Invest money commission-free with company-sponsored plan


One of the best-kept secrets of Wall Street is that most dividend reinvestment plans also permit new cash investments.

A more accurate name would be "company-sponsored stock-purchase plans."

The big plus for the investor is that in these plans, both dividends and new cash are invested without commissions or service fees (or very small charges in the case of a few companies).

Some plans even invest your money at a discount from the market price. In these instances, your dollar is worth more in the plan than it would be if you bought the same shares from a broker, since you save the commission and pay a lower price.

Hundreds of companies permit people to purchase from $10 to as much as $10,000 worth of stock every month -- without having to pay a penny in brokerage commissions or fees.

Once you open your account, with even a single share, you can begin buying additional shares -- free of commissions.

The MoneyPaper developed its Direct Stock Purchase Plan in 1986 to help small investors gain access to the dividend reinvestment plans of companies that permit investors to send cash investments to their plans. This plan helps subscribers buy that first share inexpensively -- then enroll in that company's plan. The MoneyPaper gets lots of questions about its program. In response, it has put together the answers to the questions that are most frequently asked.

Right now, the MoneyPaper is offering a free list of every company that accepts optional cash investments through a dividend reinvestment plan. To get this publication, please call the MoneyPaper at (800) 388-9993 or send your request by fax at (914) 381-7206.

Q: In February 1984, I purchased 3,800 shares of Apogee Robotics in Colorado. I have never received any dividends or profits from these shares, but from time to time, I have received rosy updates on the company. Everything sounded great until I heard from a friend that the company has gone into Chapter 11 bankruptcy. I have not received any notification from the company. Should I have been informed? Do I have any recourse?

A: The good news is that Chapter 11 is reorganization (as opposed to liquidation). The bad news is I doubt that this phoenix will rise from the ashes, since the company's phone number has been disconnected. This tells me the company is at a standstill, since potential buyers have no chance to reach anyone.

As a shareholder in this company, you are a part owner and not a creditor. As such, the bankruptcy court -- whose primary mission is to work out deals with businesses or individuals who are owed money by the corporation -- has no reason to contact you.

Are you on the hook for the company's debts? No, because as a shareholder in a public company, your liability is limited to your investment.

Do you have any recourse? Sure. You can write off your investment as a loss on your tax return. Then, if at some future date the company emerges from bankruptcy with a positive value, you will have a zero cost basis for your shares.

And don't throw out your stock certificates. Frame them, and use them to teach your children and grandchildren a lesson about gambling in penny stocks.

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