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"Drip" investing

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"Drip" investing

Dividend reinvestment plans or otherwise known as DRIP investing is the method of investing directly in companies without passing through the services of a broker. Dividend reinvestment plans are usually backed by companies themselves allowing individual investors to buy their stocks. However, Drip investing is more common to large and already established companies such as Intel, Pepsi Co, Volvo, and Wendy's International.

Drip investing is pretty easy. You normally call a company that offers dividend reinvestment plans directly and ask them how to set up an account. Even much easier, search the internet. There are already a number of companies that are online and offer Drips via online purchasing. Because of Drip investing, the stock market has been diversified. The stock market is no longer a playing ground exclusive to wealthy people who can afford to pay the sometimes exuberant fees of brokers. With Drip investing, the stock market has branched out to the people that cannot afford expensive brokers. Because of Drip investing, individuals only need as little as $10 to purchase shares of stock in companies like IBM, Coca-Cola, McDonald's or Xerox. And through regular investments, an individual can build a very decent stock portfolio without even the assistance or paying for the services of a stockbroker. It is undeniable that this remains the greatest advantage of Drip investing.

On the other hand, every investment strategy has its own drawbacks. One of the disadvantages of Drips is that dividends are still taxable. Also, when you decide to open a Drip account or buy more shares using an existing account, it is the company that sets when you could perform your transactions. This would be a little disadvantageous since you might not be able to invest on a time when the market is good. Nevertheless, companies that offer Drips would most probably schedule you during ideal market days.

Given the details mentioned above about Drip investing, we can safely conclude that investing independently is one of the easiest, if not the easiest, way of investing your money on the stock market. With Drip investing, you enjoy the benefits of no broker fees, usually 3-5% discounts, more often than not have triple digit potential and be able to benefit from special shareholder privileges.

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