Why You Should DRIP Your Dividends

A dividend reinvestment plan, or DRIP, is an important tool that every long-term investor should be aware of. Not only can automatic dividend reinvestment make your life easier, but enrolling in a DRIP can maximize the long-term effects of compound gains, and result in a nest egg that is thousands of dollars more than it otherwise would have been.

A DRIP stands for dividend reinvestment plan, and is basically a way to automatically buy more shares of your stocks when dividends are received. In other words, when one of your stocks pays a dividend, instead of receiving a check, or cash appearing in your brokerage account, the dividend is automatically used to buy additional shares of that stock.

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Source: Fool.com