Out of Commissions

James A. Anderson

Cost-conscious investor that you no doubt are, you hate paying too much in commissions when you buy stock. You’ll be glad to know that there are several ways to be equally frugal when you sell shares.

It goes without saying that selling through a discount brokerage or Internet trading account is cheaper when you set them side by side with full-service brokerages. For instance, E-Trade (www.etrade.com) charges you as little as $14.95 for 800 shares. That compares to $29.95 for Charles Schwab’s online service (www. schwab.com). The big brokerages can charge you up to $300 for that same trade.
There’s a still cheaper way, thanks to the same dividend reinvestment plans (DRIP) or direct share purchase (DSP) plans that BLACK ENTERPRISE has mentioned several times in the past. In short, DRIPs or DSPs are accounts you open directly with a company by calling its investor relations department, allowing you to buy shares from headquarters. Over 1,100 companies including Intel, Johnson & Johnson, McDonald’s and Exxon offer DRIPs. And since there are no middlemen or brokers involved, you pay no commissions.

The same holds true for stock sales. To sell shares in a DRIP, all you need to do is call investor relations and arrange the sale with the company’s transfer agent. Again, you’ll pay no commissions, but there might be a processing fee. For instance, Eli Lilly, the Indianapolis pharmaceutical company, charges $10 plus 12 cents a share commission to sell shares.

So, what if you have a brokerage account? When the shares you own are held in street name (brokerage industry lingo for holding shares in an account with anyone from Charles Schwab to Smith Barney), you can’t take advantage of selling through a DRIP. But, have a certificate for the stock issued to you, and then you can. All that’s required is that you call your brokerage and arrange to have a certificate for the shares sent to you. Brokerages often charge a fee: at Schwab, for instance, you’re required to foot $15 to have the certificate processed. Once you’ve received the documentation, however, you can call investor relations and arrange a sale.

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