I was doing some research on how to start investing with my little boy when I came across the idea of a dividend reinvestment program. They are also called DRIPs. Evidently, these allow you to buy stock directly from the company without commission and sometimes at a discount. I originally thought that since most growth stocks don’t pay dividends, that it would be hard to find DRIPs to start in.
I think if you are a small investor with $50-500 to invest, you should definitely consider a drip investment. I also think that if you do invest in a company like this that you have to make sure that they have sound fundamentals. Just because they have a program doesn’t mean that it is a good investment. Stick to good stocks with good earnings and sales.
The one thing I wasn’t sure about was if you start a drip investment program, do you actually keep the stock. If so, then safekeeping may be an issue. The nice thing about buying stock in your brokerage account is they keep all of the stocks. The article I linked to above didn’t really cover that but did go over the in’s and outs of how they work and gave me a better idea of what to look for.