Dividend reinvestment program

Dividend Reinvestment Plans (DRIPS) are plans that allow the average investor to invest directly with companies and purchase stock right from the company without going through a broker. The benefits of not going through a broker are quite large when adding up all the fees that would be saved over the years. Also, many DRIPS allow for small, regular investments of anywhere from $50. up to $1000. when you choose. Investments of $100.00 through a broker would be greatly reduced by the fee taken out each time.

DRIPS are started up by requesting an enrollment form from the company that you what to invest in. You may get the various phone numbers to call either from a book on DRIPS or from various web sites that list the companies that offer DRIP plans with the companies phone numbers. A couple of these web sites would be www.dripinvestor.com and www.netstockdirect.com.

After your DRIP is started you should continue sending in money to buy more stock and increase your investments. DRIPS make this so easy as most of the time, whenever you invest anything or a dividend is announced they send you a statement of your account. At the bottom of the statment is a tear sheet that you can fill out and send with another check to keep investing in the company. Do this whenever you like, either weekly, monthly or when ever you have extra money. These payments are called OCP's or Optional Cash Payments. There are generally minimums that you may send in, so please read your individual stock plans requirements.

The one downfall with investing through dividend reinvestment plans is that you can not acurately time when your investment will be credited. You have a couple days of mail lag time after you send in your payment, and you have a small lag time until the company's next scheduled investment date. Sometimes it can be a day or two or sometimes as much as a few days to a week. The reason this is not really too large of a concern is because of the principle called dollar cost averaging.

Dollar cost averaging is a concept that is explained by the fact that you buy more shares of a stock when the price is lower, and fewer shares of a stock when the price is higher. Over time the average works out and you have a cost basis somewhere in the middle of the scale. The key to minimizing the effect that buying high may have on your portfolio is to always invest regularly, perhaps once a month or once a quarter. This process will even out your investments over time and your portfolio will average out over the long term.

Trying to time the market is a very difficult task and is generally reserved for brokers or mutual fund managers. The problem is, even thought they spend all of their time trying to time things correctly, they still don't guess right most of the time. Most average people don't have an excess of time to devote to the process, so dollar cost averaging will work great for them.

Continuous investing will accumulate a larger portfolio that can help you save for the future. Many DRIP plans now even offer IRA alternatives that may be looked into as well. Keep investing and work your way into a comfortable retirement. IRA options within DRIP plans are especially nice because the dividends are reinvested automatically back into your plan's account.

DRIPS can become quite a hobby and the more you read about the subject the better. The amount of information, newsletters, and dialogues about the subject is astounding. Receiving a newsletter each month is a nice way to keep abrest of new DRIP plans. More are being introduced all the time by various companies. The trend is increasing because investors like dealing right with the company directly. The sense of ownership is even greater than owning a number of stocks through a broker. Most newsletters also keep you up to date with splits and DRIP plan enhancements that are beneficial to research.

Enjoying the whole process is key and will help you become a smarter, wealthier investor.