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Thursday, October 20, 2011

Simple Way to Buy Stocks: DRIP or DSPP - Dividend Reinvestment Plans

Kraft Foods is one of my DRIP plans.
A really simple way to buy small amounts of stock over a long period of time is a DRIP plan. Dividend Reinvestment Plans and DSPP Direct Stock Purchase Plans allow individual investors the opportunity to buy stock directly from the company (through their transfer agent). With low monthly fees (very often $1) and fractional shares, it can be easy to build up good size positions in solid, dividend paying stocks over many years.

For example, after a one-time setup fee, I purchase $75 of Kraft Foods each month. The bank debit costs .80 cents and the rest of my money buys shares of Kraft in whole and fractional shares to three decimal places! Kraft pays quarterly dividends in January, April, July, and October and has an over 3% annual yield. I have become a huge fan of DRIP plans lately as a big part of my long term wealth plan

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