DRIP – increase your dividends the easy way
Do you remember the shampoo advertisement on TV a couple of years ago? A beautiful woman with long glossy hair tells you to share the benefits of this wonderful shampoo by saying: “And you tell two friends, and they tell two friends, and so on, and so on.”
She is talking about the multiplier effect, where the more one has of something (in this case, fans of their shampoo), the more they will get.)
DRIPs are very much like that. A Dividend Reinvestment Plan (DRIP) is a plan where shareholders of a company can automatically use their dividends to buy more shares in that same company, sometimes at a discount, without paying a transaction fee.
There are three important parts to this easy way to make money.
- Sometimes at a discount.
- Without paying a transaction fee.
This increases the number of shares of that company that you own, which increases the value of the dividend you are paid, which increases the number of shares, and so on, and so on. You get the picture.
And so on, and so on.
Many companies have Dividend Reinvestment Plans for their shareholders. The bank that holds your self-directed investment account may allow you to opt in to a DRIP plan for either the whole account, or specific companies. This is a great way to build your investments and you save money on fees. That’s my kind of savings!