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How To Buy Stocks Online Without a Broker

Updated on September 16, 2011

How To Buy Stocks Without a Broker

Managing your own brokerage account, thereby bypassing the need for a stock broker, has become an increasingly popular option for many traders around the world. This is especially true thanks to the spectacular rise of the Internet and it's accompanying technology, giving just about everyone access to the information, ideas and tools to make their own trading decisions.

Buying stocks directly online is also a great way for people without large funds to invest and save money by eliminating the need for a middle-man. The idea of penning this article is a product of my debates with friends and family, who had no idea they had these kinds of options available to them. I, for one, like to shoulder the risks, and reap the rewards of my own ideas.

This article will outline the steps that it takes to become your own trader, but bare in mind there are limitations and guidelines (and yes, costs) that will need to be considered, we will get to those as they arise.

Introducing Some Jargon

Online Trading Companies

Using an online brokerage firm may, technically speaking, still count as a "broker", but only because unless you buy shares directly from the corporation itself, you simply cannot buy them independently. Online firms such as these provide a buying and selling platform that is non-invasive and usually offer a flat commission per trade. If you want to buy stocks directly from specific companies instead, skip this sub-heading of the article.

Your first option with regards to online trading will be that of finding a reputable online trading company (clicking on the link will direct you to a comparison of some companies that allow you to manage your own brokerage account).

Researching your company of choice is critical. Services, prices and conditions can vary greatly. I also advise contacting existing clients for feedback, or more simply by browsing objective reviews.

Things to look out for (and expect):

  • Commission and account fee transparency. Some online brokerage firms offer flat commissions per trade (regardless of share movement). Prices can vary greatly, but it seems the accepted norm is around $4-$10.
  • Client services (free and premium advice and administration).
  • East of use (the website itself, account tools, independent research).

  • Transfer Agent - The company or third party in charge of overseeing the transfer process.

Online trading can be a convenient, rewarding and relaxed way to make long-term investments. Obviously, the reverse may also be true.
Online trading can be a convenient, rewarding and relaxed way to make long-term investments. Obviously, the reverse may also be true.

Direct Purchase

After having thoroughly researched you company of choice, and made certain that they offer a direct purchase plan (DPP), you're ready to buy stocks directly from them.

The conditions and terms of individual purchase plans can vary on a company-to-company basis, there is no benchmark. For instance:

  • Transfer agents (who oversee your orders) may or may not charge an additional subset of fees.
  • The way in which the order is processed can change. From a laborious application to a swift online purchase. Admittedly the latter is becoming increasingly common, but it could be a concern nevertheless for traders on a schedule.
  • You may not have control over the when and where of the buying itself, this is something that the company will almost certainly decide.

You're best bet is to draw up a list of candidates and then research their methodology separately.

Pros And Cons Of Investing Without A Broker

Pros

  • Minimal expenses, making it a perfect fit for low-fund investors.
  • Your choices are free of influence, and you will have the certainty that you are not being used in some elaborate financial game.
  • Very little contact (that's a plus for me at least!).
  • It is very simple to do.

Cons

  • Lack of professional financial advice.
  • Potentially risky (not only because of the reason above, but be advised that online trading can suffer from electronic outages and failures as well).
  • Lack of direct control over buying and selling, you may end up being victim of a delayed buy or sell.

Conclusion

I hope you enjoyed this article onhow to buy stocks without a stock broker. If you have any concerns, suggestions or comments please feel free to use the comment module below and I'll get back to you as soon as humanly possible! Thanks in advance!

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