When it comes to investing, most people dream of that scenario where they sock away a small sum and then return years later to discover that the money has ballooned into an amount that’ll make them wealthy — all without having to lift a finger. That kind of easy, attainable exponential growth is actually achievable through something called a dividend reinvestment program, aka DRIP.
DRIPs are offered to investors directly from the company, meaning you can bypass the commissions and fees associated with a broker. You even can opt to receive your quarterly dividend in the form of more stock instead of cash (that’s the crucial “R” component of DRIP: reinvestment). Taking more stock instead of cash is what creates that pattern of exponential growth; as your dividend increases because you own more stock, the amount of stock you own increases because your dividends keep getting reinvested. Some companies might even go so far as to offer a 1 to 10 percent discount on the market price of the stock included in these dividends.
It’s important to keep in mind that DRIPs aren’t perfect. More than anything else, they involve investing in a single company, which comes with greater risk than diversified investments, such as ETFs or mutual funds. And, there might be additional fees, depending on which company you settle on. As part of a well-diversified portfolio, however, DRIPs can be a smart way to expand your wealth exponentially.
Click through to see major companies to invest in that can help keep your money growing.
