DRIP Stock Investing: How to Collect More Stock on Autopilot
Do you want to reinvest your dividends without having to think about it? Then, DRIP investing may be the tool you need. Learn everything on how to reinvest your dividends automatically with a DRIP plan.
Before you join a DRIP plan, it’s good to understand how it works, its benefits and drawbacks, and how you can join.
What is DRIP Stock Investing?
When you buy dividend stocks, companies pay you periodically for holding their shares. A dividend is a way for the company to say thank you for investing in us, and dividends mostly come from the company’s profits in the previous year.
How Does DRIP Stock Investing Work?
A dividend is a return to shareholders on their investment. It’s usually in the form of cash payment that can be paid through check or deposited directly to the shareholder’s account.
Pros of DRIP Stock Investing
Dollar-cost averaging. When you reinvest your dividends, what you are essentially doing is dollar-cost averaging. Dollar-cost averaging is a recurring purchase of an investment instead of investing once in a lump sum.
Cons of DRIP Stock Investing
Taxation. Dividends are considered taxable income. Even if you reinvest your dividends before they hit your bank account, they will still be reported to the IRS as income.
Swipe up for information on DRIP Stock Investing!