Dividend Reinvestment Plan (DRIP)
A DRIP automatically uses your cash dividends to buy more shares of the same investment.
Why this matters
DRIP can help you stay consistent and compound over time without manually placing small reinvestment orders.
Simple example
Your ETF pays a $30 dividend. With DRIP enabled, that $30 is used to buy additional ETF shares instead of staying in cash.
Common mistakes
- Assuming DRIP is always free; some brokers may handle partial shares differently.
- Ignoring tax impact in taxable accounts.
- Forgetting to review whether the underlying investment still fits your plan.