How to create your own stock portfolio for the less than a night at the movies

Unfortunately, many people wait to invest. Mistakenly, they believe they must have a windfall to do so. Here’s a little secret - you don’t need lottery winnings to start investing.

No amount is too small in the investing world. The trick is to start creating the habits of consistent saving and investing while finding the right investment vehicles for the money you have now. Otherwise, fees and commissions will be your demise.

Most people think that a minimum investment of at least a $1,000 or $2,000 is required. And even then, it still seems like its not enough.

What if you I told that if you managed to save $50, $40, $30, or even $20, you could invest in stocks? It’s true! if you've managed to save just $20, you can invest in companies like XEROX, Coca-Cola, or McDonalds just to name a few.

How?

Simple. They are called DRIPS.

One of the best ways, and best revealed secrets, for small investors to invest small amounts of money is through Dividend Reinvestment Plans (DRPs), also known as Drips. They offer a great way for a new investor or those with very limited funds to begin their path towards financial success. Drips are unique because they allow people to bypass brokers (and their commissions) by buying stock directly from the companies or their agents.

More than 1,000 publicly traded companies offer these types of stock plans. Many have low fees or no fees at all, which makes it worth your while to invest as little as $10, $20 or $30 at a time. Once you're in the plan, you don't even have to buy a full share; you can buy part of a share. Almost anyone can participate.

So what's a DRIP?

A DRIP is a program run by a publicly-traded company for its shareholders. Instead of sending dividend checks to shareholders enrolled in a company's DRIP, the company reinvests those dividends by purchasing additional shares (or fractional shares) in the shareholder's name. A shareholder usually needs only one share to enroll in a company's DRIP plan, and most of the time the company will reinvest a shareholder's dividends without a fee or commission.

Why would companies do this?

Companies like DRIPs for several reasons. DRIPs provide a stable base of shareholders who are likely to have a long-term, "buy and hold" investment philosophy. Individuals, particularly those who are dollar cost averaging into their DRIPs, may see the drop in a stock's share price as a buying opportunity, as opposed to institutions and traders who move in and out of stocks with short-term goals in mind. This base of individual shareholders can help stabilize a company's share price. DRIPs keep capital inside the company, by not paying cash dividends outright and having those dividends reinvested in additional share purchases. DRIPs can also help companies to raise additional capital without making a public offering.

One of the best features is to buy or purchase additional shares with no costs or commissions. That means that an investor can purchase additional shares of stock through a DRIP with as little as $10 or $25. Most companies allow these Optional Cash Purchases (OCPs) on a regular schedule, usually once or twice a month, or sometimes quarterly.

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