Dividend Reinvestment Program

Investing in the stock market is a subject of intense curiosity for a huge percentage of wage earners. The images of the flurry of activity at stock exchanges, and the stories about day traders raking it in, are appealing for those who want to be able to provide a better lifestyle for themselves and their families into the future.
However the truth of it is that for the great majority of investors, any gains on the share market will have to be made by sensibly choosing a balanced portfolio and letting it grow over time. The good news is that there are plenty of relatively safe investment strategies that are very likely to offer a reasonable return on your money over a long enough period! One of the less well known options that is worth pursuing if you are interested in developing a long term strategy is a Dividend Reinvestment Program, or DRIP.

A DRIP is a program run in-house by a publicly listed company. They are often offered to employees of the company, but they are also open to external investors who can meet the companies minimum share threshold to participate – usually this threshold is quite low.

The benefit of DRIP investment is that you can start with a very low volume of shares, and gradually increase your shares over time. You usually set a fixed cash amount that you will use every month to buy more shares, and this can be set up to be automatically deducted from your bank account – in essence, it is a forced savings system. The strength of a DRIP lies in the fact that any dividends paid by the company on your shares are automatically reinvested, and this has a compounding effect on your number of shares over time. Many companies also offer shares to participants in the program at a reduced rate, and of course you pay no brokers fees if dealing directly with the company!

Although it might not suit day traders out for short term gain, a DRIP is a great tool to have in your arsenal when building a long term portfolio.

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Tags: balanced portfolio, day traders, dividend reinvestment program, dividends, Investing, investing in the stock market, investment strategies, investor, money, Stock, stock exchanges, stock market

Filed Under Beginner Investing, Investing Glossary | 13 Comments

Tagged With balanced portfolio, day traders, dividend reinvestment program, dividends, Investing, investing in the stock market, investment strategies, investor, money, Stock, stock exchanges, stock market

Comments

13 Responses to “Dividend Reinvestment Program”

reibong on November 14th, 2009 5:44 pm

You article about DRIP investment is really interesting. I have been dreaming of buying shares here on our local stock market particularly Jollibee. I wish that they offer that particular scheme. Thanks for sharing the info.
k0ffle on November 14th, 2009 5:50 pm

Great! There is really a lot of knowledge to be gained from here. This is a great blog, definitely adding this to my favorites! Maybe expand more on the threshold to participate? thanks again, K0ffle
Martina on November 14th, 2009 6:01 pm

That sounds interesting! For more than a year I have been tightening the purse strings but I might actually think about options such as this one for the chance to build a financial cushion over time. Thanks for the info!
Melissa Shoaf on November 14th, 2009 6:02 pm

I must say there is still so much for me to learn about investing in stocks. I have tried a lot of times to venture into it in the past, but my lack of knowledge and the fear of losing money holds me back. I have heard a lot of people making good profits from it thoigh. after reading your post, it made me understand things better. I guesss it’s time to give it a shot.
probis online on November 14th, 2009 6:08 pm

I think dividend is the greatest passive income in the stock market. Your article is very informative. It is a very useful info. Keep on blogging friend…
rofazzz on November 14th, 2009 6:32 pm

hmm… nice article for blog
i like it because it is investment online business
then with dividend reinvestment program is recommended
rofazzz´s last blog ..Blog Earning Online
sara on November 14th, 2009 6:49 pm

Dividend reinvestment is a fantastic way to grow money. If you train yourself to reinvest the quarterly dividends AND a set amount you can afford it month it really does grow. Think of it as a painless savings account. Not guaranteed but definitely a way to experiment.
Kate on November 14th, 2009 6:56 pm

You have a very informative article on Dividend Reinvestment program. You have taught me what a DRIP is, and what sought of program it is.
dihan on November 14th, 2009 6:56 pm

This allows the investment return from dividends to be immediately invested for the purpose of price appreciation and compounding, without incurring brokerage fees or waiting to accumulate enough cash for a full share of stock.
mohd harith on November 14th, 2009 7:28 pm

Dividend Reinvestment Program (DRIP) also will help the company to boost up their company strategy for a long term as they have more fund to use. It is another a good long term investment for those who do not have much money to invest.
pshychology blog on November 14th, 2009 7:51 pm

I am an employee who was looking for opportunities of extra income on the internet. This article opened my mind and increase my knowledge about how to invest. thanks
pshychology blog´s last blog ..A General Theory of Personality Development (Erikson)
TheBlue on November 14th, 2009 10:00 pm

DRIP investment is a new matter to me.Your post provides a lots of useful information about it.I see it clearer now.Thanks for sharing.
neil on November 14th, 2009 10:05 pm

Generally, this site is very interesting. It is very professionally made and your articles are very informing. I could learn more from you in the future. I’ll be adding your site to my bookmark. You have lots of stuff going on in here, like basics, how to’s and tips in investing and earning money from the stocks and online.