Selling Stock

It might also be possible to sell the stock directly to the company that issued it. I know General Motors will buy back its own stock in this manner. You just Fedex the old certificates back to them and they send you a check. This is a very easy way to avoid the hassle associate with selling small amounts of stock.

By the way, I concur with those who recommended holding on to the stock if the original poster doesn't need the money. The heirs would greatly benefit from the stepped up basis rule.

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IIRC, it was $60K, not so small. And not knowing much about OP, we don't know her tax bracket, her other investments, or if their are heirs to benefit. Is her stock-specific risk outweighed by the cost of the cap gain if any? Don't know. Joe

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A good idea. And now that you mention it, that also is a good way to buy stocks in the first place. I am referring to dividend reinvestment plans (DRIPs). When I first looked at these some years back, I was surprised at the large number of good companies from which you can buy shares directly, in small or large amounts, with no hassle and no brokerage costs. And you get the added benefit of having all dividends re-invested automatically without cost.

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My wife holds some stocks in DRIP plans. They have started charging fees for reinvestment. Last quarter, she got $6.95 in dividends and they charged her a $1.50 for the reinvestment.

-- Doug

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Be wary of so-called DRIPs run by banks. The banks will promote a plan as a DRIP and take over the paperwork and deal with the company, but then pile on fees for this or that which mount up quickly. Some DRIPs are managed by brokerages, and their fees are not as onerous as the ones charged by banks, but still they take a commission if and when you sell. In my view the best way to go is to deal directly with the company after you acquire your first share. And in some cases you don't even need a first share to buy directly from the company.

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I agree about using banks, but don't understand why the avoidance of brokers. My reinvested dividends (through Schwab) do not have any commission. Avoiding a $10 commission on the initial purchase hardly seems worth the effort of having to deal directly with multiple companies. Paul suggested that the OP Fedex her certificates to the company to sell them. Well, last I checked Fedex was more than $10. I'd rather see the OP put the money in a brokerage account and buy CDs that way (brokered FDIC insured) that to risk having her walk in to a bank. Joe

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Joe, somehow we got off the track. I did not mean to recommend DRIPs to the OP , but was just adding some information to the sales method that Paul suggested. Actually, I doubt DRIPs would be appropriate for the OP. I wanted to point out that, just as you can save money in selling stocks by dealing directly with a company, so also you can save money in buying stocks by doing the same thing. For the OP I suspect the best course of action would be to do nothing and keep the stocks (in the absence of more detailed information).

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How does Schwab cover their costs?

-HW "Skip" Weldon Columbia, SC

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Well, to answer both of you, Skip, I really don't know. I assume their cost for such a transaction is actually in the pennies, and they can afford to extend this courtesy. And Mark, you are right, but, by having stock dividends reinvested, and cash sitting in their 'better' MM fund also reinvesting, I have no .15% money at Schwab.

I know that in margin accounts, they make money loaning out my shares, but since IRAs cannot have a margin side, I don't see their revenue source on a large balance IRA all in ETFs, no major trading.

Joe

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The only cost is the commission when buying or selling stocks. Both dividends and capital gains can be reinvested at no additional charge.

Since the stock is all book entry and reinvestments and/or dividend payments are handled in mass by computer programs, the cost per investor is probably next to nothing.

I doubt the cost per investor in any higher to reinvest than it is to post a cash deposit for the dividend/capital gain payment into the investors account.

Any broker that would charge an additional fee for reinvestment is a broker I would quickly run from.

"joetaxpayer" wrote

TRowePrice, Fidelity and Vanguard brokerages also do not charge a commission for reinvesting dividends, capital gains, and returns of capital. Ameritrade says dividend reinvestment "is available at no cost on some common and preferred stocks and closed-end mutual funds." No doubt there are more.

I have not checked precisely but from general reading I think the number of brokerages offering free dividend reinvestment has increased rapidly in the last five years. A

2006 article in USA Today says that most brokerages offer dividend reinvestment, and it "is usually free of charge."

As Joetaxpayer and Ernie propose, it likely does not cost the brokerages much to offer this service.

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Sorry I took so long to respond but was out of town.

Want to thank all of you for your advice. Looks like I should just keep the stock. It's all NSC railroad stock and the basis is about $18,000. I paid tax on over $4000 of S.S last year so I think I would have to pay on the whole 85% (10,864) this year.

Thanks again. At least I know how to sell it if I decide to do that.

Doree

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