Investing: DRIPs
September 25, 2007 by Miranda Marquit
Filed under Finance
One of the steadiest ways to build your investment portfolio is through Dividend Reinvestment Plans (DRIPs). DRIPs take investing dividends and then reinvest them. The other cool thing about DRIPs is that you are buying them direct from the company. So, you get dividend paying stocks, those dividends are reinvested in the company, and since you are investing direct, you don’t have to pay fees or commissions to a broker. Brilliant!
Other advantages include such things as the small amount needed to get started (some DRIPs will allow you to start with as little $10), the fact that you automatically investing, without having to think about it, and some companies allow you to buy stock through your DRIP at a discount rate (look for these companies).
Of course, on the flip side, your growth isn’t as dramatic as if you took a lump sum and invested in a growth company. But if you are looking for a steady way to build your investment portfolio with solid holdings, a DRIP or two might be just the thing. Just remember to diversify with some riskier holdings as well.
The Motley Fool offers this summary assessment of investing in DRIPs:
Drips are a way to begin investing with a very small amount of money, and to keep investing monthly (or as frequently as you can afford) in small or large amounts, while avoiding brokerage commissions and reinvesting all dividends, too. In the long-term, it’s a great and “patient” way to grow money over time, as you have dollar-cost averaging working for you as well, and you’re investing, ideally, in great companies that you can’t foresee selling at any time.
I have been thinking about getting start in DRIPs, it seems like the best way for someone with very little money to invest to get started. I noticed there are two kinds of DRIPs. The DRIPs that you can direct to the company and enroll, but they seem to have fees (much less then a broker, but still a fee). The other kind, you have to be a share holder first. I find directinvesting.com , they seem to be set up to get people enrolled in DRIPs. Do you know anything about them?
I don’t know anything in-depth, but it seems, at face value, to be a good site. Yes, there will be fees, no matter what investment vehicle you choose. You can also find DRIPs with some online brokerages who waive reinvestment fees. But you should always be careful and consider consulting a professional before making any investing move. But DRIPs can make a good choice. My Roth IRA has DRIPs, and as a result it was pretty well cushioned during this recession.