If you’d like to enter the stock market but are not prepared to purchase a large quantity of stocks or don’t have a large amount of money to invest, then you might find buying stocks through a dividend re-investment plan (DRIP) is the best avenue for you.
Here’s how it works
You buy one share of stock. The company does not pay you in dividends but instead re-invests your earnings into additional stocks. This type of investing allows individuals to enter the market without substantial costs and provides an avenue to purchase stocks without the need for a full service broker.
Some of the advantages in investing through DRIPS include:
- You can started with a small amount of money.
- The reinvestment of your dividends keeps the money available for growth over the long-term rather than being spent or tied up in low interest bank accounts.
- Over 100 companies offer DRIPS so you can build a varied portfolio.
- You can gain knowledge and experience in investing without making a tremendous investment of your savings.
- You can bypass broker fees and use more of your funds for purchasing stocks.
The National Association of Investors Corporation has a website for those who are interested in become more savvy about stocks especially about how to choose stocks wisely. To find companies which offer DRIPS, you can find a number of websites offering this information including Investor’s Guide.
The best time to make an investment is only after you’ve done your homework both on any kind of investment program and the company selling the stock. And above all, evaluate just how much you can risk because as we know, the excitement of investing can turn bleak when and if the prices fall.
Information is for educational and informational purposes only and is not be interpreted as financial advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.