Buying stocks can be a difficult proposition if you don't have large chunks of money to invest at a time. However, many companies offer dividend reinvestment plans -- or dividend reinvestment programs -- which often allow for small recurring investments as well as the reinvestment of dividends. All you have to do is find a company that offers a DRIP.
Video of the Day
DRIPS are offered by certain publicly traded companies. These programs allow you to buy stock directly from the company without a brokerage or other intermediary. By design, these programs reinvest all dividends paid back into the company stock.
A DRIP allows investors to invest directly with the company. The purchased stock is held in "street form," meaning that no stock certificates are sent to the investor. The investor may make subsequent investments subject to the rules of the program. When the stock pays a dividend, that dividend is used to purchase additional shares of the stock. In this way, the number of shares owned continues to increase with each dividend payment.
Many websites promote DRIPs as an "easy way" to invest "small amounts of money." However, many DRIPs require a minimum investment to start and minimum amounts for subsequent investments as well. Further, some companies' DRIPs are limited to current shareholders, meaning that you would need to buy at least one share some other way first.
It may be difficult to access money invested in a DRIP should the need for cash arise. Thus, DRIPs are suitable only for investments with funds that are unlikely to be needed in the near future.
Although there are services that will sell lists of DRIP companies, virtually all DRIPs can be found with just a little research. The investor relations section on a company's website should list the transfer agent for the stock and contact information for the IR department. Either one can provide the necessary information.