What Are DRIPs & How Do They Compound Your Dividends?

As I’m in the process of job hunting, I’m casting a wide net. You never know what kind of position, role, or company may be interested in or in need of the kind of talents I can provide, that is, researching, editing, proofreading. As a writer, you just learn to do these these things as rote gestures. Sometimes it can be difficult to convey to those unfamiliar, but I can pretty much take on any topic and compose something entirely adequate in a compressed time frame.
For example, recently one of the positions I applied to asked me to generate some topic specific writing samples. I wrote each piece in a couple of hours. I didn’t end up getting the position, but it was definitely interesting learning about the topics and writing something up on them. 
Thus, I thought I would share them here. 

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Dividend-Reinvestment-Plans

What are DRIPs and how do they compound your dividends?

 

The average American isn’t known for saving money. The Federal Reserve estimates forty percent of people have less than $400 saved. Yet, many Americans are more confident now about their ability to save for retirement than they have been in the past.

How can we reconcile these two seemingly disparate poles?

More companies are offering a variety of means for both regular investors and those new to investing routes to personal financial stability. This is where Dividend Reinvestment Plans or DRIPs come into play. Typically, when you invest, you receive cash dividends. In an innovative move, DRIPs reinvest cash dividends into additional or fractional shares of the underlying stock. Doing so creates a kind of feedback loop wherein your initial investment literally grows commission-free or with an ultra-low fee. The automatic reinvestment compounds returns. Essentially, your money makes more money creating a basis for lasting wealth.

In this way, DRIPs give shareholders stability and flexibility allowing for full-to-partial reinvestment or full pay out. It is an effortless, uncomplicated means to begin or augment investing. Many plans can be initiated for $250 or less generating a store of savings actively working for you. While providing benefits for individual investors, DRIPs also buttress companies granting them more capital to work with, which is why many companies offer shares of DRIPs at significant discounts from the current share price.

It’s not exhilarating; it’s an exercise in patience. Dividend Reinvestment Plans solidify your financial foundations creating a reserve that can be drawn upon when needed like savings while at the same time taking the long view towards retirement. As a simple and direct means to make a long-term investment contributing to a stable future, DRIPs must be part of the conversation. Whether you want the freedom to make bolder investments while still having sure footing or merely want to dip your toe into investing, DRIPs are a proven means to achieve your goals.

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