Ellie asked in Business & FinanceInvesting · 1 decade ago

DRIPS (Dividend Reinvestment Plan) Do i have to buy it from the broker first before i buy it direct from comp?

I want to invest in DRIP funds and I read somewhere they I have first invest with a broker and get the drip put in my name not the companys name and then I can buy directly though the company i.e by from a broker like sharebuilder atleast 1 share of that company and then I can buy more drip shares through the company directly...If this is true my question is

If I am already buying a share of stock with a broker then shouldnt i just continue to buy all of my stocks through them. I mean what are the advantages of buying 1 through them and then the rest directly through the company...sharebuilder offers drips (i am just using sharebuilder as an example i.e ameritrade etc)...especially if im buying stocks from more than 1 company (like 5) isnt easier to just buy it all witht he same broker instead of directly through the company. Am I saving money and is the money that significant if I buy just 1 share of each company through a broker and the rest through a company..I am planning on buying and keeping the stocks for long term...

Also heard about DSP's direct stock purchase plans that will allow me to just buy the stock right through the company the first time without having to go through a broker.

what should i do. I am totally new to this, but I want to go the route of inexpensive and if possible I want to know that the company is going to keep track of the DRIPS sold and bought for tax purposes (I heard its difficult keeping track)

2 Answers

  • Favorite Answer

    DRIPS do require you to buy the first share through someone other than them, then you can buy the rest directly from them. The reason is most companies don't actually track the ownership of their stock directly they let someone else do that. Because of that outsourcing, to then sell you your first share and thus set you up as an official investor in their company with your own account number they would have to be certified as a stock broker. They just got done outsourcing all that so the last thing they want to do is the regulatory headache of being stock brokers. Once though, you have an account as a bonafide investor in their company they can issue stock to you and just email the transaction with your account number to their 3rd party administrator (similar to what you might do if you physically gave a paper stock certificate to a friend you would have to mail the transaction to the stock plan administrator...they are acting more like a citizen then the actual company). The benefit though is absolutelly no costs on the transaction OR sometimes you get the stock at a discount.

    Again DSPs are just what they sound like but from companies that do their own internal handling of the stock administration so they don't need you to be set up in someone else's system first.

    DSP's are the easiest but there are less of them.

    There are DRIP clubs that have already purchased 5 or 10 shares and will sell one to you with less fees than brokers.

    Sharebuilder is a good program but you have to make sure that the little fees don't add up, and you are at their mercy on which stocks they buy and when. They don't handle all the shares available because their business model isn't successful on shares with little daily activity.

    Your best bet in my opinion is a local DRIP club where someone already has the shares and you can transact with a non-profit organization you trust.

    For tax purposes all personal finance softwares work just fine tracking the income issues. Just make sure you keep it updated each month and you'll be fine.

    • Login to reply the answers
  • kime
    Lv 4
    3 years ago

    maximum inventory at present is held in the broker provider's nominee or detailed Crest account. it is the broker provider, consequently that has to % between inventory dividend or funds dividend. needless to say the broker provider might desire to ask the customer what he needs to do. How it is arranged will remember on the broker provider. With my corporation the clearing agent sends around a notification asking what my customer needs to do. I telephone the customer and ask. except i know that the customer, working example constantly needs funds. it could be extraordinarily common with any broker provider, online or in any different case.

    • Login to reply the answers
Still have questions? Get your answers by asking now.