I own a few shares of Disney stock and it recently underlined for me why DRIP (definition here) investing is powerful – particularly for those who don’t make a lot of money. I bought the stock in 2013 because I learned that Disney was discontinuing paper certificates, and they’re really art pieces so I thought they might be collectible in the future.
(I would include a picture of what one looks like, but it was a giant pain in the ass to find a usable image on google, so you’ll need to look it up yourself. Suffice it to say they look nice.)
Disney recently changed transfer agents, so the new one sent me a statement. I bought 3 shares in 2013 for a little over $200, and put another $450 in periodic deposits in since then. However, I also reinvested the dividends since then, so my balance has grown to $1,211 as of today. Yes, there may have been a better utilization of my funds over that time, but buying dividend stock (and letting it sit for many, many years) is certainly a good strategy if you don’t have much cash to begin with. Dividends at least add to your number of shares, so you’re not as dependent on appreciation to make a meaningful difference. And you don’t need to add more cash along the way, although you can usually add small amounts as you go if you have it available.
Granted, it’s not going to make you rich, and it’s higher risk, but if you don’t have much cash and you have a long time it can be a nice supplement. And if you don’t have much it’ll help you get started (which was definitely my position back in 2013). Coming soon – my December update!
