If you want to boost your savings rate, save money and feel a bit retro in the process, you should become acquainted with DRIPs, or dividend reinvestment plans.
DRIPs enable current shareholders to use their cash dividends to buy additional shares directly from the issuing company or mutual fund without paying a commission or fee. Often, the shares are offered at a discount of up to 10% from the current market price. Some plans also permit shareowners to buy additional shares directly. You can learn more with our DRIPs 101: A guide to how DRIPs work.
DRIPs: A ‘Hidden’ Bargain
For individuals, DRIPs are a bargain that many investors have never heard about or ever considered. In addition to what they save in commissions, DRIPs allow investors to take advantage of dollar-cost averaging, which means that since investors are buying shares regularly regardless of the prevailing share price, the average cost of the shares purchased is typically lower than if they tried to time their purchases.