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Eat Your Spinach
Chapter 5: Persevere: Accumulate Wealth
You have accomplished something few do. You have established yourself
as a disciplined saver and a committed investor. Your task now is to maintain
your discipline while continuing to accumulate wealth. To do this, you
will need several tools. Most financial advisors recommend a “buy
and hold” strategy. This isn’t a panacea and the compact phrase
“buy and hold” conceals many nuances, some of them fairly
nasty. But one of the positive implications is the notion of “dividend
reinvestment”
Buy and Hold Stocks That Pay Safe, Increasing Dividends
Dividend reinvestment is a systematic method of accumulating shares of
a stock that pays a dividend. After you purchase a stock, simply enroll
in the company's dividend reinvestment plan (DRIP) and your dividends
will be automatically used to purchase additional shares. Also, you may
send voluntary contributions to purchase additional shares. For a mutual
fund be sure to check off the dividend reinvestment option on your application
form.
Because you pay taxes on dividends, consider putting dividend reinvestment
stocks in a retirement account so you can shelter the dividends from your
current tax liability.
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More
in this chapter:
Examples of Dividend Reinvesting
Setting up Your Dividend Reinvestment Account
Buy Low Fee Exchange-Traded and Index Funds
Tax Shelter Your Gains
Use Dollar-Cost Averaging
What Can Go Wrong with Your Investing Plan?
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TOC Chapter 1 Chapter
2 Chapter 3 Chapter
4 Chapter 6 Chapter
7 Chapter 8
Posted May 13, 2008.
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