What are drip investments? DRIP investments are becoming a popular option for both the publicly traded company and for the small investor. DRIPS, or Dividend Reinvestment Plans, mean that any dividend paid on a stock or share is automatically reinvested back into those shares. Over time it is quite possible to build a large amount of shares in a company and because companies know that the small investor will more than likely remain loyal for a longer period of time they will offer a variety of benefits in order to attract the loyal small investor. Often DRIP investments require very little purchase of shares, in fact some companies even offer optional purchases from as little as $10. It is quite possible that you will even get discounts on stock price; this coupled with the lack of brokerage fees mean you've instantly made a profit on your investment. A good entry to investments. Because DRIP investments are cheap and easily accessible, they are an excellent introduction to investments whether for first time investors or perhaps even as a gift for your children. Buy them a few shares when they are young and they will eagerly watch their little nest egg grow over the years. The quarterly and annual earnings reports you receive from most DRIP investments are excellent as a source of information and to keep your or your budding investor interested and informed of your chosen stock's performance. A sound investment. DRIPs are often much more profitable than traditional stocks for any investor and because of the way they are purchased, gradually over time, you are much more likely to produce a yield. This technique of purchasing is commonly referred to as dollar cost averaging and works because in theory over a great length of time you will buy more often when prices are lower and less often when prices are higher. Although DRIP investments are suitable for everyone, they aren't necessarily ideal for all; one of the biggest positive factors of DRIP investments is the dollar cost averaging, however all companies do have a minimum purchase and a minimum optional purchase. With many companies these are set at a low level to accommodate the small investors the schemes are aimed at, but now always. For instance while Coca Cola offer optional purchases at $10 other companies offer them at $100. What this means is that not everyone can afford to make the minimal purchases exactly as and when required. However, that said DRIP investments are truly an incredible way to get into investing, they are both affordable and relatively easy to master once you know the basics.
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