This Is A Secret Weapon For Savvy Savers
Learn how to buy stocks automatically
“Penny wise, pound foolish.” Robert Burton
Taking care of your money sometimes means you have to dig deep into the details. These efforts add up over time.
If you own some dividend-paying shares (my favorite kind), you can use this technique to increase your holdings.
Do you remember the shampoo advertisement on TV a couple of years ago? A beautiful woman with long glossy hair tells you to share the benefits of this wonderful shampoo by saying: “And you tell two friends, and they tell two friends, and so on, and so on.”
It was the 80’s Faberge Organics Shampoo Commercial and it is one of the most unforgettable tag lines ever.
She is talking about the multiplier effect, where the more one has of something (in this case, fans of their shampoo), the more they will get.
DRIPs are very much like that. A Dividend Reinvestment Plan (DRIP) is a plan where shareholders of a company can automatically use their dividends to buy more shares in that same company, sometimes at a discount, without paying a transaction fee.
There are three important parts to this easy way to make money.
Discounts.
It’s automatic (and I love that).
Zero or lower transaction fees.
You can increase the number of shares you own, which increases the value of the dividends you receive, which increases the number of shares, and so on, and so on. You get the picture.
And so on, and so on.
Many companies have Dividend ReInvestment Plans for their shareholders. The bank that holds your self-directed investment account may allow you to opt into a DRIP plan for the whole account or specific companies.
This is a great way to build your investments. You also save money on fees. That’s my kind of savings!
What is automatic in your life ( besides your car)?
If you know how to drive a stick shift, who taught you?
Do you hold your nose and buy, or panic sell when the stock market crashes?
Is your money in a sock, hidden under your mattress?
I’d love to read your answers in the comments!