It seems like most things are automated nowadays. Our Hydro is automatically paid. Our car insurance can be pulled directly from our accounts. Even our paychecks are directly deposited into our banks rather than having a physical check you have to take into the bank. Automation doesn’t just stop here — it’s also a significant part of investing. One investment plan, in particular, takes automation to the next level. This plan is known as a DRIP.
DRIP is short for Dividend Reinvestment Plan. Essentially, DRIP Investing involves reinvesting the cash dividends that investors receive from a stock or investment. Usually, investors receive dividends in the form of a cheque or direct deposit. A DRIP simplifies the process of reinvesting cash dividends directly into the purchase of more stock.
Dividend reinvestment is a popular strategy for retirement planning and generating income. If a company or investment performs well enough to be offering cash dividends to investors, purchasing additional shares is an excellent idea and can lead to higher rewards in the future if the company continues to perform well.
There are numerous DRIP Investment options available. Look for companies and investment options that offer dividend payouts and have a good history of providing consistent payouts.
A DRIP Investment can be offered in a few ways:
Now that you know what DRIP investing is and how to start a dividend reinvestment plan, you may be wondering if it’s even a good idea? We’ll be covering the benefits of DRIP investing in our next post. Can’t wait that long? Contact Jordan on our team to learn more.