Direct purchase plan

Direct Purchase Plan

A plan that enables interested first-time individual investors to purchase a company's stock directly from the company or without the direct intervention of a broker. The administrator also ensures the safekeeping of the shares by registering them directly on the books of the company. Eliminates the need for shareholders to hold on to physical certificates.

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Direct purchase plan (DPP). Some publicly held companies offer a direct purchase plan that lets you purchase their stock directly without using a broker.

You may pay a small commission or transaction fee -- smaller than if you purchased the shares through a retail broker -- although some DPPs charge no fee at all.

Direct purchase plans are similar to dividend reinvestment plans, or DRIPs, with the added benefit that you can make the initial purchase of the company's stock through the plan rather than having to purchase stock first, through a broker, in order to be eligible for a DRIP.

It's easy to open a DPP account, and because it lets you purchase fractional shares of the company's stock, you can decide whether to invest a lump sum or make small, regular purchases on a set schedule to build your investment. Your shares are registered on the company's books, and you can sell your shares through the plan as well.