Dividend Reinvestment Stocks
Dividend Reinvestment Stocks. Cardinal rules for success with dividend reinvestment stock investments.
Successful DRIP Investing
Successful DRIP Investing falls inline with Benjamin Graham’s investment principles. He adopted the basic investment philosophy that well-managed companies provide the best long-term invest returns over the long haul.
In order to succeed as a DRIP investor, you should also abide by his rules:
- Understand the difference between price and value
- Rake the market for bargains
- Don’t expect every decision to be perfect
- Rule #1: Diversify with stocks and bonds
- Rule #2: Diversify with a wide range of stocks
- When in doubt, stick to quality
- Be an investor, not a speculator
- Think for yourself
- Be patient
6 Steps to Success with Dividend Reinvestment Plans
Here is a summary of Fisher’s 6 Steps to Success with Dividend Reinvestment stocks:
1. Pick a goal, any goal
Determine a worthwhile financial goal, make it realistic and achievable, with the savings rate necessary for achievement falling within annual earned income restraints
2. Reflect and educate
Focus on stocks that fall within your personal risk-related comfort levels. Understand the relationship between risk and returns, how decide how much risk you would be comfortable with. While stocks historically outperform bonds and money market accounts, stocks are also more volatile and carry higher risk than bonds or money market accounts.
3. Research specific companies
The basic focus of DRIP investing is to invest in companies with excellent management. Research the companies’ business development; as Benjamin Graham notes, the best management with offer the best long-term returns. Nonetheless, to compare the more quantitative factors, you can compare numbers should as the operating cash flow and return on equity.
4. Develop a diversified portfolio
DRIP investing with a diversified portfolio will ensure that you further lower your risks. Identify industries that have historically low correlations with one another, so your portfolio would not be adversely affected even if a certain industry suddenly tanks.
5. Take the plunge, get in the game
Identify the easiest, lowest-cost method to get into the game. Get it direct from the company whenever possible.
6. Keep up
Though Dividend Reinvestment stocks are long-term investments, you should still keep up with the progress of the companies. Have there been high-level managerial shifts? Has the CEO left suddenly? These are all crucial alarm bells that might suggest underlying problems with the company. If a company’s management has became incompetent, do not hesitate to get out of your stock position.