critical eye, preferably by hiring a professional to help you. Company-direct investing also means you can call the office and ask questions whenever you want.
Direct Stock Purchase Plans
You can invest in individual companies directly, just through their website. If you are a big fan of a particular company, you can buy a single stock directly from them. These direct stock purchase plans, or DSPP, are usually meant for smaller investments, and offer great returns.
But, these plans have a high minimum amount. If you do not have enough money to invest, you will not be able to buy any stock from this online. But, companies are more interested in customers, and so, are providing the DSPP.
This will not help if you have a few hundred or a few thousand dollars to spare.
These plans offer a reason why you should buy stocks. Basically, they are single stock investments plans. Instead of the traditional mutual fund investments, the DSPP allows you to invest only in a single company.
Having a single account to manage will make you more serious about managing your investments. Because it will be just about one company, things will be simpler.
But, most importantly, you will be able to invest in a company you believe in, and that is a good idea.
This has a catch though. You may have noticed that some DSPP investments don’t have the same returns as you can get from index funds.
DSPPs may even have higher investment fees than is the case with mutual funds.
Direct Re-Investment Plans
[If you are a first timer then you may have a doubt as to how to buy stocks of individual companies like XYZ company ? and whether the stocks can be directly transferred to your demat account.
And you must be thinking can you invest directly with the stock market brokers in that case?
So, what are the steps involved in buying or selling stocks?
The steps involved are really simple and are explained below in brief.]
Here are the steps needed in order to buy stocks via direct investment:
You have to open a demat account with any of the stock exchanges.
You have to make a DEMAT account with any legit online stock broker like Zerodha or any other.
To open an account, you need to know the KYC requirements of the brokers. These requirements are specific to the type of account you are opening. For example, if you are opening an account to trade only in stocks, the KYC details needed for opening the account is different from those which are needed to open a demat account.
Make sure you have a PAN Card and a Bank Account in order to proceed.
Companies That Offer Direct Purchase
If you want to invest directly with a company, several businesses offer you the chance to do just that. But there are different types of direct investing available.