Dividend reinvestment plans (DRIPs), otherwise known as direct investment plans are offered by companies to allow individuals to invest in that company without going through a broker. They were started to help company employees—and then expanded to help people who already owned some shares in the company.

Now it is possible for anyone who doesn't have a lot of disposable income to invest in stock. That’s because, once you are enrolled in direct investment plan, you can make small investments without going through a broker.

However, for many plans, In order to join you first must be a shareholder. That was the problem for many people. And that problem was solved by Temper of the Times Investment Services Inc. The Enrollment Service offered by that company will buy the single share to make you qualify as a shareholder (or up to 100 shares), it will have the shares registered in your name, and it will deal with the transfer agent to get the DRIP account open in your name on the company books and records.

How can DRIPs help me?

With the market in such turmoil, you might not want to invest a large sum of money at any one time. With DRIPs you can get started with a single share of stock and build your holdings over time without paying fees when you invest. That means that you can start investing with next–to-nothing—and build up positions in stocks slowly over the years. That’s because there are no fees or commission for purchases of stock through many DRIPs, so it becomes feasible to routinely make small cash investments. You can invest as little as $10 or $25 a month

Succeed by Dollar Cost Averaging

The concept is simple, yet very few investors use it. First, you must commit yourself to invest the same fixed dollar amount on a regular basis (even though you certainly have no obligation to the plan to do so). By investing a dollar amount instead of a share amount, you buy as many shares as your investment allows instead of paying for your shares regardless of price. By doing so, you automatically buy more shares when the market price is low and fewer shares when the market price is high.

Avoid Fee-Driven DRIPs

Most DRIPs charge little or nothing to buy more stock. But fee-laden direct investment plans seem to be popping up every day, and in some cases these high fees are ruining the plans offered by great companies. If you've built up shares in a company by investing small amounts over the years, it's difficult to know what to do when fees are added. For some plans, such as those that cap their fees at $2.50, the choice is between getting out of the plan or investing larger amounts, such as $250, less frequently. (A $250 invested would limit the fee to 1% of your investment.) You might invest $500 if the plan charges a $5 fee. We are making this point to alert you to the problem of fees and encourage you to take fees into consideration when you make your regular investments.

You can use the Search function at this Website to find out which companies charge fees, and the amounts of those fees.

Can a relatively small fee have a significant impact on your investment results?

In a word, YES. Take the stock of a great company like Coca-Cola. Imagine what would have happened if Coke’s transfer agent had adopted a transaction fee of $5 ten years ago, and an investor had been sending in $50 a month...the investment would total $6,000 over the ten-year period. That $5 fee on each investment ($600 over the period), would actually have cost the investor $3,202, or more than half of his or her $6,000 investment! How so? Instead of accumulating 480 shares worth $32,017, the investor would have amassed fewer than 432 shares worth $28,815. Luckily, Coke does not have fees. Also, keep in mind that the impact of fees would be significantly less if you were making larger investments.

It's Easier than You Think

Whether you're just starting out or have been investing for a number of years, you may think that creating and maintaining a stock portfolio is a daunting task--one you might better leave to the professionals. The truth is, however, that you can minimize investment risk and cut your investment costs by doing it yourself. The process is not as difficult as some would have you believe. In fact, it can be fun.

In 1996, the Temper Enrollment Service organized to provides a comprehensive service to open DRIP accounts for individuals. Temper buys the required shares on your behalf and does all the paperwork necessary to get the account open for you. It's the most efficient way to open an account. Temper buys the shares at the beginning of the month and transfers the shares immediately to the appropriate transfer agent, along with the proper registrations for the shares.

The process takes from four to eight weeks before the account open and registered in your name. Once the account is open, you are no longer a customer of the Enrollment Service. Your account is open directly on the books and records of the company in which you are investing. The company will send you a statement showing your ownership. The bottom portion of the statement can be torn off and returned to the company along with a cash investment..

Patience

DRIP investing involves investing for the long-term. Traders need not apply!

Regardless of one's age, investing can trigger emotional reactions that lead to mistakes, so the most important trait that you will need as an investor is patience. Some people see no difference between day trading and investing. Before you embark on building a good portfolio, then, it's necessary to remind yourself that doing so involves long-term thinking, not instant gratification.

If you already have a stock portfolio, this may be a good time to examine how well it meets your current and long-term needs. If you don’t have a core portfolio, this is a great time to establish one.

We recommend that your core portfolio be invested in DRIP stocks. You can use that portfolio to accumulate assets in a risk-reduced manner. Since trading through DRIPs is not an option, you are likely to maintain your positions and continue to invest in these companies. Over time, you will find that you have built up substantial numbers of shares, which will result in great wealth.