Buying stocks directly from companies, without paying a broker, has become a popular way to invest.

But if you haven't balanced your checkbook since George Bush was president, you probably shouldn't invest in dividend reinvestment plans (DRIPs) or other kinds of direct-purchase stock plans.

One key to using direct-investment plans successfully is keeping track of the financial statements you get in the mail. Organization is critical.

If you're up to the task, here are some tips for do-it-yourselfers who aren't afraid of a little homework.

Record keeping

• If you're new to direct investing, resist the temptation to buy a dozen stocks at once. You may find yourself buried under a pile of financial statements. ''Start off with two or three, see how that goes, and as you get more comfortable with the process, you can add more,'' says Charles Carlson, editor of DRIP Investor newsletter.
  
• Set up a record-keeping system that makes sense to you. You'll need to file and keep track of statements that show the number of shares purchased directly or by dividend reinvestment, the price per share and the date. Many direct investors use financial software to record the information; others use ledgers. ''It can be as simple as a legal pad, but nonetheless, you need to start from Day 1,'' says Stephen Barnes, a financial planner in Phoenix.
  
• Cherish the year-end statement. Most companies provide a year-end statement documenting all your transactions for the year. This will give you the information you need to determine how much you owe the Internal Revenue Service, which will tax your dividends even if you reinvest them. And when you sell some or all of your shares, you'll need year-end statements to figure the original price you paid for shares you're selling, known as the cost basis.
  
• If your records are already a mess, ask the company's investor relations department for the name and phone number of the company's transfer agent. The transfer agent handles purchases and sales of the stock and should have a record of your transactions for at least two or three years, says James Volpe, vice president of First Chicago Trust. First Chicago Trust is a unit of EquiServe, a transfer agent for more than 1,400 companies.
  
• If you need records going back more than three years, you may have to pay a fee, Volpe says. Make sure you're dealing with the right transfer agent. It's not unusual for companies to change agents, so if you're looking for data that goes back several years, you may have to make several calls. AT&T, for example, has changed agents at least three times the past 10 years, Volpe says.

Taxes

• Buy stocks you can live with for the long term. Holding your shares at least a year will reduce capital gains taxes and simplify tax computations. Under the new capital gains laws, capital gains on shares held at least 12 months are taxed at 20%, while gains on shares held less than a year are taxed at your ordinary income rate -- up to 39.6%. If you wait until your shares have passed the one-year mark before you sell, you won't have to pay the higher rates and possibly wrestle with two different tax rates.
  
• If possible, plan to sell all your shares in a particular company at one time. That way, you can use the average cost basis of all the shares, the easiest way to figure what you owe, Carlson says.

To calculate how much you owe using the average cost basis, add up the amount you paid initially to buy shares, the amount of all dividends that were reinvested and any additional fees or cash payments you made to buy shares over the years. Subtract the grand total from the current market value of your account, and the result is your capital gain.

If you forget to add in reinvested dividends, you'll enrich the IRS at your expense. Assuming you're a good citizen, you've already paid taxes on your dividends. Adding them back into your cost basis ensures that you're not taxed twice.

• If you don't want to sell all your shares at once, there are other ways to determine your cost basis. One is called ''first in, first out,'' or FIFO. Using this method, you treat the first shares you bought as the first shares sold. For example, if you bought 100 shares for $20 each and sold 100 shares three years later for $30 a share, your taxable gain under FIFO would be $1,000. At a 20% capital gains rate, you'd owe $200.

You also can use the ''specific identification'' method, which lets you designate which shares you want to sell. The advantage: You can choose to sell the shares you paid the most for, thus reducing your taxable gain. For example, say you purchased 100 shares for $20 a share and 100 for $30 a share and now want to sell half your shares for $40 each. You can specify you're selling the $30 shares, thus making your taxable gain $1,000, vs. a gain of $2,000 if you use the FIFO method.

But remember: The IRS says once you pick a method for calculating your cost basis in a particular stock, you must stick with that method for all transactions in that stock.

Selling shares

One of the down sides to direct investing is the lack of control over exactly when your shares are sold. Some companies require written notification, for example.

And as John and Kristina Vinson learned, a couple of weeks can make a difference. The Vinsons, small-business owners in San Jose, Calif., have used direct-investment plans for about six years.

Four years ago, they decided to sell some shares to raise money for a down payment on a home. Not long after they sent in their order, the stock market went into a tailspin. The market came back -- after their shares had been sold.

Last summer, the Vinsons decided to sell some additional shares. They mailed the company their sell order just before the Asian financial crisis caused U.S. stocks to plunge.

''I think there were three bad days in the market in the last 10 years, and we sold on two of them,'' Kristina says. But even with that bad luck, the Vinsons came out ahead. ''We made a fair amount of money, so you won't hear me crying too much,'' John says. ''But it could have been a lot better.''

Some investors have developed ways to control when their shares are sold. Thaddeus Shura, 52, a college math professor in Lowellville, Ohio, owns stock through 23 direct-investment plans. He likes to buy blocks of shares in beat-up companies directly. But when he sells, he uses a discount broker. Here's how:

When Shura decides to sell, he asks the company to send him his stock certificates. He then deposits the certificates in his brokerage account and establishes a specific price at which he wants to sell, known as a limit order. ''Selling through a DRIP is really inefficient,'' he says.

Figuring your capital gains

If you sell stock acquired through a dividend-reinvestment plan, you must know what each share cost to be able to figure your capital gains and losses. And you can't do that unless you have kept the annual statements from the company that summarize all your transactions for the year.

Look at this greatly simplified example:

You start by buying 10 shares of XYZ on Jan. 15, 1997, for $100, or $10 a share. Then, dividends were reinvested in additional stock as follows:

$10 on March 31 buys 1 additional share.

$15 on June 30 buys 1 additional share.

$25 on Sept. 30 buys 2 additional shares.

If you sell all 14 shares for $15 a share, your gain would be $60 ($210 proceeds from the sale, minus $150, which is what you paid to buy the shares).

Any fees you paid to reinvest dividends can be added to your cost of the shares to reduce your capital gain.

The calculations get more complicated if you sell only part of your shares, rather than all, and when your reinvested dividends buy less than a whole share, which is very likely.

If you don't have good records to prove otherwise, the IRS can assume that you are selling your oldest shares first, which usually results in the biggest capital gain.

Sources: The Ernst & Young Tax Guide 1999; USA TODAY research

Where to get help with direct investing

Some places to go for more information about direct investing:

Direct Purchase Plan Clearinghouse, http://www.enrolldirect.com, 1-800-774-4117. Investors can request information and enrollment applications for companies that sell their stock directly to the public.

DirectInvestor, http://www.netstockdirect.com. Offers a list of companies with direct-investment plans. Updated daily.

DRIP Investor, http://www.dripinvestor.com, 219-852-3220. $59 a year for monthly newsletter and directory of DRIPs.

National Association of Investors Corp., http://www.better-investing.com, 877-275-6242. NAIC's Low Cost Investment Plan allows investment clubs and individuals to enroll in companies' dividend investment plans for a small service charge. NAIC's Web site provides information on enrolling in the plan and offers a list of participating companies.

The Moneypaper, http://www.moneypaper.com, 1-800-388-9993. $81 a year for monthly newsletter on DRIPs and direct-purchase plans. Reduced rate of $40.50 for first-time subscribers who enroll through the Web site. Subscription includes Guide to Dividend Reinvestment Plans.

Motley Fool, http://www.fool.com. Tips on investing in DRIPs and no-load stocks. Includes chart comparing costs of programs for DRIP investors.

Source: USA Today  By Sandra Block  Feb. 19, 1999.