“This approach is intended for average people who do not have much money to invest, who cannot afford a thousand dollars or more to invest at one time, the same people who never thought of investing in stocks, or have put most of their money into costly big bank mutual funds or GICs.” – Cannew, My Own Advisor reader and fan
The Average Persons Retirement Investment Plan is an easy to understand, simple way to invest. It allows for small investments over time and does not require extensive market forecasting or analysis. You will also see your income grow over time without commissions or fees.
Thanks to Mark for time on his site, here is my two-part series of an approach I’ve used – to get wealthy eventually – a plan that has helped me earn close to $100,000 per year in retirement income. Let’s find out how this plan helped me.
Full Dividend Reinvestment Plans (DRIPs) 101
- Begin to save money. I can’t make you save but I can help you get the most from your savings, with a little effort. So, find ways to reduce your expenses or grow your current income, or both. Cut back on buying snacks, eating out, lottery tickets, magazines, etc.
- Find ways to save $25, $50, $100 or more per month. Have your employer deduct money from your paycheque and deposit it into your savings account; just a suggestion. Think of the money you save today as a Retirement Time Capsule, where you can add money but you cannot take it out ‘till you retire.
- The money in the Retirement Time Capsule will be used to buy stocks, not just any stocks but stocks that will pay you income and hopefully the amount they pay will grow over time. You won’t take or spend the money the companies pay, but you’ll use the funds to buy more shares. If you add extra money to the Capsule, you will buy more shares and the income you receive will be higher than before.
- There will be no fees or commissions to buy shares or to reinvest the income.
- You will not have to hire a financial advisor, follow the stock market, watch financial news, worry about buying and selling or be concerned about the value of your stock, although you can do all these things if you really, really want to.
Starting your Retirement Time Capsule with Stock Transfer Agents
- With $300 to $500 saved you open an investment account with any broker (most banks have discount brokerage arms).
- Select one (1) of the seven companies that I will list in Part 2 of this series. Buy at least one share of each company or buy one company share at a time. The shares will vary in price from $25 to $85 per share per stock.
- Leave sufficient funds for an initial commission of $25 (to buy the share) and request for a share certificate fee of $50, total expected around $75 before taxes.
- Once the share(s) are bought, and with the share certificate in hand (or use a Direct Registration Service), have the stock transferred to the Stock Transfer Agent for the company/share owned. This will be either CST Trust Company or Computershare.
- Register with these Stock Transfer Agents to start your full dividend reinvestment plan with. When you register you can buy more shares send by sending a cheque with your DRIP application form. The Transfer Agent will activate the DRIP account and you will begin to receive dividend payments each quarter.
- When dividends are paid, your dividends will be used to buy more shares (if only a fraction of a share). With Computershare, (not CST) you could even set up a Direct Debit to have fixed amounts taken from your bank each month.
From this point forward your Retirement Time Capsule is fully operational. Every three months you will receive a dividend statement from your Stock Transfer Agent regarding your Dividend Reinvestment Plan. I suggest you make an effort to add new money to your Retirement Time Capsule every month. This will accelerate the dividends that are paid every quarter, dividends that buy more shares (even fractional shares) for you commission free.
Initially your Retirement Time Capsule will take time to get off the ground (meaning your dividends won’t seem to grow that fast) but the more you save and the longer you hold the shares, the faster they will grow.
Cannew is an avid reader of My Own Advisor, a fan of dividend reinvestment plans and a financially-free retiree doing whatever his heart pleases.
What’s your take on full dividend reinvestment plans?