Direct investing
The way to buy stock directly from a company for relatively small transaction fees is direct investing. It is not an approach or a strategy but rather a way to build a portfolio through small monthly contributions. Direct purchase stock plans and dividend reinvestment plans is done by direct investing.
To buy stock directly from a company, the company must first have a direct stock purchase plan, which is usually administered by a bank. International Business Machines Corporation, for example, has a plan that allows an initial investment of five hundred dollars to fifty dollars a month. For companies that pay dividends, the direct stock purchase plans usually include a dividend reinvestment plans the automatic reinvestment of any dividends into shares of the company.
Direct investing is a good way to build a portfolio without a lot of investment capital, and the regular contributions take advantage of dollar cost averaging. Dollar cost averaging theoretically evens out the fluctuations in stock price through regular purchases at fixed intervals. The disadvantage of direct investing is that you have to join a new plan for each company whose stock you want to own.
There is an alternative to joining numerous direct stock purchase plans. Net stock directs share builder allows you to choose from more than four thousand companies and index products. There is no account or investment minimum, and the cost per transaction is about four dollars or a fixed fee of twelve dollars per month.
The goal has been to introduce you to some lesser known investing styles for the sake of completeness. Keep in mind that these investing styles are called minor for a reason. Unlike the four major investing styles, the minor investing styles are not followed by million and millions of investors. It stands to reason that if a style is not well followed, it may not provide the force of momentum behind your stock selections. Nonetheless, these minor styles have had at least a modest following for some time, and if any of them piques your curiosity, by all means, investigate it further.
Another way of direct investing in stocks are to avoid brokerage commissions as you invest in individual stocks is by enrolling in the direct investing option at a growing number of companies.
If you do not want to choose stocks on your own, you have another alternative starting an investment club or joining one that is already up and running. An investment club is a group of people, usually between five to thirty people, who pool their money and decide on stocks to buy and sell.
Advantages of direct investing through such a club include:
- You will hear about stocks you probably never would have discovered on your own. Because members of the club come from all walks of life, they often have insights into companies that are doing well in industries in which they work.
- You can gain valuable experience from other members that you can apply to your own portfolio.
- Through the club, you can be part of a more diversified portfolio than you could probably afford on your own.
- The club will probably pay lower commissions than you would because it is buying more shares in each transaction.
- You may make social or business contacts that are important beyond the investment clubs scope.
Most people enjoy their investment club experiences as both a way to learn about and profit from direct investing and as a way to have fun.
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