Should You DRIP?
Daniel P. Johnson, CFP?, EA
Helping high-stress physicians enjoy life while their health, wealth, and time are at their peaks.
Do you DRIP?
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That sounds like a weird question, but in my world it is powerful.
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DRIP refers to Dividend Reinvestment Program.
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Simply, it is taking any dividends from your investments and reinvesting them.
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For example, let’s say you own $10,000 of the S&P500 and it has a dividend yield of 1.5%.
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You would receive $150 of dividend from that investment.
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You can either take that as cash or reinvest it.?
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If you automatically reinvest you are now doing Dividend Reinvestment Program.
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$150 doesn’t seem like much, but combine this with the growth of the S&P500 over time and now you have something.
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Had you invested $10,000 in the S&P500 20 years ago it would now be worth $114,272 just in growth.
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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.
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Not too shabby and why I encourage all my clients to set their investments up to be DRIPs.
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Thanks to JPMorgan for this information! Note – this data is from two years ago.