The 1 Way Ordinary Investors Can Escape Wall Street's Brutality

Investing is an incredibly challenging endeavor. Direct stock purchase plans could be the recipe for success.

Mar 26, 2014 at 2:34PM

The realization that you've been duped by Wall Street once again.

Ordinary investors need to take three important steps to make sure they don't get brutalized by big ol' Wall Street:

  1. Make sure you're not paying too much money for someone else to purchase an investment for you.
  2. Don't try to time the stock market. Invest in regular intervals -- every month, if possible.
  3. If any investment pays a dividend, be sure to reinvest those payouts into more stock using a dividend reinvestment plan (DRIP).

For investors new and old, these three steps are challenging. New investors are bombarded by complicated brokerage accounts and trading platforms right from the start.

These trading platforms require users to understand investing concepts like duration, order types, and price types before they can even buy a stock.

Even worse, if an investor is unable to invest a large enough amount of money, the fees Wall Street charges will slowly and surely cause his or her investing results to fall behind the pros'.

Then you have those dividends. What are they exactly? When do investors get them, and what's a DRIP? These are valid questions for anyone just getting started and for experienced investors as well.

Behold your investing savior: the direct stock purchase plan
Starting to invest is intimidating, but there is one way for investors to avoid all of the confusion outlined above. All an investor needs to do is to participate in a direct stock purchase plan, or DSPP. These allow individuals to invest directly in a company's stock without going through a traditional brokerage account.

Through DSPPs, investors can invest in more than 500 companies (see table below) at regular intervals, cheaply, with dividend reinvestment, and without the complications of opening a brokerage account. Computershare and American Stock Transfer and Trust Company, for example, allow investors to use DSPPs. Their websites include extensive lists of companies whose shares can be purchased through DSPPs.

While DSPPs offer a variety of benefits, they aren't without their own pitfalls. With DSPPs, investors can only invest in a small fraction of the equities on the U.S. markets. Also, DSPPs aren't made for speedy transactions, so if an investor needs to enter or exit positions quickly, a DSPP is probably a bad choice.
Lastly, investors will want to make sure the monthly investment fee is less than what they would have to pay at a discount brokerage and below 2% of the monthly purchase amount. So if an investor is purchasing $100 per month, he or she wouldn't want to pay more than $2 to purchase that amount of stock.

Hands-on with DSPPs
I personally purchased shares of International Business Machines (NYSE:IBM) three days ago through Computershare, and it took a whopping five minutes. Now, I'm set up to regularly invest each month and automatically reinvest dividends, and I'm only paying Computershare a dollar a month to do so. Keep in mind that investors are typically charged an initial set up fee -- $10 for IBM -- to open an account. This is reasonable and negligible over the investment's lifetime.

In the video below, I'll go over exactly how these plans help investors succeed, how you can participate in them, and how they've helped me personally. Don't be intimidated by DSPPs; they're an investor's edge against an inscrutable (and sometimes unscrupulous) Wall Street.

Feel free to comment below with any questions.

Who Doesn't Love a Dividend?
One of the secrets that few finance professionals will reveal is the fact that dividend stocks, as a group, handily outperform their non-dividend-paying brethren. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Blake Bos owns shares of International Business Machines. The Motley Fool owns shares of International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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