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).
-
Best Cold Weather Places to RetirePlaces to live Some like it hot; others not so much. Here are the 12 best places to retire if you can't stand the heat.
-
Getting Divorced? Beware of Hidden Tax Traps as You Divide AssetsDividing assets fairly in a divorce means looking beyond their current values and asking whether they'll create tax liabilities — or tax breaks — in the future.
-
Getting Divorced? Beware of Hidden Tax Traps as You Divide Assets
Dividing assets fairly in a divorce means looking beyond their current values and asking whether they'll create tax liabilities — or tax breaks — in the future.
-
All-You-Can-Eat Buffets: Can You Get Kicked Out for Eating Too Much?Don't plan on practicing your competitive-eating skills at an all-you-can-eat buffet. You can definitely get kicked out. Plus, don't be a jerk.
-
A Social Security Storm Is Gathering: Here's Your Safety PlanIf Social Security reserves are depleted by 2033, as predicted, future benefits could be cut by as much as 21%. Here’s how to weather the impending storm.
-
What a Second Trump Term Means for Investing in Water SafetyA new administration focused on deregulation could change the scope of today's water protections. So, what does that mean for the investors who support them?
-
How to Avoid These 10 Retirement Planning MistakesMany retirement planning mistakes are easily avoidable. Here are 10 to have on your radar so you don't end up running out of money in your golden years.
-
Before the Next Time Markets Sink, Do Your Lifeboat DrillsAn eventual market crash is inevitable. We can't predict when, but preparing for the ups and downs of investing is imperative. Here's what to do.
-
This Late-in-Life Roth Conversion Opportunity Spares Your HeirsExpensive medical care in the later stages of life is an unpleasant reality for many, but it can open a window for a Roth conversion that benefits your heirs.
-
Women, What Is Your Net Worth?Many women have no idea what their net worth is, or even how to calculate it. Many also turn to social media finfluencers for advice. Here's what to do instead.
