A Stock Portfolio That Kids can Afford
With direct investment plans (DRIPs), you can build great wealth by starting while you are still young.
Such a commitment to investing can mean great returns when you are older. The reason is simply the passage of TIME, which will cause those investments to grow far beyond your wildest dreams.
Although it may seem to be too good to be true, the power of compounding is dramatic, and if you give it a chance, your reward will be huge benefits.
Say that you can afford to put away $2,500 a year from the time that you are 18 years old until you reach age 65. During that time, the $60,000 investment can be expected to grow to more than $2.6 million! What’s more, to get the full impact of that growth, consider that you had only about $30,000 (on average) on the table during the period. You started with only $2,500 and invested in increments of $2,500 a year until finally you invested all $60,000. Please click to see the math behind this statement, which is based on an annual growth rate of 10%.
The best, (if not the only, way) to anticipate 10% annual growth is by investing in the stock market over the long term. But this doesn’t mean that you should invest through a mutual fund. Funds have fees and tax consequences that would eat into the growth
Instead, the editors of The Moneypaper suggest that you create your own portfolio of stock, and that the portfolio be made up of stocks that accept direct investments through their direct investment plans (or DRIPS). DRIPs allow you to participate in the market without the services of a stockbroker.
To simplify the process, The Moneypaper editors have selected a starter portfolio of stocks that have DRIPs. These companies have long histories of paying dividends and increasing those dividends. In addition, they produce products and services with which you may be familiar.
You can also use the Search for DRIPs area at the www.directinvesting.com Website to find out whether a stock you like has a DRIP (and the provisions of the plan if it does).
To start a portfolio (or open a DRIP account), simply click on the company name. You’ll find complete information on the company DRIP, as well as a capsule review of the company operations. You’ll also find a link to Enroll. The complete process can be handled online.
You can buy a single share of any or all of these companies. The share(s) will be registered in your name and an account will be opened in the company DRIP so you can continue to invest even small amounts and without fees.
By following this simple strategy, you will be building a substantial nest egg based on relatively small investments, and you will also be taking responsibility for an important part of what your future will look like.