If you’ve been trading on the stock market for a while, you know just how much money you spend on transaction fees and brokerage commissions. By dropping your broker and handling your own investments, you can save a ton of money and even trade more effectively. Keep reading to learn more about the methods and benefits of trading without a broker.
Why Don’t I Need a Stockbroker?
Thanks to apps and technology, it is easier than ever to start trading on your own. By going broker-free, you can increase your market knowledge, grow your investment skills, and lower your transaction costs, allowing you to earn more of a profit. Additionally, handling your own trades means that you will be more aware of developments and able to participate in more responsive trading.
How Do I Get Started?
Stockbrokers can be helpful when you’re first starting out, but after you familiarize yourself with the world of trading, it can become clear that you don’t need a stockbroker anymore. When you decide to try investing on your own, you have several options for how and where you purchase your stocks. Your options include:
- Direct Stock Purchase Plan: A DSPP allows you to purchase stocks with much lower fees directly from companies that use this service. A lot of companies use Computershare as their transfer agent. Using this method, you choose a company, pay a small transaction fee, and then invest as little or as much as you want.
- Dividend Reinvestment Plan: You can also trade directly using a dividend reinvestment plan, or DRIP. Before investing in a DRIP plan, you have to already own shares of the company’s stock and register with the company as a participant, meaning this plan takes a bit more forethought. You have access to more companies through this plan, even if they don’t sell stock directly to investors. Additionally, you usually get a discount on the current share prices and there are no fees associated with the purchase.
- Discount Broker: Online brokers can be more convenient and much cheaper than using a traditional broker, and many trading sites and apps provide you with analytics and educational tools to guide your investments. Though this method gives you more freedom while charging less, there is still usually a commission involved with these platforms.
How Do I Find Good Stocks?
Finding promising stocks broker-free may feel intimidating, but realistically you’ve been doing the work already. To identify and invest in good stocks, you should look at the:
- Growth rate: Assess both the past and future earnings growth rates to determine if the stock has potential.
- Price-earnings ratio: The P/E ratio allows you to evaluate a stock’s value and pricing by dividing the current price per share by one share’s annual earnings.
- Company and industry: Take a look at a company’s balance sheet, industry, and management before you invest.
Before you dive into broker-free investing, make sure to assess your goals and needs. Trading on your own does take a bit more time and attention, but it can be extremely rewarding.