Lux Investing

21 year old, decides to invest in drip, thoughts from the experienced!?

im 21 years old and i decided that i would invest in DRIPS as i can slowy add money to build shares without brokers, i plan to do this because i prefer long term investing as i retire at 50 with my job. that offers a 401 and pension which im already contributing to thats why i think drips is also best because i dont need a hunk of money to buy shares i can slowy build. my Question what a companys are best to invest in i think i would like around 8-10 different compays as in 10 years i would have a good amount of shares in all of them. and once i buy the requiring shares for all the companys to qualify for drips what do i do? what are some of your choices you would go with compay wise? coca-cola, Mcdonalds, walmard, GE,? i just would like to hear your thoughts because this is where i found out about drips. Thank you

Public Comments

1. DRIP's are great long-term investments. A broker will not tell you about them because he or she will not make any commissions from them. I have been in a DRIP for over 20 years and my returns on average, are right at 9% annually, and I expect it to reach 10% soon. These are great programs, which don't cost much to implement. I think you made a good decision.
2. DRIP's are great investment plans. I think you made a wise choice, and over the long-term they provide great returns. I will list a website in the source for you to look at, it has great info on DRIP's. Companies to consider: Bank of America, Walmart, Black and Decker Any Blue Chip company that you know will be around for a long time to come and has a solid track record.
3. Drips are a very good approach for someone your age. You are able to invest periodically with no commissions, and you accumulate a diversified portfolio of solid stocks which will grow over time. Your portfolio will fluctuate up and down, but the long-term trend is going to be about 10 percent growth per year. If you invest the same amount periodically, you'll be dollar-cost averaging, which is another good aspect. Locate a list of stocks that offer drips and select a variety of industries in 8-10 with approximately equal dollar amounts of each. You have a good plan.
4. DRIPS have been over the years an excellent way for long-term investors to accumulate shares. However, their prime benefit was the low-cost acquisition of shares, and this advantage has been slowly diminishing over time, due to the advent of many low-cost online brokerages. Also some DRIP plans (by no means all) actually do end up costing you more to buy and sell than a $8 brokerage fee at a place like TDAmeritrade. (As opposed to what used to be $30 fees some years ago.) Whatever company you are interested in, make sure and get the complete details on the DRIP plan including limitations and fees. If it's one of the DRIP plans that has stiff fees, either forget about the company or get the shares via an inexpensive online brokerage. Another advantage of some DRIPs is discounts on additional future share purchases. If you select a company that still has discounts, all the better. And a final note: If you reinvest dividends, take scrupulous records and keep them. One day you'll need to track all your gains and the company may or may not have sufficient records for your own tax purposes.
5. The only downside with DRIPs is the tax record keeping. Each quarterly dividend is counted by the IRS as a separate purchase and has it's own cost basis. Keep ALL the statements until the stock is sold plus seven years, and you should be fine.