Yes, you can purchase stocks and bypass the stockbroker

Staying Ahead

July 15, 1996|By Jane Bryant Quinn

NEW YORK -- Do you love buying stocks but hate paying brokerage commissions? Check into the trend toward "no-load" or direct-purchase stocks.

Nearly 130 companies now sell their shares directly to the public, bypassing the stockbroker. Within two years, there could be 2,500, predicts James Volpe, a vice president of First Chicago Trust Co. of New York, which handles transactions for no-load plans.

Some companies charge zero for this service; the rest charge only a fraction of what the broker would. What's more, you can generally invest with small amounts of money. Most no-load share-buying plans accept $100 to $500 and let you make additional purchases of less than $100 each time. (Most plans also have annual maximums, typically in the $50,000 to $100,000 range.)

If you don't have the money to buy a full share, the plan assigns you a fraction of a share.

Every company has different rules for its no-load shares. Among fee-charging plans, most levy a service fee when you buy. A few have enrollment fees of $5 to $15; a few charge $15 annually.

All the plans let you reinvest dividends, paying low or no fees to buy the additional shares (these are known as DRIPs, or Dividend Reinvestment Plans).

Fees in some plans are creeping up. Grand Metropolitan, for example, charges a $15 annual fee, $5 for each transaction plus 12 cents for every share you buy. That may be too high a price to pay if you're making many small investments over time, Vita Nelson, editor of The Moneypaper, a newsletter that follows DRIPS, told my associate, Kate O'Brien Ahlers.

Well-known companies with free no-load plans include Dial, Exxon, Mobil and Barnett Banks. Those with fees include Amoco, Enron, Home Depot, McDonald's, Procter & Gamble and Wal-Mart. You'll find a bunch of utilities in both categories. A few foreign companies also participate, including Fiat, Sony and TDK -- although their fees are as high as Grand Met's.

Some firms offer automatic investing. As little as $10 a month can be taken from your bank account and invested in company shares. Two with a $25 minimum: Barnett Banks and U S West.

Ameritech lets you borrow against your shares if you have at least $2,000 worth. A few firms, mostly utilities, let you buy shares at a 3 percent to 5 percent discount from market price. A handful of no-load plans provide Individual Retirement Accounts, including Barnett Banks, Exxon, Mobil, Morton International and Oklahoma Gas and Electric.

Some utilities offer no-load shares only to their customers. A few firms sell only to residents of the states where they operate. The majority, however, are open to all buyers.

No-load shares are normally held in book-entry form (meaning that they're kept on the company's books). But you can get a free stock certificate. With a certificate in hand, you can sell through a stockbroker, if you need a fast sale and are willing to pay the commission. But it's cheaper to sell through the plan. A few plans charge zero to sell; most charge a modest fee.

One important point: No-load plans aren't for people who like to jump in and out of the market, or who try to trade at a particular price. They're for investors who want to make regular purchases and hold for the long term.

No-load plans usually buy shares weekly or monthly, for everyone who sent in money during that time. To sell, you may have to submit your order in writing, although a growing number of firms accept sales by phone. Some sell daily; some sell weekly. You may have to wait another week to get the check.

For a free list of direct-purchase plans -- both those freely available and those with restrictions on sales -- write to: (1) DRIP Investor, 7412 Calumet Ave., Suite 200, Hammond, Ind. 46324. This list shows the phone number and minimum investment for 129 plans. (2) The Moneypaper, 1010 Mamaroneck Ave., Mamaroneck, N.Y. 10543. (phone 800-388-9993, ext. 301). It includes 119 plans along with their minimum investments, telephone numbers and fees.

To make a no-load purchase, call each company you're interested in. It will send an application plus a prospectus with all the plan's details. To save time, call the clearinghouse run by the DRIP Investor (call 800-774-4117). It provides free information and application forms for 32 no-load plans.

Pub Date: 7/15/96

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