installing vinyl siding grayslake best siding antioch installing vinyl siding siding calculator harvard soffit installation deer park .. Chicago Drug testing

Dividend Reinvestment Plans: Investing on Automatic Pilot

If you're like many investors who squander those small dividend checks from your stock portfolio, a Dividend Reinvestment Plan (DRP) might be just what you need. Just as its name implies, a Dividend Reinvestment Plan allows you to reinvest some or all of those dividends into more stock of the issuing company. Unlike purchases made through traditional means, partial or fractional shares, as well as whole shares, are available.

Technically, there are two types of DRPs. The first type involves buying shares at the market through an outside trustee. Although the company may subsidize the transaction costs, buying shares at a discount is not allowed.

The second type allows you to purchase directly from the issuing company, which may provide a discount from the market price. This is a distinct advantage over buying from an outside trustee.

Besides giving dividends a better purpose than sitting in your pocket or in a brokerage cash account, a DRP may offer other advantages as well. By buying on a regular basis, you are "dollar cost averaging" your purchases, an investment strategy designed to reduce volatility. Dollar cost averaging involves continuous investment in securities regardless of fluctuation in the price. Of course you should consider your ability to continue purchasing through periods of low price levels. This type of plan does not ensure a profit or protect against loss.

Secondly, many companies offer added options with their DRPs, including purchasing stock at low minimums and sometimes even offering shares at a discount (often 3-5%) off current market prices.

From a tax standpoint, you are subject to income taxes on the value of the dividends whether you reinvest them or not. Your tax basis for all your shares including the reinvested dividends is the amount paid for the original shares plus the dividends, minus any costs deducted from your dividends as a service charge as part of the DRP.

Keeping good records is a necessity, especially if you plan to continue participating in a DRP over a number of years. Without the records, it may become very difficult to track all your purchases. A little bit of effort now can save you big headaches later on.

Usually, you will receive a quarterly statement outlining your DRP account. Among other things, these quarterly statements will detail your on-going investments, how many shares are held by the program, how many shares are held be you, and the value of all your shares.

Not all companies offer DRP's but, for a list of one's that do, there are many web sites dedicated to these plans. These internet sites not only have a full list of companies with DRPs, they also offers online enrollment services. For securities held in a brokerage or wrap account, check with your brokerage firm to determine if they have the means to enroll you. If all else fails, try either the company itself or its transfer agent.

Although it is easy to see the advantages of DRP programs to the investor, we should not overlook the benefits to the issuing company. Besides helping to stabilize market prices, a DRP is a relatively efficient way to raise capital and, because companies only "promise" to continue these programs in the future, the issuing company controls when and how much capital will be raised.

Over 1,000 companies currently offer some type of Dividend Reinvestment Plan and, with a little research, you should be able to get on the path of "automatic pilot" investing for the future.

Glenn ("Chip") Dahlke, a senior contributor to the Living Trust Network, has 28 years in the investment business. He is a Registered Representative of Linsco/Private Ledger and a principal with Dahlke Financial Group. He is licensed to transact securities with persons who are residents of the following states: CA. CT, FL, GA, IL. MA, MD. ME, MI. NC, NH, NJ, NY.OR, PA, RI, VA, VT, WY.

If you have any questions or comments, Chip would love to hear from you. You may contact him at dahlkefinancial@sbcglobal.net. You may also contact him by going directly to the Living Trust Network web site located at http://www.livingtrustnetwork.com

Copyright 2005. LivingTrustNetwork, LLC. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without the written consent of the Living Trust Network, LLC.

In The News:

How Eating Bitumen Made Me a Better Trader

Trading is a fascinating activity.There are so many layers to... Read More

Stock Valuation using the SMP Model

Disclaimer: Please note that I do not necessarily purchase, own,... Read More

What Our Investment Advisor Wont Say Off The Bat

Most advisors will tell you they can beat the market.... Read More

The Stock Market - How Just One Question Will Tell You All You Need To Know About Your Stock Broker

Last time we looked at the real performance of the... Read More

Using Sector Funds to Construct Diversified Mutual Fund Portfolios

'Sector funds are too risky.' 'I doubled my money with... Read More

How Much Money Can I Make With Trading? What Account Size Do I Need To Start?

What account size do I need?How much money can I... Read More

Finding A Good Stock

One of the things people are always asking me is... Read More

Investment Clubs

Because you don't feel too sure about which stock or... Read More

3 Components Needed for Beating the Market

Time to look back2004 is over, now we are in... Read More

Performance Funds

Mutual funds are doing more and more to discourage investors... Read More

Catnip of the Stock Market

I have watched my cat play with a bag of... Read More

Political Investing

We have two candidates for president that have really different... Read More

Low Expense Ratio

One of the big advertising kicks today from mutual funds... Read More

Mutual Funds are Dead

You may have wondered why your mutual funds have been... Read More

How To Beat The Mutual Fund Companies At Their Own Game

You'd have had to be living on a desert island... Read More

Stocks & Oil, Sat Jun 18th, 2005

Both the stock market and oil prices rallied recently, which... Read More

Different Ways of Buying Stocks

Let's say you are interested in this one company. You... Read More

Parachute Investing

Ever jumped out of an airplane? It's OK if you... Read More

Box Of Chocolates

Ever have one of those sample boxes of candy? Each... Read More

Mr. Market

I constantly hear the talking heads on CNBC-TV, the radio... Read More

Choosing a Stock Broker

If you were to find that you had some severe... Read More

How to Evaluate Load vs. No Load Mutual Funds

If you have been dealing with mutual funds for any... Read More

Stock Insurance

You have a lock on your house. You have a... Read More

Its Snowing

The Winter Games for the Olympics are coming up soon... Read More

Leverage - Margin Debt

What is leverage?Here is a definition of leverage from an... Read More

led parking lot fixtures led parking lot light fixtures Pete's produce ..
led parking lot fixtures led parking lot light fixtures Pete's produce ..