Buying stocks directly - Brief Article

Black Enterprise, Feb, 2001 by Derek T. Dingle

Q I'm very interested in buying stocks [directly from the issuing company]? How do I get started?

--Gwen Washington Norfolk, Virginia

A You have selected a sound course of action to getting on the road to wealth accumulation. Whenever possible, you should always pay yourself first. The best way to start purchasing stocks as well as mutual funds directly is through your company's 401(k) plan. Your employer can direct a portion of your paycheck--up to $10,500 annually--into an array of such investment offerings as equity mutual funds and, in some cases, company stock.

Of course, you can invest in stock mutual funds directly and purchase shares through automatic withdrawal programs in which you direct a given mutual fund company to take funds out of your savings or checking account--usually between $50 to $100 per month--to invest in the fund of your choice. Another way to purchase stocks directly from a company is through direct stock plans (DSPs) and dividend reinvestment plans (DRIPs), accounts that allow you to buy shares directly from a company's headquarters.

By using such plans, you avoid paying hefty broker commissions that can eat into your total return. In fact, Netstock Direct, the leading Internet service for direct investors, has 1,600 stocks to purchase online. (Access the program through blackenterprise.com, at the site's Direct Investor Center) Recently, the service launched the innovative ShareBuilder program where investors can set up an online account and build a portfolio of stocks over time through automatic and periodic dollar-based investments. Another benefit: The program does not require investment minimums.

--Derek T. Dingle

Mail your finance questions to Ask B.E., BLACK ENTERPRISE, 130 Fifth Ave., New York, NY 10011, or send an e-mail to dingled@blackenterprise.com