You cannot buy stocks online without going through some kind of broker
There is no way to purchase stocks directly from a company and own them in your own name without a broker handling the transaction. Every stock trade — whether you place it yourself or someone else does — goes through a licensed intermediary. What has changed is that you now have choices about which intermediary, and some routes cost far less than they used to.
The confusion usually comes from the word "broker." Most people think of a broker as a person or a firm that charges you a commission. But technically, a broker is any entity licensed to execute trades on your behalf. That includes discount brokerages like Fidelity, Charles Schwab, and E*TRADE, which let you trade stocks for free or nearly free. It also includes direct stock purchase plans (DSPPs) and dividend reinvestment plans (DRIPs), which are programs run by companies themselves — but even those use a transfer agent (a licensed intermediary) behind the scenes.
Key Takeaways
- You must use a broker to buy stocks, but discount brokerages now charge zero commission on most stock trades.
- Direct stock purchase plans let you buy shares straight from a company's transfer agent, often with lower minimums than traditional brokerages.
- Dividend reinvestment plans automatically buy new shares with your dividends and may offer a small discount on the purchase price.
- Opening an account at a discount brokerage takes 10 to 20 minutes and requires an ID, Social Security number, and bank account information.
- The cheapest route depends on how often you trade and how much you want to invest per purchase.
Discount brokerages with zero commission trading
A discount brokerage is a licensed firm that executes your trades and holds your stocks in an account registered in your name. The major ones — Fidelity, Charles Schwab, E*TRADE, TD Ameritrade, and Webull — charge zero commission on stock trades. This means you pay nothing per transaction, though you may pay other fees (account maintenance, wire transfers, or advisory services if you use them).
To open an account, you provide your name, address, Social Security number, date of birth, and employment information. You link a bank account for deposits. The whole process takes 10 to 20 minutes online. Once your account is open and funded, you can place a stock order immediately. The order executes during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays), and the shares settle in your account two business days later.
The main trade-off with discount brokerages is that they are designed for frequent traders and larger accounts. If you want to invest $50 a month, you will pay the same zero commission as someone investing $5,000, but you will also see your account balance eaten by small percentage fees if you use certain features. For very small, infrequent purchases, a direct stock purchase plan may be cheaper.
Direct stock purchase plans (DSPPs)
A direct stock purchase plan is a program run by a company that lets you buy shares directly from them without opening a brokerage account. You contact the company's transfer agent (the firm that manages shareholder records), set up an account, and send money. The transfer agent buys shares on your behalf and holds them in your name.
DSPPs often have lower minimum investments than brokerages — sometimes as little as $10 or $25 per purchase. They also typically charge lower fees per transaction, sometimes $0 to $10 per purchase. This makes them attractive if you want to invest small amounts regularly. However, not all companies offer DSPPs, and the ones that do may have restrictions: some require you to own at least one share already, some limit how often you can buy, and some charge higher fees than others.
To learn about a company offers a DSPP, visit its investor relations website and look for "direct stock purchase plan" or "shareholder services." You can also call the company's investor relations department. Once you enroll, you typically fund the account by bank transfer or automatic deduction from your checking account. Purchases usually happen on a set schedule — often monthly or quarterly — rather than whenever you want.
Dividend reinvestment plans (DRIPs)
A dividend reinvestment plan is a program that automatically uses your dividend payments to buy more shares of the same stock. Many companies offer DRIPs, and some offer a small discount — typically 3% to 10% — on the share price. This means if a stock is trading at $100 and the DRIP offers a 5% discount, your dividends buy shares at $95.
To enroll in a DRIP, you must already own at least one share of the company's stock. You can buy that first share through a discount brokerage, then contact the company's transfer agent to set up the DRIP. From that point forward, dividends are automatically reinvested. Some DRIPs also let you make additional cash purchases at the discounted price, similar to a DSPP.
The advantage of a DRIP is the discount and the automatic nature — you do not have to remember to reinvest. The disadvantage is that you cannot control the purchase price or timing. If the stock price spikes on the day dividends are reinvested, you buy at the peak. You also need to track DRIP purchases for taxes, because each reinvestment is a taxable event even though you did not receive cash.
Comparing costs across the three routes
| Route | Minimum per purchase | Fee per purchase | Best for |
|---|---|---|---|
| Discount brokerage | Usually $1 (no minimum) | $0 | Frequent traders, larger accounts, flexibility |
| DSPP | $10–$100 (varies by company) | $0–$10 | Small regular investments, long-term holding |
| DRIP | Automatic (dividend amount) | $0 (sometimes a discount) | Dividend stocks, passive reinvestment, long-term holding |
If you plan to invest $100 or more per month, a discount brokerage is almost always the cheapest option because the zero commission saves you money on every trade. If you want to invest $25 to $50 monthly in a single stock, a DSPP may cost less. If you own dividend stocks and want to reinvest automatically, a DRIP is free and may offer a discount.
What happens after you buy: account registration and taxes
Stocks bought through a discount brokerage are held in a brokerage account registered in your name. The brokerage acts as custodian but you own the shares outright. You receive a statement showing your holdings, and you can sell whenever you want during market hours.
Stocks bought through a DSPP or DRIP are held by the transfer agent in your name. You own them outright, but selling requires contacting the transfer agent or moving the shares to a brokerage account first. This process takes a few days and may involve a small fee.
All stock purchases trigger tax consequences. When you sell, you owe capital gains tax on the profit. When you receive dividends, you owe income tax on the amount (even if reinvested through a DRIP). Keep records of purchase dates and prices so you can calculate gains accurately when you sell.
Getting started: which route to choose
Start with a discount brokerage if you are new to stock investing. The account setup is straightforward, there are no hidden fees, and you have complete flexibility to buy and sell whenever you want. Fidelity, Charles Schwab, and E*TRADE all have simple interfaces for beginners and educational resources.
Consider a DSPP if you have identified a specific company you want to own long-term and you want to invest small amounts regularly. This works well for dollar-cost averaging — investing the same amount at regular intervals regardless of price — because the low minimums let you stick to a plan without worrying about commission eating your returns.
Use a DRIP only after you already own shares and want to automate reinvestment. Do not open a DRIP as your first stock purchase; buy the initial share through a brokerage first, then set up the DRIP for future dividends.
Frequently Asked Questions
Do I need a lot of money to start buying stocks online?
No. Discount brokerages have no minimum account balance. You can open an account and buy a single share of any stock. DSPPs often have minimums of $10 to $100 per purchase. DRIPs require you to own at least one share already, but after that, dividends are reinvested automatically regardless of amount.
Can I buy fractional shares?
Yes, most discount brokerages now allow fractional share purchases. This means you can invest $50 in a stock that costs $200 per share and own 0.25 shares. Not all DSPPs or DRIPs offer fractional shares, so check the specific program.
How long does it take to buy a stock after I place an order?
Through a discount brokerage, your order executes during market hours (9:30 a.m. to 4 p.m. Eastern, weekdays). The shares settle in your account two business days later. Through a DSPP or DRIP, purchases happen on a set schedule — often monthly — so there is a delay between when you send money and when shares are bought.
What if I want to sell my shares later?
Shares held at a discount brokerage can be sold immediately during market hours. Shares held through a DSPP or DRIP require you to either contact the transfer agent to sell or move the shares to a brokerage account first, which takes a few days.
Do I pay taxes on stocks I buy but do not sell?
You do not owe capital gains tax until you sell. However, if the stock pays dividends, you owe income tax on those dividends in the year you receive them — even if you reinvest them through a DRIP. Keep records of all purchases and dividends for tax time.