While there is merit to this line of thinking as we will know exactly when and how our dividends will be deployed, I remain a big fan of dollar-cost averaging mainly due to it removing the need to make decisions. For me, not only is having my positions on DRIP a form of dollar-cost averaging, but it is also a way to avoid decision fatigue. Each time we make a decision, it takes a bit of our mind power away from us.
Studies have shown that as human beings, we wake up with more will power in the morning. But as we make more and more decisions throughout the day, our will power becomes eroded as we begin to experience decision fatigue. This is cited as a primary reason why you see many Silicon Valley tycoons, mainly the late-great Steve Jobs, as always wearing the same outfit - a black turtleneck with blue jeans.
By wearing the same outfit daily, he removed an aspect of decision fatigue from his daily schedule, which opened him up to more will power for the bigger decisions that would come up later that day. By having our positions on DRIP, we will not need to constantly research new stocks whenever we receive a cash dividend. This will help to maintain our will power at higher levels. Our overall stress level and decision-making abilities will be greatly improved.
Another great benefit of DRIP investing is that your investment positions are on auto-pilot. As an investor, it takes a lot of energy finding, researching, and initiating new positions. I have found that dividend investing is a great way to keep investing into the market without having to continually initiate new positions in the marketplace. While I do continue to monitor my stocks for performance, the majority of my research is done at the beginning of investing into a stock.
Monitoring a position takes far less effort than does initiating a position, especially when buying in for the first time. DRIP Investing takes little-no effort on my part. This type of auto-pilot mode for my stocks, where I am investing at routine intervals, is another great benefit of DRIP investing. Both of these are fantastic ways to increase your ownership positions. And the companies have a policy of raising the dividend payment once per year.
In Dividend Income: the Trend , I track this growth. As you can see by looking at this data, I am increasing my annual dividend income, both through DRIP and raises. As investors seeking Financial Freedom , we want to simplify our lives through generating income that is passive in nature. One of the best ways that I have found to do this is through dividend investing - in particular through DRIP investing my current positions.
However, if we do pursue this avenue of passive income, we need to stay diligent. Being someone that seeks out value plays in the investment world, I am cognizant that there are reason why certain stocks are valued lower than the general market. In most cases, there are the following factors at play:. Start Investing Today Complete your application online in minutes - it's fast, secure and easy.
Get Started. It is your responsibility to ensure that any associated tax requirements or obligations are satisfied. Legal Disclaimer 2. The list of DRIP eligible securities is subject to change at any time without prior notice. RBC Direct Investing will purchase whole shares only. It requires you to acquire at least one share in a company and obtain the share in paper form. Once regular DRIP is set up and running, the entire dividend amount is reinvested.
In other words, fractional shares can be purchased. This is an effective way to build up your dividend portfolio with a small amount of capitals.
That topic is for another post in the future. With synthetic DRIP, only full shares can be purchased. If the dividend amount received is less than the price of the share, no share is purchased.
Synthetic DRIP requires you to own sufficient amount of shares to enrol. Typically you want to invest more than the minimum amount of shares required in case the price of Royal Bank continues to go up.
In this case shares of RY would probably gives enough buffer to make sure enough dividend is received to cover the stock price. Regular DRIP is powerful because the entire dividend amount is reinvested.
The only downside is that you need to deal with fractional shares when calculating the cost basis. This could lead to some messy accounting. Synthetic DRIP, on the other hand, only purchases full shares, making accounting simpler. How does all this information relate to our dividend portfolio? As mentioned in my dividend investing approach previously , I try to reinvest dividends whenever I can.
Whatever dividend money left over from synthetic DRIP is accumulated with other dividend incomes and to be used to initiate other positions. Enrolling in DRIP has definitely helped us in harvesting the power of compound interest. As I pointed out in the compound interest scenarios, the number of times the interest is compounded per year makes a significant difference.
This is true for DRIP as well. Typically dividends are paid out quarterly, so the interest is compounded 4 times each year. However if you were to invest in stocks that pay monthly dividends , you would be compounding your dividend 12 times each year. The compounding effect takes off very quickly after a few years. A word of caution on DRIP. You mentioned you have a dividend portfolio for your baby, can you please tell me more about it?
How did you open it and where? How does that appear in your brokerage holdings? How can I account for it? I was simply using that as a ticker example of a stock. Is this correct? Meaning, when I log into my Questrade account, I can see all my positions of shares that I bought ie.
So let says before the fractional share was bought I owned 20 shares of XYZ, and after the fractional share is bought would I see something like Questrade does not support full DRIP. They only support synthetic DRIP where full share is purchased. Does this make sense? How will it be displayed? What exactly would I see? Would it be listed as
0コメント