Expert: Robert Hanzel - 2/21/2007

Question
DRP is a drip
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The text above is a follow-up to ...

-----Question-----
 Thanks for answering my previous question.  I did a little researching of my own and I discovered something called DRP's which seems like exactly what I was looking for.  I have a question regarding them though, I'm assuming their designed for the long term investor, do these companies penalize you if you have to cash out?  Also if you could give me a little more information regarding DRP's
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I am not quite sure what a DRP is. I have heard of a DRIP, which is a dividend reinvestmant plan, but that is not something that you can necessarily opt into. Can you give me a little more info on a DRP?

Answer
Gotcha. A DRIP account is basically when a person opts to have the dividends that there stock pays put back into buying more shares of that stock. Therefore, you must own the stock before you can participate in their DRIP account. If this is the type of investing you would like to participate in I would recommend finding strong, long standing companies that pay a decent dividend yield and buying a few shares of each of those. For instance, General Electric has been around for over a hundred years I believe and pays a 3.1% dividend. Home Depot is part of the Dow and pays a 2.2% dividend. You want to be sure that your portfolio is diversified so that you don't have too much risk in one company, so be sure to spread it out over several companies. Lastly, I name those companies only as examples. I am not making a statement as to my recommendations regarding those companies. But I wanted to give you an example of what I was talking about. Good luck!