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| Direct Investment Plans (Dividend Reinvestment Plans or DRIPs) |
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You
don’t
have to be Rich to Get
Richer |
Leveling
the Playing Field through
DRIPS |
With
DRIPs, you don’t
need much money to start
investing. You can begin
with next to nothing and
you end up with a bundle.
That’s
because DRIPs make it possible
to invest as little as $25
or $50—and
get shares directly from
the company without having
to open a brokerage account
and without having to pay
brokers’ fees
or commissions.
How
come you don’t
know about these plans? No
one advertises them. Broker’s
wont and SEC rules forbid
companies from advertising
them.
What’s
the advantage of investing
directly? Besides saving on
commissions, you save on risk.
How’s
that? The stock is always
registered in your name--not
in the name of a broker who
holds your account. (The
Bear Stearns situation may
make you realize that broker-risk
does exist.)
What’s
more, you can probably afford
to own lots of different companies
if you invest through DRIPs
(companies like G.E., Microsoft,
Johnson & Johnson,
and many more blue chip companies).
All it costs to open a DRIP
is the price of a single
share of stock plus the enrollment
service charge. Then you
can invest as little as $25
in each company whenever you
have the money to do so (or
you can set up a program
to invest automatically on
a regular basis).
The
best part of DRIP investing
is that you don’t
have to guess which way the
market is going next week,
next month, or next year….
You are in for the long haul!
Market slumps can actually
be an advantage. When the
market is down, your investment
will buy more shares than
it would when it is high.
Usually
investing carries risk. People
get burned trying to guess
which way the market will
go. You won’t.
Years from now, you’ll
have sizable holdings that
you built up with money that
you might have spent on something
that you didn’t
really need.
The
bottom line: DRIPs let you
have the same risk-reducing
strategies that big investors
can afford—you
will be buying shares on market
dips and you will own lots
of different companies. What’s
more, as a DRIP investor,
you won’t
react emotionally to the financial
news and you won’t
worry about your broker. You
will just keep adding to the
shares you own (in your own
name) until you have built
wealth. |
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You
can afford to own a larger
number of companies |
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DRIP
investors can start with
small positions in a large
number of different companies
and build their positions
slowly, which is known as
diversification. When some
of your stocks are lagging,
others may be gaining. That
way you won't feel so much
pressure to sell the laggards
(assuming that all things
are equal, you would want
to be buying those companies
when they are lagging, not
selling them!). Learn more |
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You
can invest small amounts
on a regular basis |
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Unlike
traditional investing, DRIP
investing is based on investing
dollar amounts. You can invest
even small amounts on a regular
basis if the company doesn’t
charge fees, which is known
as dollar-cost averaging.
Dollar-cost averaging also
imposes discipline on your
investing because you decide
how many dollars you intend
to invest on an investment
schedule that you set up
in advance. Learn
more. |
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