Dividend Reinvestment Programs

A Dividend Reinvestment Plan, also called a DRP or DRiP, is a method of investing that allows an investor to gradually build a large amount of shares in a specific company. You can choose to get involved in a DRiP most easily if you are an employee of the company, but you can also choose to participate in a companies program as an external investor - since every companies program can be run on their own terms, you should contact the company directly. These plans have obvious appeal for investors, for several reasons:

* You can start out with a very small of shares, even as little as one share in a company.
* You usually have an automatic deduction set up that means you purchase a set price worth of the companies shares on a regular basis.
* When dividends are paid, these are reinvested into more shares.
* The share price for participants in a DRiP is discounted by many of the companies that run these programs
* Since you deal directly with the company, there are no brokerage fees.

It all sounds pretty good right? Well that's because it is! DRiP investing is a great way to invest your money, and provides better value than buying the same amount of shares through a broker in many cases. By setting up automatic deductions, you are forcing yourself to save money - money that you will probably never notice missing. However one point that you need to consider is that it is very important to diversify your portfolio. A DRiP only lets you invest in one company, so to achieve a balanced portfolio you will need to join the program with a range of companies, or else join a DRiP to complement your other investment strategies.

DRIP investing is a useful strategy for those who wish to grow their portfolio over time, but don't have significant assets starting out. However you should diversify your portfolio over time - this might mean participating in the DRIP programs of a range of companies.

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