OPTION #4: DIVIDEND REINVESTMENT PLAN (DRIP)
Dividend is just a fancy word that means you receive stocks from your company. A DRIP is an investment option that allows you to bypass stockbrokers (and their potentially hefty fees) to acquire shares of a stock directly from a company. If the stocks go up, your dividends get reinvested in more shares. Some DRIPs even offer cash payments. Fees may also apply, but you won’t be taxed too hard if you’re starting with a small amount of money that can compound significantly over time.
Not every company offers DRIP, however. (Cheapskates!) And you’ll also need to keep extensive records to ensure you’re getting the proper amount when it’s time to cash out.
A stockbroker could be a good alternative to a DRIP; they’ll make it easier to buy/sell/trade/track your portfolio — but they don’t work for free.
