Dividend Reinvestment Plans (DRIPs)
Once you are enrolled in a direct investment plan, you can make small investments over time. This means you don’t need to save up to start building.
How can investing in DRIPs help me?
With the market in such turmoil, you might not want to invest a large sum of money at any one time. With DRIPs you can get started with a single share of stock and build your holdings over time without paying fees when you invest. This conservative approach to investing means that you can start with next–to-nothing—and build up positions slowly over the years. With many DRIPs, there are no fees or commissions for purchases of stock, and you can invest as little as $10 or $25 a month.
Succeed by dollar-cost averaging
The concept is simple. You invest the same fixed dollar amount on a regular basis. By investing a dollar amount instead of a share amount, you buy as many shares as your investment allows instead of paying for the same number of shares regardless of price. By doing so, you automatically buy more shares when the market price is low and fewer shares when the market price is high.
Getting started is easier than you think
You may think that creating and maintaining a stock portfolio is a daunting task–one you might better leave to the professionals. The truth is, however, that you can minimize investment risk and cut your investment costs by doing it yourself. The process is not as difficult as some would have you believe. In fact, it can be fun.
Many DRIPs require you to own at least one share of stock to participate. Temper of the Times Investment Services Inc. will buy the single share to make you qualify as a shareholder (or up to a minimum number of shares required by a particular company DRIP), it will have the shares registered in your name, not in street name as most brokers do, and it will deal with the transfer agent to get the DRIP account open in your name on the company books and records.
The Temper Enrollment Service is the only such service available, and it’s the most efficient way to open an account. Temper buys the shares at the beginning of the month and transfers the shares immediately to the appropriate transfer agent, along with the proper registrations for the shares.
Once your account is opened at a transfer agent, you are then no longer a customer of the Enrollment Service. Your account is open directly on the records of the company in which you are investing. The company will send you a statement showing your ownership. The bottom portion of the statement can be torn off and returned to the company along with a cash investment.
DRIP investing is meant for the long-term (although many companies allow you to sell DRIP shares daily).
Before you embark on building a good portfolio, it’s necessary to remind yourself that doing so involves long-term thinking, not instant gratification.
If you already have a stock portfolio, this may be a good time to examine how well it meets your current and long-term needs. If you don’t have a core portfolio, this is a great time to establish one. The next few years may prove opportunities to buy at affordable prices.
We recommend that your core portfolio be invested in DRIP stocks. You can use that portfolio to accumulate assets in a risk-adjusted` manner. Over time, you will find that you have built up substantial numbers of shares. DRIP investing is meant for conservative, long-term investors. While some companies do allow you to sell DRIP shares daily, we do not recommend that you do so.