Dividend Reinvestment Plans are a great way to buy stock directly from public companies without having to invest large amounts. In fact, in most plans, you can invest as little as $25 at a time. When you invest in these types of plans, you are investing long-term. Any dividends that you may receive are automatically reinvested; purchasing you more shares of stock.

A few years ago, DRIPs made up the majority of my stock portfolio. When I started working for E&Y, I had to sell them all. Public accountants are held to extremely high independence regulations to protect the investing public. While I agree this is best, I hated to liquidate the shares I had spent my college years slowly building.

Now that I no longer work for E&Y, I have decided that it may be time to start again. If you could see how poorly my portfolio performed in 2008, you would realize that the dollar cost averaging that naturally occurs when investing in DRIPs would have produced far superior results than I achieved. In fact, I think it is safe to say that I had just about as poor a year in the stock market as any human being alive has ever had. Luckily (?) I have 30 years until I retire!

Before I jump back into it though, I have decided to compare the advantages and disadvantages when investing in these types of plans.

Advantages

• Small initial investment – Many times, all you need is one share of stock to get enrolled
• Small incremental investments allowed – Once enrolled, you can send in almost any amount that you want to invest. If you have an extra $20, you can actually buy stocks with no brokerage fee added. If for example, a stock is trading at $40 per share, but you only have an extra $20 this month, you can send in the $20 and your agent will buy you 1/2 a share. This could be really help to grow my eHow earnings.
• Discounted share price – Some companies even discount the price of the shares they sell you by as much as 10%.

Disadvantages

• First Share – To enroll, you must first own a share of the company’s stock. Deciding how to purchase this stock can be a real pain. The last time I started investing in DRIPs, I used moneypaper.com, which helps you get started. It does cost $97 a year, but includes some pretty decent materials each month. Of course, this was 10 years ago, so there may be a better alternative now. If you know of one, please let me know.
• High Fees – While you may purchase the stock relatively cheap,the selling fees can be high. I found out the hard way when I had to sell 2 shares of a company and the “fee” was about 50% of the price. Of course, I only had two shares of this company, so any fee would be high, relatively speaking.

Have you tried dividend reinvestment plans? Are you still investing with this method? How did you get started?

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A few months ago, my wife and I attended Dave Ramsey’s Financial Peace University. I must admit that I was completely surprised that my wife was interested in going at all. Don’t get me wrong, when I was working 100 hours a week at E&Y, she paid all of the bills and made sure we keep our credit in decent shape. She does not, however, have the passion for personal finance and investing that I do. When she suggested that we attend, I jumped all over that idea and ran with it.

Following Dave’s baby steps, we quickly established our “baby” emergency fund of $1,000. Good luck was with us while we then started to attack our debt. Within the next three months, we had paid off $7,000 in consumer debt, leaving only my student loan and our mortgage left. The life started happened…. AGAIN!

Both of our cars had issues, my Silky Terrier needed $500 worth of medical care and the refrigerator died. All valid emergencies, but needless to say, our emergency fund really took a hit. Currently, it sits pathetically low, haunting my dreams and basically just stressing me out.

This is not the environment to be short in the cash department.

Last night, as my wife and I had one of our weekly budget meetings, we discussed the “state” of our e-fund. I realized something that had never occured to me previously. To my wife, an emergency fund equates to safety. Without it, she feels out of control and scared. I cannot imagine how she must have felt when we were making a combined $25,500 and living off our credit cards just to survive.

With that being said, we are going to work on fully funding our emergency find over the next 12 months. Obviously, the first goal is to get it back to $1,000 and then build upon it from there. Ultimately, we need to establish a fund that would cover us for at least 6 months, should something happen to my job.

I am not going to get another job. The time I spend with my family is much too important, plus with the number of hours I work at my current job, I am not sure that I could find the time if I wanted to. I will, however, continue to write for eHow and Today. Both sites are producing nicely and I expect them to grow significantly over the next 12 months. I have also started tinkering with article marketing and affiliate sales, with limited results.

Do you have a fully funded emergency fund? Does your spouse feel more secure because of it? Drop me a comment and let me hear from you!

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I know you have noticed the decline in the number of posts made here recently. Without trying to make too many excuses, I will say that this is due to numerous factors including 1)completing my CPA requirements 2)trying my hand at article marketing 3)writing articles for eHow and 4)spending a ton of time reading some amazing blogs each day.

One of my favorite blogs is “Cents”able Momma, which is always on my daily read list. I must admit that I hate searching for coupons and deals. This is where the power of “Cents”able Momma comes in, since she does all of the leg work for you. What an awesome site!

Not too long ago, Centsable Momma won the Lemonade Award, then shared the love with PassiveFamilyIncome.  PFI is an incredible personal finance blog that specializes in generating passive income. From peer-to-peer lending, to writing articles on eHow, to how to sell covered calls, passivefamilyincome covers it all!

Typically once you win The Lemonade Award, you pass it along to a few other blogs that have influenced you in the past few months. This tends to encourage them to continue doing what they do so that you can enjoy their content on a regular basis.  Here are a few blogs that have motivated me to new heights over the past 3 months (in no particular order).

1. Smart Passive Income

2. Bible Money Matters

3. My Investing Blog

4. Counting My Pennies

5. The Frugal Housewife

6. Single Guy Money

7. Free From Broke

8. Budgets Are Sexy – Why yes they are!

9. Sense to Save

10. Realm of Prosperity

These are just a few of the many amazing blogs out there. Check these out and let me know when you find another “gem”. You can learn so much from others if you take the time to get to know them.

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