Dividend Reinvestment Plans - Pretty Cool!

[Jadow]

Hi all,

I thought I'd tell you about a really way to invest that I have learned about, and started doing.

It's called Dividend Reinvest Plans, and usually is referred to as a DRIP or DRP.

Here's how its works, you start buying stock in a company, Exxon, Bank of America, Wal Mart, Pfizer, Lockheed Martin, etc... And when that company pays a dividend, that dividend is automatically reinvested into company stock. Essentially you start out with X shares, and over time your # of shares grows!

Here's the really cool part, and what enticed me the most. You can start out with a real small amount of stock, and have a set dollar amount automatically invested into the stock each month from your checking account, similar to an ING automatic investment.

Now, the ultra cool part is this, you can get into these plans directly from the companies that offer them, or their transfer agent, and NOT PAY COMISSION ON THE PURCHASES or the Monthly automatic investments.

I recently invested $250 into Exxon, and am now putting $50 a month into Exxon stock. I had to pay a 10 dollar start up fee, but that was it.

Now, this is an investment, its not insured or guarenteed, but its a good way to start investing in common stock and watch your earnings grow over the years. Also, you do have to pay taxes on the dividends (currently 15%), but you don't need to pay capital gains taxes on the stock until you sell it.

The website I go through is www.equiserve.com there's also www.sharebuilder.com even though their charge higher fees.

Check it out!

 

[Kipper]

http://www.scottrade.com/

$7 Market/Limit orders, $500 signup.

If you feel the need to diversify a small amount, discount brokers are probably the way to go, since you go to one place and can get real-time pricing rather than DRIP pricing which in my experience is a bit of a hassle.

 

[Jadow]

Scott Trade has good rep, but I like the ability to invest 50 a month and not pay a comission, if a comission is ever more than 2% of the purchase amount, you're paying too much, or not investing enough.

 

[ArmenK]

Yes, DRIPs are really cool and not many people know about them. The obvious benefit is that there is no comission but the other cool thing is that you can buy fractional shares and thus invest a set dollar amount every month. This way, you can plan around your investments since you know how much money will be going into them every month.

Another cool investment that is commision free is treasury direct bonds. Any FDIC insured bank that you have an account with is required, by law, to help you buy bonds from the US treasury at no cost to you. Definately something to consider once the interest rates go up a bit. You can read more about it here

 

[V00D00]

go go for the power of compounding.

What is even more powerful, is the fact that you invest a set amount on a set interval.

Then when the price of the stock goes down you get more shares, and when the stock goes up you get fewer, but the shares you bought earlier go up in value as well... woohoo win either way.

 

[Jadow]

thanks for the link Armen, that's cool.

 

[Literati]

If I remember correctly, Warren Bufftet is a huge advocate of compounding investments.

Ahh well, anyways I enjoy Ameritrade very much although I have never used any other services, but I have heard that Scott Trade is pretty decent for the amount you pay and what resources are available to you.

I'm psyched right now though because I am almost finished with a 2 day session of finincial study! yeaaaa

I just have to review tonight, but the grunt of the work is done.

GOOOOO STEELERS

 

[spidey07]

Originally posted by: ArmenK
Yes, DRIPs are really cool and not many people know about them. The obvious benefit is that there is no comission but the other cool thing is that you can buy fractional shares and thus invest a set dollar amount every month. This way, you can plan around your investments since you know how much money will be going into them every month.

Another cool investment that is commision free is treasury direct bonds. Any FDIC insured bank that you have an account with is required, by law, to help you buy bonds from the US treasury at no cost to you. Definately something to consider once the interest rates go up a bit. You can read more about it here

always, always, always do dividend re-investment if there is no charge.

plus, no taxes!

 

[gopunk]

Originally posted by: Jadow
Hi all,

I thought I'd tell you about a really way to invest that I have learned about, and started doing.

It's called Dividend Reinvest Plans, and usually is referred to as a DRIP or DRP.

Here's how its works, you start buying stock in a company, Exxon, Bank of America, Wal Mart, Pfizer, Lockheed Martin, etc... And when that company pays a dividend, that dividend is automatically reinvested into company stock. Essentially you start out with X shares, and over time your # of shares grows!

