Direct Individual Stock Purchase

When I was in my 20s I wanted to buy stocks but, I didn’t know exactly what to do. I “knew” you had to go to a broker but, I didn’t know how to find a good one. I had spoke to a co-worker and he told me I didn’t want to go to a broker. I should buy “no-loads”.

At the book store I looked for books on no-load stocks. There were plenty of books on no-load mutual funds. I was only able to find one book about no-load stocks called: “No-Load Stocks” by Charles B.Carlson”

1995 Version of No-Load Stocks

1995 Version of Book

No-Load Stocks was very well written for the beginner. I saw the book broke down in two basic sections: What were no-load stocks and a directory of stocks to buy. The book defined the no-load stock as a stock issued by a company via a transfer agent for paperwork and accounting. The purchaser can buy the stock from the transfer agent direct from the company with out paying the fees directly. (the company picks up the fees)

The stocks available were then listed with their transfer agents, initial cost and minimum payment needed. There were two really interesting concepts I didn’t know before reading the book. The first concept was you buy stocks by dollar amount not buy number of stocks. This to me was a major difference from brokers. With brokers you put money in an account, they buy full shares of a particular company with the your money, and the rest of your money just sits in the account doing nothing. The second concept was dividend re-investments; where the dividends of a purchased stock automatically gets re-invested into buying more stock. (I looked at it as buying stock at a discount because the up front money was the same as not dividend re-investing.)

When I decided to try the concept of buying stocks with the help of this book I was in my 20s not making hardly any money to spare. I was living paycheck to paycheck making less then the average person at the time. I had to focus upon stocks with two different type of attributes: Low initial costs and low additional minimum payments. It seems crazy to me now but, I remember scraping together $25 for an initial payment was a process. I had no extra money. The only idea I came up with at the time was using the gas/depreciation money the company I worked for gave me for me using my car  for company business. I could get together about $50.00 per month at the time. (After subtracting the actual price of gas)

Based upon minimum payments to the I allotted my stock buying to one company at $50 on one month , the next month of two companies; one at $15 & the other at $10,  buy the first company again on the third month,  buy the other two companies on the fourth month, and the cycle would continue until I decided to stop. I was able to own a portion of three different companies with little up front money and all of it going towards the stock purchase. Had I gone the route of the stock broker I would have not have been able to do any stock purchases that made sense. (The stock purchased would have had to increase a high percentage to be able offset the cost of the stock broker.)

No-Load DRIPs (dividend re-investment plan) with direct purchase is a great way to build financial momentum because you have everything going in the right direction:

  • low up front costs
  • no brokerage fees
  • ability to purchase partial stock
  • ability to have dividend reinvested in more stock
Of course there needs to be the regular due diligence in making sure the company looks solvent and is most likely not going to go out of business. The book is outdated as far as what stocks are available to buy. However it did give a great concept which can still be followed today. Charles B. Carlson is an editor of a web site now with a wealth of information (Drip Investor) Be sure to check out the investor basics section. He also has a “Dividend Reinvestment Plans Directory” -updated yearly which can be purchased. (I think it is the updated directory part of the original book I read.)

A funny thing about the co-worker who told me about “no-load stocks”; he actually meant no load mutual funds. Searching by myself was more productive for me had my co-worker just came to the bookstore with me. ( knowledge + action = momentum)

*On a side note: The $50 a month company; I only contributed for the 1 year ($300 total invested). I held on to the stock for about 10 years and sold for about $1200. The dollar was worth less in the ten years I held but, it was still a good profit from car “gas” money. The other two companies only made about $50 each but, I held those stocks for only about 3 years. 700 bucks is not a bad overall profit on $600 invested; it just took some time. I don’t expect this all the time or even most of the time but, it is nice when it does happen.

 

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One thought on “Direct Individual Stock Purchase

  1. Pingback: WAVE-B | Invest in Yourself: Dollar Cost Averaging for the Long Haul

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