Easy ways to Invest in a Dividend Reinvestment Plans Program

If you own shares or stocks in equity, you are entitled to dividends on a quarterly basis. Mostly, these dividends are paid out in cash and they are proportional to the amount of shares you own in the company and the profit accrued. Most of the times, this money is paltry and cannot be used for any other purposes. In most cases it is also too little to buy more shares in the company. What you need to do is to invest in a dividend reinvestment plans program. This way you can save your money for when you really need it and not misuse it.

The advantage of the dividend reinvestment plan is that you can accumulate huge amounts of money from your paltry dividends. This money will keep accumulating interests and so you will get it at higher value. The problem with cash dividend is that it may be too small to purchase more shares, and when it is enough to, there are too many charges that are involved. On the other hand, a DRIP is free of charge or in some cases a small levy is taxed on it. This is an effective and wise way to save money for when you really need it.

When you invest in a DRIP, all the money accrued from your quarterly dividend payments is reinvested back into the stocks you own. The money is reinvested immediately and therefore it continues price appreciation and compounding on the shares you own. As far as long term investment plans go, this is the best because you do not have to keep reaching deeper into your pockets to sustain it. Some tips that will help you to invest in a DRIP program include:

Instructions

  • 1

    Purchase good stocks; Of course this is the first step towards a solid investment plan is choosing the right kinds of stocks in which to trade in. Stocks that bring in a huge profit will of course lead to a larger share of DRIP and therefore more investment value for you. High value stocks are the best because they are stable and they are not easily affected by market currents.

  • 2

    Look at it as a long term investment; Investing in DRIP is essentially saving your profits so that you can enjoy them art a later date when they have appreciated in amount. This is why you should think of it as a long term goal rather than a short term one. This kind of investment takes patience because it will take years to pay off.

  • 3

    Acquiring stock in the company; Majority of companies will require a DRIP investor to be a direct owner of shares in the company. This means that you have to be a registered stock owner in the company in order to join the plan. Proxy owners that use brokerage firms or banks to purchase shares cannot join the DRIP programs in most companies. In the past people used to have stock certificates with them as prove of ownership but now due to the digitization of systems one does not need to.


     

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