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).
-
Here's How To Get Organized And Work For YourselfWhether you’re looking for a side gig or planning to start your own business, it has never been easier to strike out on your own. Here is our guide to navigating working for yourself.
-
How to Manage Risk With Diversification"Don't put all your eggs in one basket" means different things to different investors. Here's how to manage your risk with portfolio diversification.
-
How Much Money Is Enough to Be Happy? Can You Have Too Much?The relationship between money and happiness is complicated, but the experts agree on these three eye-opening fundamentals.
-
Five Year-End Strategies You Can't Afford to MissInstead of making New Year's resolutions, consider making some money moves that could help save you big bucks on your taxes.
-
Buying an Insurance Policy: Three Ways to Do ItYou can buy an insurance policy through an insurance agent or broker or on the internet. Which way works best for you?
-
10 Ways Your 1031 Exchange Can Go Horribly WrongDon't let your tax-saving strategy become a financial nightmare — discover the hidden pitfalls that could turn your 1031 exchange into a costly disaster.
-
From Entrepreneur to Retiree: Boosting Your Business' ValueWhen business owners contemplate retirement, their first step should be maximizing the value of their biggest asset. Here are a few steps that could help.
-
You've Got a Trust: Now Who Should Be the Successor Trustee?You've set up a trust to protect your assets and your beneficiaries, but you still must choose the right person to execute your wishes. Here's how to do that.
-
Three Ways Fiduciary Financial Planners Put You FirstFiduciary financial advisers are required by law to work in your best interest. Here's how they are key to intentional and efficient financial management.
-
How Long-Term Care Insurance Has Become More FlexibleToday's long-term care insurance offers retirees more appealing options, which can preserve assets and protect the financial stability of a healthier partner.
