Our faucet isn’t the only thing that DRIPs
We have a dripping faucet in our bathroom that I’ve been guiltily procrastinating on fixing. That little drip now and then doesn’t seem like much, but I KNOW that it’s really wasting a lot of water. Of course this is a bad thing, but there are cases where drips can be GOOD things.
You see, DRIPs is an acronym for dividend reinvestment plans. I’d heard the phrase before, but never really understood what it meant. I’d always assumed that it just meant that any dividends you received on stock in a mutual fund would be automatically reinvested. In other words, I thought it referred to the little check box on brokerage house investment forms that said something along the lines of “what would you like us to do with any dividends or capital gains? Invest them or send them to you?”. Well, I was wrong.
A DRIP actually refers to plans offered by individual companies that allow you to invest directly in shares of their stock. This means that you bypass the broker (and any fees they would charge) and buy from the companies themselves instead. It’s also good because you don’t have to wait until you have enough money to buy whole shares. You can buy partial shares, a little at a time, on a regular basis. Dividends on those shares are then automatically invested as well. There are a lot of companies out there that offer DRIPs — you can search for them at sites like DIRECTinvesting.com.
I’m going to be looking into this for some of the companies that I already own shares in, since at least one of them does offer a DRIP.
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March 12th, 2008 at 7:45 pm
You’ll definitely want to make sure you choose companies that you want to own for a long time. They can be great set it and forget it investments though.
March 14th, 2008 at 12:52 pm
I’m on board with DRIP’s – if you don’t have enough initial funds to get commission-free trades at Zecco. For new investors, I think DRIP’s are great… but like Fiscal Musings said, you have to make sure you’re going to “buy and hold”.
March 15th, 2008 at 11:14 am
I am an avid investor. DRIP’s are the way to go. Always play the market for the long term is what people need to remember. Set-up monthly withdrawals and your investment will grow. Also, I advise everyone to learn exactly how the market works.