You Should DRIP!

Do you DRIP?

That sounds like a weird question, but in my world it is powerful.

DRIP refers to Dividend Reinvestment Program.

Simply, it is taking any dividends from your investments and reinvesting them.

For example, let’s say you own $10,000 of the S&P500 and it has a dividend yield of 1.5%.

You would receive $150 of dividend from that investment.

You can either take that as cash or reinvest it.  

If you automatically reinvest you are now doing Dividend Reinvestment Program.

$150 doesn’t seem like much, but combine this with the growth of the S&P500 over time and now you have something.

Had you invested $10,000 in the S&P500 20 years ago it would now be worth $114,272 just in growth.

Now, had you automatically reinvested all those dividends your new number would be $208,215. This is from the growth of the initial investment, the regular growth of the S&P500 and adding all those dividends right back in allowing them the opportunity to grow too.

Not too shabby and why I encourage all my clients to set their investments up to be DRIPs.

Thanks to JPMorgan for this information! Note – this data is from two years ago.