Here's the really cool part, and what enticed me the most. You can start out with a real small amount of stock, and have a set dollar amount automatically invested into the stock each month from your checking account, similar to an ING automatic investment.

Now, the ultra cool part is this, you can get into these plans directly from the companies that offer them, or their transfer agent, and NOT PAY COMISSION ON THE PURCHASES or the Monthly automatic investments.

I recently invested $250 into Exxon, and am now putting $50 a month into Exxon stock. I had to pay a 10 dollar start up fee, but that was it.

Now, this is an investment, its not insured or guarenteed, but its a good way to start investing in common stock and watch your earnings grow over the years. Also, you do have to pay taxes on the dividends (currently 15%), but you don't need to pay capital gains taxes on the stock until you sell it.

The website I go through is www.equiserve.com there's also www.sharebuilder.com even though their charge higher fees.

Check it out!

Along the same lines, you can get mutual funds and do the same thing! Then you don't even have to worry about picking stocks... I find that I do better than most people with just VFINX

 

[astroview]

Jadow, there is a message board for DRIPS that I really like.

http://www.dripinvesting.org/Boards/Boards.asp

I'm DRIPing a few companies right now too.

 

[Jadow]

THANKS FOR THE LINK!

 

[DaveSimmons]

Originally posted by: gopunk
Along the same lines, you can get mutual funds and do the same thing! Then you don't even have to worry about picking stocks... I find that I do better than most people with just VFINX

Hey, that's my investment rant!

 

[gopunk]

Originally posted by: DaveSimmons

Originally posted by: gopunk
Along the same lines, you can get mutual funds and do the same thing! Then you don't even have to worry about picking stocks... I find that I do better than most people with just VFINX

Hey, that's my investment rant!

 

[AStar617]

Originally posted by: V00D00
go go for the power of compounding.

What is even more powerful, is the fact that you invest a set amount on a set interval.

Then when the price of the stock goes down you get more shares, and when the stock goes up you get fewer, but the shares you bought earlier go up in value as well... woohoo win either way.

The term for this is "dollar cost averaging".

 

[AStar617]

Originally posted by: gopunk
Along the same lines, you can get mutual funds and do the same thing! Then you don't even have to worry about picking stocks... I find that I do better than most people with just VFINX

teh WINNAR! Although I would further specify that this does not usually hold true for any old mutual fund... Vanguard 500 is a no-load INDEX fund.

Most mutual funds (something on the order of 85-90%) fail miserably at beating whatever indices they attempt to beat, so it's best to just mirror an index with an index fund, which tries to match an index almost exactly. The results are better by far than a standard mutual fund due to the lack of paid analysts (no need for them, the portfolio simply mirrors the index!) and all the requisite fees that are taken from your earnings to pay for their salaries, advertising, etc (the "load).

I have 100% of my 401(k) invested in an S&P 500 index fund (not Vanguard, just whichever one is offered by my Fidelity plan). At 23 years old, dollar cost averaging kicks serious ass. I'm hoarding shares while the market is still bearish. My balance will explode when things pick up.

 

[Liviathan]

Yeah drips are pretty cool...before I got laidoff I used to invest about 200 a month in 2 stocks...do that for a while and you'll be surprised how quickly it adds up. Now that I am working again I need to get back on the wagon.

 

[edro]

Sorry to say, but Exxon filed Chapter 11 over the weekend.










just kidding... Anyways, my company stock purchase program automatically does the DRIP for me. I just got my year-end statement and it showed that all my dividends were forwarded to purchase more stock. My dividens were only like $40, but what the heck, that is over half a share!

 

[Jadow]

cool, a lot of investors on here! In 40 years we'll rule the world thanks to our compounding! HHAHAHAHAHAHA

I am a big fan of Index funds too, in my 401k and Roth IRA, I have about half of my total $ in an S&P Index fund. Fidelity just really lowered the fees on theirs now too, its cheaper than Vanguard. .10 percent (1/10 of 1 percent) expense ratio and no loads of any kind.