Over the past year or so, I’ve written about the advantage of following a dollar-cost averaging strategy through dividend reinvestment plans (DRIPs) and holding on for the long term — the longer the better! With this strategy, even the smallest investor can efficiently invest in equities.
The advantages are substantial: You minimize the risk of entering the market at what might turn out to be the wrong time. You naturally “average down,” because your regular investments buy fewer shares when prices are higher and more shares when prices are lower.
What’s more, by holding high-quality dividend-paying stocks over the very long term (particularly companies that routinely raise their dividend payouts), the “magic” of compounding will turn even modest investment amounts into substantial wealth.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
What’s great about DRIPs is that you don’t need a lot of money to get started. Your loose change — or the money you spend on coffee or impulse items at the gas station — can set you on the road to a secure retirement. That’s because many DRIPs accept investment amounts of as little as $25 or $50.
You don’t have to have a stash of cash to start with, but you do have to start!
There are almost 1,300 dividend-paying companies that offer the opportunity to buy shares directly through their DRIP. Many of them do not charge commissions or fees and will set up schedules to withdraw funds from your bank account to automatically fund your DRIP account in order to regularly buy additional shares (or fractions of shares depending on the price of the stock) on the company investment dates.
Below is a 10-stock DRIP portfolio that could stand as a core portfolio for those who are seeking to get rich slowly, while minimizing the risk of falling prey to their emotions as they build wealth over the long term. You can click on the company ticker symbols in the list below to find out the specifics of the company’s plan.
Hormel Foods (symbol HRL)
RPM International (RPM)
Altria Group (MO)
3M Company (MMM)
Johnson & Johnson (JNJ)
PepsiCo (PEP)
NextEra Energy (NEE)
Costco Wholesale (COST)
Comcast (CMCSA)
Union Pacific (UNP)
An investment of just $25 a month in each of these 10 DRIPs ($250 a month) is a great start. You’ll earn dividends, which are automatically reinvested to buy additional shares to increase your holdings. Instead of making a lump investment in the hopes that you are getting in at a good price, your $25 per month will buy as many shares — or fractions of shares — at the market price on the investment dates … not too many if the price is high and more if the price is low. Do that 12 times a year, year after year, and you will be surprised at how much wealth you are bound to accumulate.
Ms. Vita Nelson is the Editor and Publisher of Moneypaper's Guide to Direct Investment Plans, Chairman of the Board of Temper of the Times Investor Service, Inc. (a DRIP enrollment service), and co-manager of the MP 63 Fund (DRIPX).
-
Stock Market Today: Stocks Step Back From New HighsInvestors, traders and speculators continue the low-volume summer grind against now-familiar uncertainties.
-
Ask the Editor — Tax Questions on the New Senior DeductionAsk the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the new $6,000 deduction for taxpayers 65 and older.
-
Do You Need Flood Insurance? I'm an Insurance Expert, and Here's Where You Can Get ItStandard homeowners insurance does not cover flood damage, so you might need separate flood insurance, which you can get either through FEMA or private companies. Here are the details.
-
I'm an Investment Professional: These Are the Three Money Tips I'm Giving My College GradCollege grads can help set themselves up for financial independence by focusing on emergency savings, opting into a 401(k) at work (if it's offered) and disciplined, long-term investing.
-
New SALT Cap Deduction: Unlock Massive Tax Savings with Non-Grantor TrustsThe One Big Beautiful Bill Act's increase of the state and local tax (SALT) deduction cap creates an opportunity to use multiple non-grantor trusts to maximize deductions and enhance estate planning.
-
Know Your ABDs? A Beginner's Guide to Medicare BasicsMedicare is an alphabet soup — and the rules can be just as confusing as the terminology. Conquer the system with this beginner's guide to Parts A, B and D.
-
I'm an Investment Adviser: Why Playing Defense Can Win the Investing GameChasing large returns through gold and other alternative investments might be thrilling, but playing defensive 'small ball' with your investments can be a winning formula.
-
Five Big Beautiful Bill Changes and How Wealthy Retirees Can BenefitHere's how wealthy retirees can plan for the changes in the new tax legislation, including what it means for tax rates, the SALT cap, charitable giving, estate taxes and other deductions and credits.
-
Portfolio Manager Busts Five Myths About International InvestingThese common misconceptions lead many investors to overlook international markets, but embracing global diversification can enhance portfolio resilience and unlock long-term growth.
-
I'm a Financial Planner: Here Are Five Smart Moves for DIY InvestorsYou'll go further as a DIY investor with a solid game plan. Here are five tips to help you put together a strategy you can rely on over the years to come.
