In the world of dividend investing and personal finance, I truly believe that dividend reinvestment plans (DRIPs) and direct stock purchase plans (DSPs) are incredibly underrated. While new technologies often get the spotlight, these old school stock investment vehicles are incredibly innovative, in my opinion. In today's video, learn why DRIPs can be beneficial for both new and seasoned dividend stock investors. And, learn how to get started!
At the end of the day, I get a lot of questions here on my YouTube channel about fees and commissions. It seems like all investors want to minimize fees. I also receive questions about getting started. Many feel that they just don't have enough money to start investing in dividend stocks. In my opinion, dividend reinvestment plans remove all barriers. They reduce (and often eliminate) fees, while bringing accessibility to smaller investors.
Today's video shares the pros and cons of dividend reinvestment plans! Some of the pros discussed include:
* Holding stock in your name (versus the street name, in the case of a stock brokerage).
* They can be free! In the case of General Mills, for example, their DRIP charges no fees for purchasing stock (other than the $15 1-time setup fee).
* DRIPs make it easy to dollar cost average, one of my favorite investing strategies of all time.
* DRIPs allow one to buy fractional shares, a critical component of my dividend investing strategy. (One is hard pressed to find other avenues that make it so easy to purchase fractional shares of stock.)
* As the name implies, DRIPs allow one to reinvest their dividends, accelerating their portfolio value.
* They keep one "in the game".
* They are easy!
Of course, there are some cons with DRIPs as well:
* Trades can be (very) slow. If one needs to time the market, DRIPs are just not going to work well. By contrast, such plans are great for "buy and hold" long-term investors, like myself.
* Fees can change over time. While a DRIP can be "free" right now, fees could pop up. It's important to watch the fee schedule very closely.
* Bookkeeping is a bit more involved when one makes regular purchases and reinvests dividends. (This really pertains to the dividend growth investing strategy overall.)
In my opinion, if more people knew about dividend reinvestment plans, they would not be so scared to start investing.
Worth noting, today's video also goes into the specific example of General Mills (ticker: GIS). This DRIP, other than the $15 setup fee, changes no fees for buying stock nor reinvesting dividends. (All fees are paid by the company on behalf of the shareholders.) Run by EQ (formerly Wells Fargo Shareholder Services), General Mills is the poster child of a great dividend reinvestment plan.
As mentioned in the video today, I recently purchased General Mills. Want to learn why? Here's my General Mills dividend stock analysis:
Mentioned in today's video, here's one of my earlier videos on DRIPs:
Also mentioned, here's my "stay in the game" strategy:
And, here's how I personally reinvest my dividends:
Want to reach out? Let's connect on Instagram:
Disclosure: I am long General Mills (GIS). I own this stock in my portfolio.
Disclaimer: I'm not a licensed investment advisor, and today's video is just for entertainment and fun. This video is NOT investment advice. Also, I'm not a tax advisor and today's video is NOT tax advice. Please talk to your licensed investment advisor before making any financial decisions.
All content on my YouTube channel is (c) Copyright IJL Productions LLC.