In internet investing, DSPPs is indeed an agreeable deal. Because, brokerage allows significant payment for trading and management fees for buying stock. Although it is agreeable, DSPPs almost fade because the recent brokerages offer more convenient and cheaper solutions. Basically, the main advantage of DSPPs is that shareholders do not have to get physical certificates. They could directly register onto the company’s books. Recently however, the stocks are stored in the electronic form in a broker’s computer system or in the street name. Thus, there’s no more paper certificates. The concept of DSPPs remains in investment, however, it is no longer functional as it has been.
When investors purchase through a DSPP, they do not have any control over the trade date. Although they make a one-time purchase or sign up for monthly investment, they still do not have the control. In addition, using a transfer company makes the transaction not happen for weeks. In a nutshell, the purchase would go through whatever stock price available at that time. In brokerage, investors could trade in real-time and they always know the price.
Although DSPPs’ fees are low, it is too rare for a plan that does not have fees at all. Some would charge initial setup fees, purchase transactions, and sales fees. In DSPPs, small fees could add up over time. Therefore, just like many other investments, it is important to read the DSPP prospectus to know the charged fees. Afterall, DSPPs greatest benefit is that individual investors have the ability to avoid commissions by not choosing brokers. Some believe that investing in DSPPs is a good option. Small investors ready to buy individual shares in a particular company and hold long term, could try DSPP.
