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The pros and cons of dividend reinvestment plan companies

Here you will find about Dividend reinvestment plan companies by details, will start by explaining the pros then will explain the cons.

Dividend reinvestment plan companies

The pros of dividend reinvestment plan companies

1- Many Dividend reinvestment plans companies allow your IRA to invest.

2- Besides buying stocks by reinvesting your dividends, DRIPs companies also allow you to purchase fractional additional stocks.

3- The payments depend on the particular plan, investing in DRIP can be less expensive than buying by a broker.

Many DRIPs pay no fees or charges for registration and purchase of shares, some pay registration fees and other charges, but may add less than the trading fees for the broker.

4- DRIPs sometimes offer companies their stocks at a market price discount

(The discount is available in some cases only on the shares purchased by reinvestment dividend rather than on optional cash purchases).

The cons of dividend reinvestment plan companies

1- The companies have their own schedules to invest their money.
It may take days for the company to receive your buy request and for your money to invest, and the same goes for selling shares.

This can be an excellent way to prevent panic selling, but not for all.

2- Enrolment and other charges may be available.
Terms and conditions of DRIP differ, and the research needs to be done to find the best plans and, of course, ensure a good investment for the company.

3- Most, but not all, businesses need to be an investor to be included in a DRIP.
One approach is to buy a single share from an investor and then ask the broker to sign it on your behalf (This service is likely to be charged by the broker).

4- Typically, there is a stock sale fee.

A flat fee of between $5 and $15, plus a stock selling charge of between 5 and 12 cents, says Carlson, be not uncommon.

Management of multiple DRIPs may involve more burden than holding one brokerage account.

And you should keep your records straight because you usually owe dividend tax in the year you got them,

Although those dividends reinvested immediately.

If you would like to read about some of the DRIPs,

Check the Computershare stock purchase page, a business that acts for many DRIPs as the transfer agent.

Make it easy with an account of the brokerage

If the model of the company is too costly, you could want to keep on establishing a discount brokerage to reinvest the dividend, where several forms of investment are available individual stocks, Mutual funds definition and Preferred stock ETFs, for example, for the convenience of a single account.

Note: If the model looks too expensive,

Perhaps you want to stick to set up a discount brokerage for dividend reinvestments.

Charles Rotblood says, American Individual Investor Association Vice President,

A non-profit group aimed at educating investors.

“It’s easier for most people because you have only one account and you need not think about more paperwork and accounts in order to monitor”.

Nonetheless, it can be a good way of boosting returns over the long term by reinvesting dividends.

Rotblood tells: “You take the cash you receive and put it right back to work,”.

“Say to buy an additional share of shares you get enough dividend.

The additional stock share gives you more dividends and continues to grow.”

This means you keep an eye on all investments that you are continuously reinvesting dividends with time,

Says the certified financial planner and partner Benjamin H. Dorsey in Ellicott City, Maryland, at Court Place advisors.

He says you want to ensure that in that role, you’re not over-concentrated.

Source: Direct investing

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