It is educational to watch TV and learn stock picking and retirement advice from Jim Cramer, Suze Orman, Clark Howard or Dave Ramsey, but I feel it is mutually beneficial to receive retirement investing advice from other members of the Blog community.
Listed below are three of my favorite videos about the topic of: Dividend Reinvesting, otherwise known as DRIP.
Sit back, relax, and learn from some of the best bloggers in the game today. Support your fellow man and always give credit where credit is due!
Do you like being charged brokerage fees?I didn't think so. Are you charged an annual fee just to use your brokerage company? I believe it! If so, kick them to the curb and sign up for one who does not charge an annual fee. Brokerage companies that charge annual or quarterly fees can absolutely ruin your Roth IRA Stock portfolio potential gains and dividend payment returns.
Well, you are most likely charged a brokerage fee each and every time that you purchase stock, right? These fees may range from $7.95 to $19.95 in some instances, depending on which brokerage firm that you use. These fees hurt your ability to grow your dividend stock portfolio into a money making income machine. You not only take a financial hit when you are charged a brokerage fee but you also lose money on the interest that could be compounded on that $7.95 to $19.95. Here is a quick analysis to show you what I'm talking about:
Let's say you purchase stock each week, once a week. That's $7.95 per week.
$7.95 x 52 weeks in a year = $413.40 x 30 years (i.e. 2012 to 2032, typical working career) = $12,402.00 in fees!
If you had invested those funds (aka fees) into Johnson & Johnson (stock ticker JNJ), with an average of 3.48% dividend yield you would have all of those fees, $12,402.00, in your Roth IRA stock portfolio and also all of those dividends paid based off of that $12,402.00 reinvested!**
**Current principal of $7.95, annual addition $413.40, years to grow: 30, interest rate 3.48%, compound interest: 1 time annually at the start of the compounding period). Additionally, these figures do not even include whether JNJ increases in value or not. Just think of all the money left on the table in fees, fees, fees!
That being said, here are four ways that I try to avoid brokerage fees, or greatly reduce my exposure to those pesky FEES!
1) Sharebuilder by ING. I am not being paid to talk about this company. They are just fantastic. They offer a $4.00 weekly, bi-weekly, monthly, yearly Automatic investment plan. Each investment occurs every Tuesday and hey $4.00 is better than $7.95!
2) DRIP - Dividend Reinvestment - A DRIP is an excellent way to increase the value of your investment. Most DRIPs allow you to buy shares commission free and at a significant discount to the current share price. Great video from YouTube below.
3) Charles Schwab ETFs - I am not being paid to talk about this company. They are just fantastic too! Schwab offers $0.00 online trade commissions through their Schwab Accounts.
Click HERE to learn more and hear about ETFs from the man himself below!
4) Direct Stock Purchase Plans - Click on the links below and read up on how to buy stock FEE FREE! You probably won't hear about these plans from your stock broker! Enjoy!
No, that's not the sound of your leaky faucet or the rainstorm outside. DRIP pertaining to stock investing stands for Dividend Reinvestment Plan. DRIPs are offered by corporations which allow investors to reinvest their cash dividends by purchasing additional shares or fractional shares on the dividend payment date. I strongly suggest reinvesting your dividends rather than receiving cash payments. You may only receive a fractional share, however if you have 30 to 35 years to invest until you retire, trust me your money will end up working for you instead you working for money!
Most brokers allow you to setup automatic dividend reinvestments. If your broker does not allow you to reinvest your dividends it is worth your while to transfer your shares to one of the following Stock transfer companies (See links below). Review each listing to determine if any of the companies that you own stock in offer DRIPs or Direct Stock Purchase Plans. Most plans require that you already own at least one share of company stock and a minimum monthly investment. This is an easy way to avoid commission fees!
