Purchasing stock in a company is most often done through either a traditional full-service broker or a discount online broker. That's not to say that you are unable to contact the company and purchase stock directly from their investor relations department. Buying stock directly from a company is a great way to avoid paying broker fees and commissions. Keep in mind that these types of transactions have certain restrictions that should be understood prior to making a purchase. These types of direct purchases of stock are often referred to as direct purchase plans, direct investment plans or no-load stock purchases. Here are some tips to help you by direct stock from a company.
The first guideline is not specific to buying direct stock from company but is more reflective of investing in stock in general. Just as you would normally conduct traditional research on an organization when purchasing stock through a broker the same goes for direct stock purchases. Thoroughly research the company to evaluate fundamental, technical and organizational performance prior to making any stock purchase. Because you're dealing directly with the company it makes sense to go above and beyond normal due diligence when evaluating a stock purchase. Sometimes when investors purchase stock via a brokerage house they buy small lots in multiple companies to spread the risk around. To make it worthwhile when you buy direct stock normally the lots are larger which means more risk so a more thorough evaluation of the company is necessary.
Once you have thoroughly researched an organization, contact the investor relations department to obtain information on how to buy direct stock from the company. It is normally a straightforward process and there will be helpful representatives on the other end which will guide you. They will point you to either the correct department or answer questions on what paperwork to fill out and where to mail your information. There is no standard on how to buy direct stock so it is important to ask lots of questions when dealing with a company to make sure all paperwork is filled out correctly and the payment is made for the correct amount.
If you buy direct stock from a company sometimes there is additional flexibility in how much and for what amount the stock can be purchased. Some organizations allow you to set up monthly purchase plans to buy fixed dollar amount of stock resulting in fractional shares. This normally will not be possible through traditional and online brokerage houses where you only buy in round lots of hundreds or thousands. When you buy direct stock it is in the company's best interest to make it easy for individual investors to complete their transactions in the most efficient way possible.
It's good to know how to buy direct stock from companies as it allows an alternative means for investors to purchase shares from their favorite organization while saving money on commissions by cutting out the middleman. As with any financial transaction ask lots of questions and thoroughly review all paperwork to make sure you are not only protected but that you also understand your obligations. Now that you know how to buy direct stock in a company the only thing to do now is pick up the phone and start investing.