KATV Topic of the Week

As a certified financial planner (CFP) and the financial editor for Little Rock's ABC affiliate KATV Channel 7, I bring sound financial advice to Arkansans each Saturday morning on Daybreak. Below is this weeks topic. If you can't find what you're looking for here, check out our TV archives by clicking on the link above- there is a wealth of great information available to you in our archives. I'd also love to hear your feedback- just click the Feedback link at the bottom of the page.
- Thanks! Mary Ann

© Money Magic, Inc. 10/19/02
Saturday Daybreak KATV, Chn. 7
Mary Ann Campbell, CFP

Wanna own some common stock with small amounts of money?

There are reliable newsletters and online resources to allow you several different ways to buy stocks combining four excellent wealth building strategies:

1. reinvestment of dividends (compounding the growth of your investment)

2. asset diversification (purchasing several different holdings) and

3. time diversification (spreading your investments over time; dollar-cost averaging)

4. educational experiences (gifting to minors to create interest and learning)

DRIP stands for Direct or Dividend Reinvestment Plan. In a traditional DRIP, you have all dividends paid on shares immediately used to purchase more of the same shares.

First, and simplest to me, are the Direct Stock Reinvestment Plans. You purchase shares of stock directly from the corporation, without a broker. This one is a do it yourself process, but you’ll benefit most in the long run without paying commissions.

Second are the Dividend Reinvestment Plans where you need to own at least one share of stock in your name, and then purchase additional shares through the company plan. You can eliminate traditional and more costly brokers by using intermediaries who broker DRIPs for you at a reduced fee.

Top providers of DRIP information and services are Chuck Carlson and Vida Nelson:

Directory of Dividend Reinvestment Plans ($12)
Drip Investor Newsletter ($69 yr)
800-233-5922
www.dripinvestor.com

MoneyPaper’s Guide to Direct Investment Plans ($9)
The MoneyPaper Newsletter ($90)
800-388-9993
www.moneypaper.com

Third are the online companies that allow you to purchase fractional shares of stocks for small amounts of money. You set the dollar amount to be invested rather than the number of shares, and partial shares can be owned. Check out www.BuyandHold.com and www.ShareBuilder.com.

Discount brokers such as www.schwab.com and www.waterhouse.com as well as some full service brokers such as www.merrillynch.com offer dividend reinvestment programs in accounts.

The newsletters explain which companies allow DRIPS in IRAs and even list phone numbers to buy into stocks in over 300 foreign countries.

What people don’t like about DRIPs: Record keeping is tedious. The actual calculation of your cost basis can quickly become an accounting nightmare. Software programs like Quicken or Microsoft Money can make this a lot easier for you.