Daniel sent me the following question asking about buy and hold stock investing strategies:
I would like to buy stock 1 time and sit on the stock for years. How can I do that without paying fees every month or year? And I want the stock in my name.
I would like to answer this question in a post since other buy and hold investors have similar goals. For long-term buy and hold strategies, You can purchase shares through Zecco (Read my Zecco Review), or directly from companies using ComputerShare’s Direct Stock Purchase Plans (DPPs).
Advantages/Disadvantages of Buying through Zecco Trading
The quick and easy route is through Zecco because online discount brokers allow you to manage your entire portfolio online. All Stock and ETF trades are free (You get 40 free trades/month), and your stock investments are managed all in 1 place.
While managing everything in one place is convenient, you have to assess the potential disadvantages of owning a Zecco account, such as:
- Zecco may change their existing commission and fee structure
- Zecco’s resources and tools may not exceed your standards for an online broker
- You may have to transfer your assets in the event of an emergency/unique circumstances
I recommend opening a Zecco account, but by no means suggest that investors place all their investments under one roof. And who knows, free Zecco trades may not last forever.
Advantages/Disadvantages of Purchasing Through ComputerShares or Other Direct Purchase Plans
Since your goal is to buy once then hold, purchasing directly through the company has some advantages:
- Exemption from unexpected brokerage fee increases
- Automatic DRIP (Dividend Reinvestment Plans) if you opt-in
- Increased Exposure to Tender Offers from company management
Direct purchase is well suited for the blue-chip stocks (WMT, T, KO, etc). These stocks pay hefty dividends and trade under low volatility, so you can assume a more hands off approach to your investment portfolio.
Of course, there are several disadvantages:
- More complicated portfolio structure
- Susceptibility to One-Time setup and purchase fees
- Varied minimum purchase requirements
Whichever investment method you choose is up to you. I personally favor brokerage accounts over direct purchase because most brokers provide quick online access and tools that save me lots of time. However, if buying stock directly from the company works well for you, then start thpse DPPs today!
Are You a Buy and Hold Investor? Would you recommend direct stock purchases or the traditional brokerage account?
For one time purchases, brokers are probably best. Keep your total fees (buy/sell/maintenance) to less than 2% of your initial purchase and you’ll be fine if you’re holding for a long time. If you’re planning on holding for a real long time, incurring fees for buying/selling might be worth it if there’s no maintenance fees.
If you’re making multiple purchases over a long period of time, company sponsored DRiPs are something you should look into since there’s often no/very low fee for purchasing.
Assuming one is making a substantial investment, does the choice of brokerage really make that much of a difference when purchasing a stock?
Maybe I’m missing something about ownership in the question above, but wouldn’t just about any online brokerage be able to handle such a purchase for less than $10?
I definitely like the brokerage option better. I just like etrade so much that I’m unwilling to change yet. I need to check out Zecco one day…
I took a good advice and signed up with scottrade.com and got 3 free
trades with this promo code: YWEU0574
Scottrade is a decent broker. I haven’t used them before, but usually hear positive things about them.
What exactly is long-term? If I were to buy stock in Mentor Capital, which could experience stock price gains as a result of their 20% stake in a biotech company working on a new breast cancer treatment, I would hold the stock until those gains were realized, but if that only happens to be 3 months away I would possibly sell. Would that be considered long-term as opposed to 1 year as in some industries?