How to Invest in Stocks Directly

Invest in stocks today with Interactive Brokers or Public.com as your online stock broker.

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.

How to Buy Stocks From a Company Directly

There are numerous options if you want to buy stocks without a brokerage account. Companies offer stock-purchasing plans that vary depending on if you are an employee of the company. 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).

1. Direct Purchase Plan (DPP)

A company direct purchase plan typically involves lower fees and often allows for the purchase of fractional shares. Employees can set up automatic, recurring investments and reinvest dividends. DPPs are usually offered by larger, well-established companies and provide a cost-effective way for long-term investors to build their holdings over time.

2. Stock Purchase Plan (SPP)

A company stock purchase plan, also known as an employee stock purchase plan (ESPP), is a benefit offered by some companies that allows employees to purchase company stock at a discounted price. Typically, employees contribute to the plan through payroll deductions over a set period, after which the accumulated funds are used to buy company shares. The discount is usually between 5% and 15% off the market price. SPPs provide employees with an opportunity to invest in their employer and potentially benefit from the company's growth while enjoying tax advantages in some cases.

3. Stock Option Purchase Plan (SOPP)

More commonly referred to as an employee stock option plan (ESOP), a company stock option purchase plan is a form of equity compensation granted by companies to their employees. Under this plan, employees receive the right (option) to buy a specific number of company shares at a predetermined price (strike price) within a set timeframe. These options typically vest over time, encouraging employee retention.

The benefit comes from the potential increase in stock price over the strike price, allowing employees to profit when exercising their options. SOPPs align employee interests with company performance and can be a valuable part of a compensation package, especially for startups and growth-oriented companies.

3. 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. 

4. 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. 

5. IPO (Initial Public Offering)

The initial public offering or IPO on a stock is the best way to get in on the ground floor when a company chooses to go public. You will find there’s quite a lot of information out there when a company is close to going public, and you can leverage that information to make wise decisions regarding new stocks. Plus, you can invest with brokers that give you better IPO access. You can also check out Benzinga’s IPO calendar to learn more about what’s coming to the marketplace.

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 account 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
• Allow you to paper trade or use a demo investment account to practice

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 network errors
• Some brokers don’t offer much information
• Brokerage fees can rise quickly
• Margin accounts can be dangerous for novice investors (and experienced investors)

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. Keeping costs down is a good way to start building your portfolio, but you must also choose a platform that makes it easy to invest. Trade stocks with any of these brokers and you may achieve high stock trade performance. Some of the best commission-free brokers are:

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.

Best Stocks of the Day

Create Your Investment Strategy and Make Stock Trades Today

Investing in stocks can be a great way to make money, but it is also a risky endeavor. Before investing in stocks, it is important to understand the risks involved and do your research. Familiarize yourself with the stock market and how it works. Learn about different types of stocks and their corresponding risk levels. Consider what kind of investments are right for you based on your financial goals and risk tolerance. Once you have done your research and are comfortable investing in stocks, you can begin to build a portfolio.

Frequently Asked Questions