DRIP Investing Canada

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DRIP is an acronym for Dividend reinvestment Plan. DRIP is offered by many companies and this program involves purchasing shares directly from the company themselves rather than using the services of a broker. The real strength of the DRIP strategy lies in dollar cost averaging where a person makes several purchases over a long period of time. This is in turn reduces risk which is one important thing to consider while investing.

Before considering the DRIP strategy, an individual has to look at several factors along with the limitations and fully understand DRIP investing before shooting for it.

There is a minimum purchase amount on all DRIP plans. This means that whenever purchases are made the amount has to be equal or more than the minimum purchase amount. Some companies have set their minimum purchase amount low while others have kept it high.

A good amount of discipline to invest regularly is required from the individual when going for DRIP investing.  DRIP investing will not be viable for a person who is in long term debt and is having difficulty to even pay off his loans. Time frame also needs to be considered in DRIP investing. Ideally a time frame of a decade or a longer is considered best in this case. The risk decreases as the time frame increases and vice versa.

DRIP investing offers several attractions to small individual investors although they need to select the companies carefully after proper research studying the trends as to which will offer the most return in the long run.