Direct-Purchase Plans May Directly Benefit You

The number of companies offering their shares directly to the public is swelling rapidly.

Last week, 23 companies said they would start selling single shares to individual investors who wanted to start accumulating stocks without paying brokerage fees or mutual fund managers.

That brings the number of direct sellers up over 130, more than quadruple the number of companies that were doing this in 1994.

Direct-selling plans go a little further than the more familiar dividend reinvestment plans. Those so-called DRIP plans allow existing shareholders to reinvest dividends and buy additional shares directly. The new breed of direct-investment stocks don’t limit their offering to existing shareholders. You can jump in any time.

In a direct-purchase plan, you don’t pay the management fees or transaction costs that even no-load mutual funds carry. (But some plans do carry fees.)

More important, you can time your tax hits: You won’t realize any capital gains until you sell a stock. And perhaps best of all, you can plan your own investments without worrying about the market. Find a company you like, and buy shares steadily.

If the market suddenly falls out of love with one of your directly purchased companies, you can view that as a buying opportunity and stock up. Mutual fund investors often end up having to sell out of stocks at distressed prices if their fund managers face redemptions when a stock is down.

You can get a list of the companies offering direct sales by writing to DRIP Investor, 7412 Calumet Ave., Suite 200, Hammond, Ind. 46324, or by visiting the Securities Transfer Assn. Web page at https://www.netstockdirect.com