You have two options when you want to invest in stocks. You can either buy stocks through a broker or do it yourself. Buying stocks through a broker can be an excellent option if you have money to pay them for work done. But, it’s usually an option for established investors.
Beginners without enough budgets to cater for brokerfees mostly choose to invest all by themselves. Of course, there’s no law binding an investor to buy stocks only through brokers. If you understand what it takes to invest in the stock market, you can avoid going through brokers.
It all starts with learning how to buy stocks without a broker. That’s what we will help you learn by the end of this blog post. We will discuss how stocks work, how to buy them without a broker, and how to determine what stocks to buy from various options in the market.
Here’s everything you should know.
Understanding Stocks: What They Are and How They Work
Stocks are small pieces of ownership that you can have in a company. Companies usually have many owners, each having a specific percentage of ownership. Everyone having a share or multiple shares with a company is part of it and is entitled to its profits.
Stocks work in a very easy-to-understand manner. The value of shares fluctuates depending on how the company is performing. For instance, you may purchase shares when a company isn’t performing well with the hope that it will improve and resell them later when that happens.
Investing in shares with the hope to profit from them requires patience. It can take 20 years for a share to increase in value from $100 to $1000. If you are patient enough, you’ll earn more dividends after 20 years. Share value can also decline if the company is performing poorly.
In short, the primary reason people invest in stocks is the potential to earn higher returns. Other reasons to invest in stocks include:
- Protecting wealth from inflation
- Having a source of passive income
- Diversifying your investment portfolio
- Enjoying liquidity - you can buy and sell stocks at any time
- The ability start small and grow
Can You Buy Stocks Without a Broker?
Direct stock purchasing has been an alternative for many investors in recent years. As said earlier, people prefer investing directly to paying brokers to help them with the process. But then, the trend has also been changing over time thanks to commission-free brokerage accounts.
These accounts are free to set up and do not charge as much as traditional brokers. These accounts make buying stocks directly from a company a more expensive option. Setting up a free brokerage account and buying shares online can be a good option for an investor.
So, can you buy stocks without a broker? Yes, because many other options are better than using a full-service broker. For instance, you can open a brokerage account online, invest in a dividend reinvestment plan or opt for the direct stock purchase option.
We’ll discuss these alternatives of using a broker in more detail later in this post. You can use any of them to avoid working directly with a broker. Investing in the stock market by yourself is worth considering if you’re looking to purchase stocks in a gold company.
Ways to Purchase Stocks Without a Broker
Purchasing stocks without going through a broker can be rewarding. Here are some ways you can do it effortlessly:
Direct Stock Purchase Plan (DSPP)
One option to consider is purchasing through a direct stock purchase plan of a company. But you need to start by checking if the company offers such a plan first. Not many investors know about this option, even though it has existed for many years now.
Most companies have adopted this plan to open doors for small investors. This option allows you to start investing in company shares even as low as $100. You can then grow your investment over time, increase the returns you get as dividends, or sell your shares at a profit.
As the name suggests, companies offering this option make it as easy as possible for people to transact directly with them. For instance, they have agents who help them gather all the details they need and get the paperwork out of the way. These agents also help investors get started.
Dividend Reinvestment Program (DRIP)
A dividend reinvestment program is another excellent option for those looking to grow their investments. It works for people who already have bought shares from a company. You can ask the company to reinvest the dividends you get from your shares in more shares to increase your ownership portion.
Most companies have these programs for investors who don’t want to withdraw their dividends. It saves such investors time while increasing a company’s working capital. However, some companies may charge some money for this service while others will offer it free of charge.
If you’re interested in gold stocks, you can find a company that offers this program. Or you can find a gold company that deals with gold bars and invest in them. You can ask the company to resell them later when prices are attractive and then reinvest your profits in its stocks.
Online Share Purchasing
You can also open an online brokerage account that you can use to buy stocks. Start by selecting an online stockbroker that you’ll open an account with for stock investing. Finding the best can be easy if you utilize online reviews and comparisons available through internet searches.
Proceed to pick the stocks that fit your needs after setting up your account. This will be easier if you have experience, but some research should also help you find the best stock. Decide the number of shares you’ll buy. It’s advisable to start small if you are a beginner in stocks.
Once you’re done, you should transact with the company through your account. You can then diversify your portfolio with other options offered by the company. For instance, if a company sells gold bars, you can consider investing in both their stocks and bullion bars.
Determining Which Stocks to Buy
Investing through a broker gives you one major benefit. You have an experienced person by your side, helping you make informed investment decisions. However, doing it all by yourself, especially as a beginner, means you’ve no one to guide or advise you in case of a dilemma.
One of the biggest headaches you can face is deciding which stocks to buy. There are many companies worldwide, and you need to choose stocks that fit your needs. This section of our post will help you know what to look for in stocks and choose the best. Read on.
So, how can you determine which stocks to buy?
It would help to start by considering your needs and plans. Some people buy stocks for investment purposes, while others buy to trade for profits. Both parties have different needs, and thus, the stocks they purchase must align with those needs to ensure they get the desired returns.
Here are the factors to consider if you’re buying shares for long-term investing:
- The stock’s dividend payout rates and history
- Cash balances and liquid assets
- Credit ratings
- Litigation issues and settlement of disputes
- Scalability and diversification potential
- Intellectual property
- Earnings growth and history
- Revenues and cash flows
- Debts and liabilities
If investing for trading, i.e., the short-term, you should consider these factors:
- Anticipated future value of stocks
- The timeframe you can hold stocks
- Your risk tolerance
- Your investment goals
Those are the factors both investors and traders in the stock markets should consider when choosing stocks. The aim should be to ensure you get the desired returns on investment. As a long-term trader, you’ll be looking at the dividends while a trader will consider future profits.
Choosing the right stocks is the biggest step to getting the expected returns. Also, it will be the best way to avoid losing your money to rogue investors. You can easily find the best stocks for your goals if you take your time to consider these factors.
That’s what you need to know about investing in stocks without going through a broker. Most investors, primarily beginners in stocks, prefer to deal with companies directly when buying shares. This is understandable as brokers charge a fee that can be high for most starters.
We have provided all the insight you need to start buying stocks directly. All you need to do is identify the companies you’d like to invest in. Next will be checking the options they offer to investors who do not want to go down the broker route for some reason.
Gold companies can be worth investing in if you want to enter the stock market. You can find gold companies that have machinery for direct stock purchase plans. Gold companies also offer other investment options like gold bars.
Contact Acre Gold for more about bars as alternatives to stock.
Stockbroker Definition | investopedia
Direct Stock Purchase Plan (DSPP) - Overview, How It Works | corporatefinanceinstitute