Stock Investing For Dummies®, 3rd Edition

Chapter 19. Getting a Handle on DPPs, DRPs, and DCA . . . PDQ

In This Chapter

• Buying stock directly from a company

• Looking at dividend reinvestment plans

• Using dollar cost averaging

Who says you must buy 100 shares of a stock to invest? Do you really have to go through a broker to buy stock, or can you buy direct? What if you only want to put your toe in the water and buy just one share for starters? Can you do that without paying through the nose for transaction costs, such as commissions?

The answer to these questions is that you can buy stocks directly (without a broker) and save money in the process. That's what this chapter is about. In this chapter, I show you how direct purchase programs (DPPs) and dividend reinvestment plans (DRPs) make a lot of sense for long-term stock investors, and I show how you can do them on your own — no broker necessary. I also show you how to use the method of dollar cost averaging (DCA) to acquire stock, a technique that works especially well with DRPs. All these programs are well-suited for people who like to invest small sums of money and plan on doing so consistently in the same stock (or stocks) over a long period of time.

Note

Don't invest in a company just because it has a DPP or DRP. DPPs and DRPs are simply a means for getting into a particular stock with very little money. They shouldn't be a substitute for doing diligent research and analysis on a particular stock.

Being Direct with DPPs

If you're going to buy a stock anyway, why not buy it directly ...