Saturday, March 25, 2006

Investing with Dividend Reinvestment Plans

Investing with Dividend Reinvestment Plans

Did you know that you can buy stock without a broker? Would you like to purchase shares of Starbucks or Disney for your kids or grandchildren but you don't know how? Are you interested in buying shares in a particular company over time but don't have a lot of money to do so. Participating in a Dividend Reinvestment plan might be just the solution that you are looking for. The DripAdvisor has a great list of companies which participate in dividend reinvestment programs. It even has a search function that allows you to search by ticker symbol or company name to determine if they have a dividend reinvestment plan.

What is a dividend reinvestment program: Dividend reinvestment plans also known as DRPs or DRIPs is a way for individuals to buy stock directly from the offering company in small amounts. If you have a lot of cash you can buy a large amount but then you would probably already have a brokerage account.

How to participate in a dividend reinvestment plan: The are several ways to buy stocks through a dividend reinvestment plan. First of all you can go to ShareBuilder 401(k) and sign up for their plan. Sharebuilder allows you to invest any dollar amount on Tuesdays exclusively online. You can also schedule investments on a weekly or monthly basis. They have a broad selection to choose from including over 5,000 stocks and Exchange traded funds or (ETFs). Of course there is a fee but it is minimal, there advertised rates start a $4.

Advantages of dividend reinvestment plans: First of all the biggest advantage is that you do not need a large amount of money to start. Another benefit of participating in dividend reinvestment plan is literally the dividend reinvestment. If the stock that you purchased pays a dividend then the dividends are automatically reinvested to buy more of the stock usually at no fee. Additionally some companies allow you to invest additional funds in amounts as small as $10 to $50. There are nearly 200 companies that offer the option to have your investments made monthly by automatic withdrawl from your checking account. Some companies even allow the DRIP investor to purchase stock at a discount to the market rate.

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