Drip Investing: An Overview
Drip Investing: An Overview
The consumers of America have been more interested with several investment options after having faced the financial disaster and the problem of debts. Although, the debt consolidation programs have provided relief from the debts, the consumers will now require thinking about the wealth building processes. The DRIP investment implies that the consumers will no longer receive the quarterly dividends; instead the company will reinvest the stocks by purchasing more shares and thus the money will be put back into the same stock. There are a lot of companies who may provide the opportunity of stock purchase programs for their employees. These stocks are usually purchased in a reduced price and therefore act as a nice bonus. The employees are not offered the dividend checks rather the money is invested back into the stocks of the company. This offer became very popular with the employees and gradually all of them have started availing the same.
In order to avail the opportunity of DRIP investing, an individual should have a share in the stock of the company, in his own name and not in the name of the broker. On fulfilling these requirements, the employee can have a DRIP option. Followed by this, they will need to call the company and get all the details which are related to DRIP investment. However, there are various ways of purchasing a DRIP. If you are already habituated to purchasing your shares through a brokerage, you can perhaps try to explore the option of DRIP with them. Some of the brokerages will allow their investors to avail this option. Due to the popularity of this mode of investment, the companies are now trying to engage a third party to handle the reinvestment plans. On the other hand, some companies are still running the drips on their own. It is easy to know about them by simply calling them and you will be directed to a representative of their own.
As a matter of fact, the companies which are handling the DRIPS are not really a matter of concern as long as the dividends are reinvested into the investments. Only those companies which offer dividends can subsequently offer the DRIP option. According to a survey, there are only a handful of companies which are offering dividends followed by DRIPS. However, the ones that are offering the DRIPS are still large in numbers. Let us now get into the advantages which are provided by a DRIP investment program. The first advantage is that the consumers can invest with a relatively small amount of money hand without having to pay the brokerage fees. The return of investment on Drips has been found to be higher than the traditional forms of investment. Since the fees are not so high, the investors will have an edge with diversification, which is used to abolish risks from the portfolio. Once you are enrolled for a DRIP program, it will be easier for you to review the performance of the stocks. DRIP is a great way to start for the beginners to invest in discounted stocks. Lastly, DRIP will also allow the investor to withdraw a specific amount from their account.
In short, DRIP is the best suited option for the investors who are meticulous, and have a rational approach with their investments.
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