More information on DRIPs can be found on the educational Web site www.dripinvestor.com, which is run by Chuck Carlson, a frequent guest on our national radio show.

If you are just starting out as an investor and don't have a lot of cash to play with, you can get into a DRIP plan very affordably. This is also a smart way to give a gift of stock to a child.

Dollar-Cost Averaging

Reinvesting your dividends is an effective way to execute one of our favorite techniques for lowering your investment costs: dollar-cost averaging.

Here's how it works: You invest a set amount of money at regular intervals–most commonly, every month, or every quarter. The amount is the same, but the number of shares you buy varies based on the price. Your money gets you more shares when the marke

price is down and fewer when the price is up, but over time the average price per share will be less than the price you would have paid if you had purchased all of the shares at once.

The key to this simple strategy . . . picking good stocks! (Learn how with our guide How to Choose a Successful Stock.)

Unfortunately, in bear markets, when this strategy really works (with good stocks), most people don't continue. So instead of getting many more shares at bargain-basement prices, they end up with fewer shares at higher prices.

Helpful Web Sites

Here are some valuable Web sites if you're interested in dollar-cost averaging through DRIPs or even mutual funds:

• www.firstshare.com. For a $30 annual membership fee, plus a few extra dollars for referrals and handling fees, First Share allows you to buy stocks that offer DRIPs in small quantities–small meaning as little as one share at a time! The idea is that you build your portfolio through dividend reinvestments, which give you a built-in dollar-cost averaging (see below).


• www.sharebuilder.com.Sharebuilder will carry out investment transactions for a small fee, with three different plans available and no minimum investment required, so that you can buy just one or two shares at a time.


• www.mfea.com. You can use dollar-cost averaging to invest in mutual funds, too. The Mutual Fund Investor's Center is an information site that will give you a list of mutual funds that waive the initial investment requirement if you commit to investing $50 a month.

Put your investments to work making you more money with these guides:

• 3 Ways to Earn Money Through Mutual Funds
• Boost Your CD Yields
• Dolans' 10 Simple Rules of Investing

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