Looking for an easy and cheap way to invest money in solid dividend-paying stocks? Which is the best company to invest in shares bypass brokers and buy stocks directly from the company itself.
Direct stock purchase plans, also known as dividend reinvestment plans, are great for anyone who wants to invest small amounts of money in individual stocks at a regular monthly interval. 25 per month, says Chuck Carlson, editor of DRIP Investor Newsletter. You can make direct one-time stock purchases, but the minimum purchase is frequently much more expensive. There are many companies that have no fees at all, and the commissions you’re saving on can add up to an enormous percentage over time,” says Vita Nelson, editor of the annual The Moneypaper’s Guide to Direct Investment Plans.
We’re talking a savings of thousands of dollars over the life of an investment. 120 per year in commission fees. Buy directly from Exxon Mobil, on the other hand, and you’ll pay no fees to set up your account or to buy stock. Nelson says such plans are especially advantageous to small-money investors. Start by looking at companies in the Dow Jones Industrial Average, preferably those with direct investment plans that have no fees.
Gamble — have their ups and downs, but they are solid long-term performers and unlikely to lose value rapidly. The biggest benefits come when you reinvest these dividends to buy more shares. Another benefit is that a direct investment plan essentially forces you to use dollar cost averaging. It’s a strategy that prevents you from trying to time the market. You simply invest a set amount of money at a regular interval, say monthly, no matter what’s happening with the market. It’s important to remember that diversification is a critical element of spreading your risk while investing.
The best way to achieve diversification is through a balanced or target-date fund. Carlson says you can begin building a diversified portfolio through direct stock purchase plans by buying different companies in different industries. But these stocks should not make up your entire portfolio. Direct stock purchase plans aren’t for investors who want to buy and sell based on the latest news.
They may require shares to be traded on a regular, preset schedule at an average market price. That means you won’t be able to make a trade as quickly as you can with a broker. You can find when the company will buy and sell shares and how it determines the price by reading its disclosure documents. Many direct stock purchase plans are now administered by third parties, the biggest one being Computershare.
Read the full plan description and information at the company’s website to determine when they buy and sell shares and how they determine the price. Pay attention to eligibility requirements, fees charged with each transaction and number of shares needed to open an account. You’ll also want to look at the dates you can invest, how to withdraw, transfer or sell shares, and how to withdraw from the plan entirely. Want to buy breakfast with gold? Fund manager Gervais Williams has carved out a reputation as one of the UK’s best smaller company stock pickers. While the Miton manager runs funds that invest across different sized companies, it is small caps that have made his name over a 30-year career – thanks to a knack for spotting recovery opportunities, future growth stars and the stocks sitting below the FTSE 100’s big guns that can pay a consistent and rising dividend. But despite his ability to meet with senior company directors and the research resources that he enjoys, Gervais says that he believes private investors, especially those outside London, can have an advantage when investing in smaller companies.