With direct investment plans (DRIPs), you can build great wealth by starting while you are still young.
Such a commitment to investing can mean great returns when you are older. The reason is simple as we demonstrated in the Article 1 under Investing for Kids. The passage of TIME. Time causes investments to grow far beyond your wildest dreams.
Although it may seem to be too good to be true, the power of compounding is dramatic, and if you give it a chance, your reward will reap huge benefits.
Say that you can afford to put away $2,500 a year from the time that you are 18 years old until you reach age 65. During that time, that $117,500 investment can be expected to grow to more than $800,000! What’s more, to get the full impact of that growth, consider that only $60,000 (on average) was on the table during the entire period.
How’s that? Well . . . you started with $2,500 and invested in increments of $2,500 a year until finally you invested all $117,500.
The best, (if not the only, way) to anticipate 7% annual growth is by investing in the stock market over the long term. But this doesn’t mean that you should invest through a mutual fund. Funds have fees and tax consequences that would eat into the growth.
Instead, the editors of The Moneypaper suggest that you create your own portfolio of stock, and that the portfolio be made up of stocks that accept direct investments through their direct investment plans (or DRIPS). DRIPs allow you to participate in the market without the services of a stockbroker.
Suggested Starter Portfolio
To simplify the process, The Moneypaper editors have selected a starter portfolio of stocks that have DRIPs. These companies have long histories of paying dividends and increasing those dividends. In addition, they produce products and services with which you may be familiar.
| Portfolio #1 | Portfolio #2 | Portfolio #3 | Portfolio #4 |
| Bank of America (BAC) $38.52 | AbbVie Inc. (ABBV) $192.61 | American Express (AXP) $240.88 | Comcast (CMCSA) $39.06 |
| Hormel Foods (HRL) $33.36 | Becton Dickinson (BDX) $234.89 | ConAgra Brands Inc. (CAG) $30.95 | Essential Utilities Inc. (WTRG) $39.38 |
| Honeywell Inc. (HON) $196.28 | Deere & Company (DE) $350.07 | Emerson Electric Co. (EMR) $102.89 | Polaris Inc. (PII) $80.42 |
| Merck & Co. (MRK) $112.43 | Ecolab Inc. (ECL) $240.90 | Microsoft Corp. (MSFT) $415.43 | RTX Corp. (RTX) $117.33 |
| NextEra Energy Inc. (NEE) $77.91 | Genuine Parts Co. (GPC) $137.10 | Wal-Mart Stores Inc. (WMT) $68.61 | Yum! Brands (YUM) $137.54 |
| Portfolio 1 Total: $458.50 | Portfolio 2 Total: $1,155.57 | Portfolio 3 Total: $858.76 | Portfolio 4 Total: $413.73 |
You can also use the Search for DRIPs area at the www.drp.com Website to find out whether a stock you like has a DRIP (and the provisions of the plan if it does).
To start a portfolio (or open a DRIP account), simply click on the company name. You’ll find complete information on the company DRIP, as well as a capsule review of the company operations.
You can buy a single share of any or all of these companies. The share(s) will be registered in your name and an account
will be opened in the company DRIP so you can continue to invest even small amounts and without fees.
By following this simple strategy, you will be building a substantial nest egg based on relatively small investments, and you will also be taking responsibility for an important part of what your future will look like.