If you felt burned by the stock market following the financial crash of 2008, you are not alone. The financial crash of 2008 left many wary of investing in the stock market and working with stockbrokers. In recent years, however, the investment landscape has undergone a transformation. Between the internet and numerous investment apps, it is possible to purchase stocks directly online without a broker. As a result, you have more flexibility in what you trade, when you trade and how much you pay in fees.
Whether you own stock or are looking to buy stock for the first time, it is worth considering whether buying stocks directly is right for you. Read on to learn more about your options for buying stocks without a broker.
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Best Ways to Buy Stocks Without a Broker
There are numerous options if you want to buy stocks without a broker. Companies offer stock-purchasing plans that vary depending on if you are an employee of the company.
If you are an employee, you can purchase company stock directly through a variety of options such as a direct purchase plan (DPP), a company stock purchase plan (SPP) or a company stock option purchase plan (SOPP). These plans typically allow employees to buy shares in a company without paying brokerage fees or requiring a brokerage account. Though the cost of investing is lower, most DPPs, SPPs and SOPPs include limits to both the amount of stock you can purchase as well as the amount deducted from your monthly paycheck. This can limit your potential returns.
If you are not an employee, you can buy stock from a company directly through either a Direct Stock Purchasing Program (DSPP) or a Dividend Reinvestment Plan (DRIP). By purchasing stock through a DSPP or DRIP, you can bypass brokers and brokerage fees to buy stock directly from your company of choice.
Best Ways to Buy Stocks From a Company Directly
The best ways to buy stock directly from a company are a DSPP and DRIP. Both options allow you to have more choice and control over what you invest, how much you invest and how long you invest.
1. Direct Stock Purchasing Program (DSPP)
A DSPP allows you to purchase stock from a company directly without having to pay commissions to a personal or online broker. Typically, the company you’re investing in will take a specified amount regularly from your checking or savings account. You can also make larger
one-time purchases instead of monthly amounts. If your company pays dividends, you also can reinvest your dividends back into the company by purchasing stock. DSPPs are an attractive, low-cost option to individuals who want to purchase stock from companies that they trust while retaining a high degree of self-directedness.
2. Dividend Reinvestment Plan (DRIP)
Companies distribute their profits to shareholders through dividends, or corporate payments, to encourage continued investment in their company. If you are a shareholder with a DRIP, you can continue purchasing company shares instead of receiving cash dividends. Since DRIPs don’t require a broker, you forgo broker fees and commissions, reducing the costs of investing.
If you have a DRIP, you purchase fractions of shares rather than whole shares. This means that the amount of a stock you purchase is smaller because you will be buying parts of shares instead of the whole amount. However, a DRIP is advantageous for individuals who wish to stay with a stock long-term and maximize compound returns.
Is it a Good Idea to Buy Stocks Without a Broker?
Online brokers can offer you many advantages that traditional brokers do not:
- Save you money and time with lower brokerage fees and real-time access
- Reduce the personal biases of brokers who promote standard investment packages
- Are convenient, allowing you to make trades from anywhere with internet access
- Provide analytical tools that can help you evaluate common stocks and preferred stocks to see which is a better fit for your investment goals
Investing with online brokers can have disadvantages:
- May be overwhelming for new investors with little to no market knowledge
- May be addictive, causing investors to spend too much too fast
- Allow you to make trades without considering how it affects your overall strategy
- Are dependent on computers and vulnerable to computer errors
If you decide to trade with an online broker, remember that you will have to put in the time to do research, develop a strategy and make adjustments along the way if you want to see a return on investments.
Best Commission Free Brokers to Buy Stock
Commission-free brokers are a great choice if you’re looking to capitalize on the flexibility and lower-costs of online brokers. Some of the best commission-free brokers are:
Commissions
Account Minimum
1 Minute Review
Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.
Webull is widely considered one of the best Robinhood alternatives.
Best For
- Active traders
- Intermediate traders
- Advanced traders
Pros
- Commission-free trading in over 5,000 different stocks and ETFs
- No account maintenance fees or software platform fees
- No charges to open and maintain an account
- Leverage of 4:1 on margin trades made the same day and leverage of 2:1 on trades held overnight
- Intuitive trading platform with technical and fundamental analysis tools
Cons
- Does not support trading in options, mutual funds, bonds or OTC stocks
Commissions
Account Minimum
1 Minute Review
TradeStation is for advanced traders who need a comprehensive platform. The brokerage offers an impressive range of investable assets as frequent and professional traders appreciate its wide range of analysis tools. TradeStation’s app is also equally effective, offering full platform capabilities.
Best For
- Advanced traders
- Options and futures traders
- Active stock traders
Pros
- Comprehensive trading platform and professional-grade tools
- Wide range of tradable securities
- Fully-operational mobile app
Cons
- Confusing pricing structure to leave new traders with a weak understanding of what they pay
- Cluttered layout to make navigating TradeStation’s platform more difficult than it should be
Commissions
Account Minimum
1 Minute Review
This publicly listed discount broker, which is in existence for over four decades, is service-intensive, offering intuitive and powerful investment tools. Especially, with equity investing, a flat fee is charged, with the firm claiming that it charges no trade minimum, no data fees, and no platform fees. Though it is pricier than many other discount brokers, what tilts the scales in its favor is its well-rounded service offerings and the quality and value it offers its clients.
Best For
- Novice investors
- Retirement savers
- Day traders
Pros
- World-class trading platforms
- Detailed research reports and Education Center
- Assets ranging from stocks and ETFs to derivatives like futures and options
Cons
- Thinkorswim can be overwhelming to inexperienced traders
- Derivatives trading more costly than some competitors
- Expensive margin rates
While many brokers are commission-free, it does not mean you won’t be paying fees to use their services. Brokers may charge other fees such as per-contract fees, account maintenance fees, account transfers and withdrawal fees among others. When researching a broker, make sure to take into account all fees associated with their services to see if they are a good fit for your needs.
If you’re ready to start dipping your toes back into stock market investing but want to retain your independence, you have some choices. You can invest in a stock or company directly through a variety of plans depending on whether you are an employee of a particular company. Alternatively, you can turn to the convenience and services offered by an online broker. Both options provide you with more flexibility and control over your trades and investments.
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Disclaimer: These stocks are not stock picks and are not recommendations to buy or sell a stock. Rather, these ideas should be viewed as potential opportunities for elevated levels of volatility and trader interest and thus increased liquidity. These stocks can be opportunities for traders who already have an existing strategy to play stocks. Benzinga does not recommend trading or investing in low-priced stocks if you haven’t had at least a couple of years of experience in the stock market. For a full statement of our disclaimers, please click here.