Features of Direct Stock Purchase Plans That Each One of Us Must Be Aware
In direct stock purchase plans, minimum investment amounts are variable. However, it can be adjusted to meet your needs. Usually, they range between $25 and $2,500.
You can make the payments by check, automatic bank debit, or a combination of both.
Purchases can be scheduled weekly or monthly those allow you to dollar-cost average and potentially reduce risk.
Direct stock purchase plans allow you to invest in small amounts, rather than investing by number of shares. When your purchase amount does not afford to buy a full share, then you can get fractional shares that still earn dividends.
Here dividends can be reinvested. Few companies do not charge fees for stock purchases. In many cases, companies neither charge account set-up nor dividend reinvestment fees.
When you select any investment, then you need to analyze the company. Not only have you needed to analyze the company but also the industry carefully in terms of profitability, future outlook. You must also check whether the investment is in line with your goals and risk tolerance. Investing via direct stock purchase plans can be more advantageous than going through a broker. Thus you may miss out on your broker’s advice. Always keep in mind that this avenue is best followed by those who are willing to do the research and be their own financial advisor.