Obviously, determining which stock is the best value gets to the core of stock selection, but every investor needs a strategy with which he or she can approach the market. Simply picking random DRIP stocks isn't enough. