How to Buy Stocks Online Without a Broker

FT Contributor
A man buying and trading stocks at his desk with three computer screens.

Most investors who are active in the stock market use a brokerage firm or stockbroker to help buy and sell different stocks. With a professional broker on your side, you can get assistance in building a strong investment portfolio that’ll perform. You’ll also be able to seek advice on the best investments to make and the right time to trade or sell stocks.

If you’re new to investing, you may be turned off by brokerage fees you’re required to pay when you request most investment transactions. You don’t have to use a broker to buy and sell on the stock market but your options for trading are limited if you don’t use the professional services of a brokerage firm.

It’s important to review the advantages and disadvantages of using a stockbroker, as well as your options for trading without one before you decide how to conduct your stock transactions.

Table of Contents

Are Stockbrokers Worth It?

Most stockbrokers charge fees for each transaction you request. While these fees cut into an investor’s profits, there are many advantages to using a stockbroker when trading.

Advantages of a Stockbroker

Most investors use stockbrokers to buy stocks in their portfolio because they have experience with trading and provide access to the entire market. Additional advantages to using a stockbroker include the following:

  • They can give you effective advice on where and how to invest.
  • They can help you develop short- or long-term investment strategies based on your financial goals.
  • They act as a middleman between you and the stock market so you don’t have to do the trading yourself.
  • They handle the administrative duties and backend paperwork that comes with trading.
  • They can manage your entire investment portfolio to ensure it’s diverse and profitable.
  • They’re another person in your corner and on your side focused on making you money.

When you hire a stockbroker who’s invested in your future and has experience with the stock market, you may see better returns on your investments than if you tried to go at it alone.

Disadvantages of a Stockbroker

One of the most obvious disadvantages to using a stockbroker is the fees you’re charged to complete transactions. In addition to brokerage fees, you may be wary of hiring a stockbroker to manage your portfolio due to the following:

  • Some brokers make money from both your gains and losses, so they don’t have much skin in the game.
  • You may disagree with some of the investment decisions they make for you.
  • They may not have clear reasoning for the actions they want to take with your portfolio.
  • They might be more focused on making a profit for the firm and less focused on your financial goals.
  • You could catch them churning, or buying and selling stocks rapidly to make money for the firm and to rack up your brokerage fees.

Handing over the rights to make financial decisions on a personal investment portfolio can be too much for some investors, even if a broker has years of proven experience.

How to Buy Stocks

If you’ve decided you don’t want to hire a broker to assist with trading, you have a few limited options for buying stocks on the market.

Direct Stock Purchase Plans

Some companies offer direct stock purchase plans (DSPPs), which allow you to buy stock directly from the company. If you attempt to purchase stocks in this manner without a broker, the company may demand you make a minimum regular investment.

This minimum investment varies depending on the company, but is usually around $50 per month. Instead of a regular investment, the company may request a minimum one-time stock purchase, which is usually $250 or $500.

Before you agree to a regular minimum investment or lump-sum payment through a DSPP, be sure to review the fees associated with your investment. You may get lucky and find companies that allow you to trade their shares for free. However, most companies charge small transaction fees, which are usually a few dollars, plus a few extra cents per share. When you sell, you may be responsible for a large fee, usually about $15 plus a few cents per share sold.

Dividend Reinvestment Plans

When you enroll in a stock’s dividend reinvestment plan (DRIP), you can take the cash dividends that are paid out to you by the company you own shares in and use it to buy more shares in the company. These plans are usually coupled with cash investment options since you may pull cash out from your investments.

A DRIP is convenient because you have the option of setting up regular bank account withdrawals that are placed directly into investments. The specific regulations on a DRIP vary, but in most cases, you’re required to pay small fees or no fees at all. These plans are best for long-term investors or those with a low risk tolerance.

Other Speciality Accounts

Without your own broker, you may be able to approach an asset management company and gain access to stocks. If the Registered Investment Advisor (RIA) agrees to work with you, they’ll instruct a company broker to make a trade, then transfer that trade to one of your family members. With the stock in your family member’s name, they can buy stock in that company without the assistance of a broker.

If you don’t already have a personal relationship with an asset management company, you may need to prove you have a significant amount of money to invest before the company agrees to work with you. If you’re a beginner investor without a lump sum set aside to invest, this option may not be viable for you. It’s also important to note that the shares are not in your name but in the name of your family member, which may get complicated.

If you’re not sure whether you want to use a broker to help with your stocks and trading, consider the advantages and disadvantages of enlisting professional help. While you have a few options for purchasing stock without a broker, your choices are limited if you don’t go through a brokerage firm.

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