Invest Without a Broker

The challenge for many people who are looking to invest is money. I hear it all too often “I don’t have enough money to invest.� The key to investing for the average investor, who is busy with other matters in their life, is to keep it simple and easy. A simple way to invest is through Dividend Reinvestment Plans (DRIPs). Whether you have substantial amount of money to invest or small amounts of money you can invest in dividend stocks. It’s a great way to set it and forget it.

What are Dividend Reinvestment Plans?

It’s more than just dividends. Essentially, you are buying stock directly from the company in very small or large amounts on a monthly basis, if desired. The name comes from the face that they reinvest the dividends rather than paying out the dividends in cash. Dividends are paid/reinvest on quarterly basis. Reinvesting the dividends allows you to purchase more stock. Similar to your 401(k), you arrange a certain dollar amount to invest in your DRIP account. The difference is that you are building shares in a particular company.

Similar to DRIPs is Direct Stock Purchase plans (DSPs) which allow you to buy directly from the company instead of going through a broker. In a nutshell, you end up buying directly from the company and enrolling in the reinvestment program. For most companies, as long as you own one stock, you can enroll in their DRIP.

Benefits of DRIPS

• You don’t need a broker. Therefore, you avoid brokerage commissions.
• Low to zero fees to purchase the stock
• Invest with small amounts of money. As I’ve mentioned, you don’t need large amounts to invest in the program. Some DRIPs let you invest as little as $10 per month.
• Monthly automatic investing

Where can I buy the stock?

• Computershare
• Head directly to the company’s website and typically, under the investors page.

A note on DRIPs

Large companies such as GE, P&G, Nike, and Wal-Mart typically offer DRIPs. Investing in one company or putting all your eggs in one basket is not proper diversification. However, you can use DRIPs to help you begin to create your investment portfolio. You are implementing the dollar-cost averaging strategy and it’s a patient strategy to grow your money. Make sure you research the company you plan on investing in. DRIPs are a great way to begin investing on a shoestring budget and to continue investing every month.