Dividend Reinvestment Programs(/Plans) [DRiPs]
DRiP investing is a way for people to begin investing using small amounts of money to buy stocks at regular intervals. These programs usually only require the purchase of the first share through an agent and after that, all purchases are through the company itself, usually without any fees. All dividends most commonly are also reinvested toward the purchase of more shares of stock. This type of stock purchase is designed for long-term holdings, requiring a lot of patients as the money grows over the years. By investing regular amounts the investor is taking advantage of dollar-cost-averaging, where the price of all shares of stock are averaged together.
DRiPs give you the same access to stocks as brokerage firms do, just at a lower risk. Being a DRiP investoryou are also less likely to take risks and jump in and out of the stock market, often timing purchases or sales at the wrong time. With dollar-cost-averaging you are also reducing your overall purchase price of stocks.
DRiPs are also much more affordable, often there are no fees whatsoever, which allows you, the investor, to afford to purchase stocks in many more companies. By holding stock in a number of companies you are also diversified, invested in various industries and companies at the same time. Since you are allowed to invest as little as $25 or $50 each month, after the initial single share, it allows you to become a regular stock purchaser. By investing regular dollar amounts you are continuously buying shares, more when the price goes down and fewer as the prices goes up, but the dividend continues to work automatically in your favor by helping you buy more shares four times a year.
Some Advantages
There is the low cost to getting started. Since many companies only require the purchase of one share of stock, few do require more, it costs much less to get started in investing in stocks than many mutual funds or brokerage accounts.
Despite a few companies charging fees on their DRiP programs, many do not, which makes this type of investing much more cost effective.
Anyone can find $25 to $50 each month, or every three months, to invest and become part owner in a company.
Dividends grow the number of shares you own which helps you later when you finally sell your shares, usually as part of your overall retirement plan.
In Closing
These programs are not for the super lazy. You can invest automatically using automatic deposits, but you should take the time to keep track of how a company is doing and plan accordingly. You also do need to track purchases, stock splits and earnings as this will all be important when filing tax returns. Some people find all this far too bothersome and will never be the many of people who take control of their financial future, able to grow their money to more than a million dollars for their retirement.
DRiPs have helped people for many decades to take control of their finances and grow their investments into small fortunes. These are worth the look and the National Association of Investors Corporation, is an organization that has been around since the 1950s teaching everyone how to invest in stocks and grow their investments wisely. Also, here is a free online book: DRIP Investing, Step by Step: A Complete Guide to Investing in Stocks on a Shoestring Budget.
Happy investing!
Additional Resources
If this website helped you find your financial future we ask you to please give as a way to say Thank You. Not only does it support this site, is is a way to give it forward so others may find their way toward financial security. Please consider giving. Thank You.
