Buying Direct

There is an alternative method to buying stocks from a broker.  Investors can try to buy stocks directly from a corporation through a DSPP (Direct Stock Purchase Plan).  For some companies, the commission that you pay is $0.  This allows investors to slowly add shares of a company to their portfolios over time without having to build up a sum of money to purchase all at once (otherwise, you'd be paying a very large percentage of your investment in commissions).  There is usually a fee to sell shares, but hopefully, the stocks you pick for buying direct are for the long-term.  Some companies do have fees to buy shares, but they are generally less than broker's depending on the company.  Most of the ones who offer a DSPP are blue chip stocks like P&G or Microsoft.  You can find a company's DSPP plan if they have one on their website under the investors tab.  Or you could probably google search it.

With a DSPP, you can either choose to make a one-time purchase (they usually have a $100-$250 minimum initial purchase) or you can set up a recurring purchase with a minimum of $50.  This way, you slowly add to your portfolio over time and average out the short-term fluctuations of the market.  The main issue investors have with buying direct is the lack over control of the price you get your shares at.  Even when you send in a purchase order for a larger initial investment, the trade date is up to the transfer agent who processes the order.  Of course, timing the market on your own is difficult and whether you want to try to do so is another story (although you do have more control with limit orders) so this may not be a negative depending on your perspective.

Many companies who offer this method of purchasing stock usually don't advertise it widely.  Compared to E-trade and Scottrade who advertise all over the internet and on t.v., it isn't surprising that not too many investors believe that a broker is their only option to purchase stock.  Of course, for college students who don't have a lot of capital to work with but are looking to get some equity exposure, a DSPP in a blue chip may be just the tool to use.