Encyclopedia of Investment Terminology

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DSP - Direct Stock Plan

Some companies allow you to purchase or sell stock directly through them without your having to use or pay commissions to a broker. But you may have to pay a fee for using the plan's services. Some companies require that you already own stock in the company or are employed by the company before you may participate in their direct stock plans. You may be able to buy stock by investing a specific dollar amount rather than having to pay for an entire share. In that case, you could have your checking account debited on a regular basis to make investments in the plan. Some plans require a minimum amount of investment or require you to maintain specific minimums in your account.

DSPs usually will not allow you to buy or sell your securities at a specific market price or at a specific time. Rather, the company will purchase or sell shares for the plan at established times for example, on a daily, weekly, or monthly basis and at an average market price. You can find when the company will buy and sell shares and how it determines the price by reading the company's disclosure documents. Depending on the plan, you may be able to have your shares transferred to your broker to have them sold, but the plan may charge you a fee to do so.

Much of the above information is courtesy of the SEC.


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