Where to buy stocksDear Travis,
I’ve been subscribed to your newsletter for over a month now and absolutely love your detailed articles and analyses of the latest teased stocks – so much so that I would like to buy into some myself!
However, one question I have not seen answered anywhere on Stock Gumshoe is WHERE exactly do you go to actually buy these stocks? Do you use an online broker, such as TD Ameritrade for instance, or do you buy them directly from the companies themselves? I am also asking this because I am tempted to buy some dividend-paying stocks and am not sure how exactly those dividends are going to be paid to me if I use an online broker?
Thank you very much for your time and patience with a stock newbie such as myself. I hope to hear from you soon!
Have a great end of the week!
Kind regards,
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Welcome aboard!
It is theoretically possible to buy some stocks direct through the company (or almost directly, at least, through a transfer agent like Computershare), but that’s really only appealing for people who find a stock they want to gradually build a position in over decades using smallish monthly purchases. That’s generally called DRIP investing or Direct Stock Purchase Plans (DSPP), and they gained favor in the 1970s and 1980s, partly because trading stocks through a full-service broker was prohibitively expensive for small investors because of huge commissions and high minimums.
That’s no longer true. Discount brokers will trade most stocks for you for a very small $5-10 commission per trade, and many offer free trades to some of their customers, and you can open a brokerage account now and get perfectly fine service from a discount brokerage for $500 or less in many cases.
All brokers will follow your instructions when it comes to dividends, so you can either have those dividends automatically reinvested in new shares (and therefore compound your earnings over time) or take them in cash.
If you take dividends in cash, they don’t actually send you a check — the broker gets the cash, and they will put it into your clearing account or cash account. Most brokers will also let you set up automatic withdrawals if you need the income and send it right to your checking account (or let you write checks on your cash account). Part of the service is that they also prepare the tax forms you need at the end of the year, so you will get a report of your dividends and capital gains and any other transactions you made.
Different brokers have different fee structures and different account features when it comes to dealing with cash, or minimum investment levels, or commissions, and they each will take a little getting used to in terms of the flow of placing trades and depositing money and all that, but for the most part the large discount brokers are all quite similar. I use Fidelity and TD Ameritrade regularly among the discount brokerages and find them both completely satisfactory, I prefer Interactive Brokers for much of my trading because of easy direct access to international markets and the very precise control you can have, but Interactive Brokers is also complicated to use compared to the big discount brokers and it’s not necessarily the platform you want to start with if you’re just learning how to invest in stocks.
Fidelity will charge you $4.95 per trade and it’s easy!
Thank you very much for the friendly and very detailed answers, guys!
I am actually the OP and wanted to personally let you know how much I appreciated your kind support. I’ve only recently started doing my research and plan to pull the trigger on some stocks in the near future.
Should you have any other broker recommendations, please do not hesitate to share them with me!
P.S. Do you also happen to know if I can open an account with TD Ameritrade or Fidelity if I am not a US citizen/based in the US? I am asking because I live across the pond, in Europe! 😛
I don’t think TD Ameritrade or Fidelity accept overseas investors through their US platforms, but I could be wrong — there are plenty of fairly similar discount brokerages in Europe that will let you trade in the US (and other markets), including Saxo Bank, Internaxx, Swissquote and DeGiro. I’ve never used any of them, but from what I can tell they seem to offer fairly similar services to the US discount brokers at similar prices.