My kitchen sink is currently dripping like a cold wet winter in Vancouver. But don’t worry I’m off to fix it as soon as I’m done writing this out for you. On to the meat – DRIP (Dividend Reinvestment Plan) It’s just a nice way of saying that any dividend payments (your money) that you receive from an individual stock or ETF will automatically go towards purchasing more shares/units of the same. That means instead of getting a cash payment you get more shares which eventually will pay you more dividends and the best part is that it’s commission free. Now that’s something to get aroused about.
Some of the benefits of setting up a DRIP:
- Dollar cost averaging – You’re not a genius just let your DRIP take care of the purchases.
- Commission Free – Arousal
- Some companies offer discounts and other incentives to join their DRIP plan – Did somebody say discount?
- In some cases your DRIP will purchase fractional shares in other cases you will just get a cash payment for the difference
- DRIPs are better for long term investments 5+ years but will work for any investment of any length of time. Using online brokerage firms it’s ridiculously easy to activate, when you don’t need the income and deactivate when you do.
It takes less time than a selfie with Trudeau and it will make you look like an investing genius (to your spouse). A step by step below on how to set up a Dividend Reinvestment Plan using Scotia iTrade:
1) Log into your account.
2) Select your trading account.
3) Select the stock/etf that you would like to start a DRIP and click on the down arrow to the right.
4) Click Enroll in DRIP.
5) You will then be presented with a page with a bunch of fine print. The page confirms that you would like to enroll in a DRIP and it also asks if you hold the same security in any of your other accounts to enroll those securities as well. You can change this at anytime. Hit submit to confirm.
6) The stocks/etfs in your account will show a D symbol next to them when the DRIP has been activated.
Now that the investments are DRIPing – it’s time to take care of that kitchen sink. Gotta go!