Drip, Drip, Drip... Until Your Glass Is Full!
Oct 02 '00
Dividend Reinvestment Plans(DRP's), better known as Drips. What an appropriate name for a program for buying stocks a little bit at a time.
How Do Drips Work?
To get an idea, turn the kitchen faucet on so it drips every second or so. Put a glass under it. After watching the drips for a few seconds you don't see much in the glass. Now go eat dinner, watch some television(I'd recommend Nightly Business Report or Wall Street Week In Review), read the newspaper. When you go back after a few hours, guess what? There's quite a lot of water in the glass.
That's what happens with a DRP. At first you don't see much. But, as time goes by, you go back and look. Your financial glass is filling up fast!
Each month or each quarter you buy more stock in the companies of your choice. And this isn't limited to a few companies. It used to be, but not anymore. Thousands of companies take part in DRP's.
As you make your monthly purchase your portfolio grows and grows. But, that's not the only way it grows. If you research the companies you should be able to build a portfolio of good, solid, growth companies that can easily result in an annual increase of your shares' value of 10%. In addition to price increases you receive quarterly dividends. And what does the 'R' in DRP stand for? That's right, reinvestment. You can choose to have your dividends automatically reinvested in more shares of the same company.
How Do You Get Started?
Probably the easiest way is through an online Drip-oriented broker like BuyAndHold.com or Sharebuilder.com. This type of site offers accounts that can be opened for as little as $20. They are quick, easy, and charge commissions of only two or three bucks per trade. I do most of my Drip trading through one of these sites because they are so-o-o-o convenient.
Another way is to go directly through the company you are buying stock in. The biggest advantage to buying through the company, Direct Stock Purchase(DSP), is that many do not charge any commission. The disadvantages are that it takes more effort to get your account set up with the company and many of them have fairly high minimum purchase amounts.
Now Get Started!
When you can get started for $20, you don't have an excuse. I ignored this same advice years ago. Then I finally started. And, I found that I really didn't miss the money that much. But after only a couple years of Drips in my glass it's starting to fill up!
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StraightTalker
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Member: Rick Jacobson
Location: Milwaukie, Oregon, USA
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Just hangin' out waitin' for my next trip to Mexico!
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