Adding compound shares to your portfolio
Compound shares are those bought directly from a company that accumulate (or compound) through the purchase of additional shares or fractional shares.
Purchase compound shares from a company that offers a DRIP (Dividend Reinvestment Plan) or DSPP (Direct Stock Purchase Plan). A DRIP is an investment plan offered directly to the public and a DSPP is an investment service offered directly to the public or by a transfer agent. Basically, these terms are interchangeable, with DRIP being the more common term.
Instructions
1. Find out if the company you want to invest in offers a DRIP (or DSPP) plan by going to the company's site and looking for investment or shareholder information. If you are not sure what company you want to invest in, there are many sites that list companies that offer DRIPs.
2. Find out what the requirements are for buying shares, if any. In some cases, you will need to already own stock in the company to join the plan. If so, you can buy one share through a low-cost online broker.
3. Make your initial DRIP investment with the company you choose, and set up automatic investments if you do not plan to send in regular payments. In some cases, setting up an automatic investment will waive the initial investment requirement.
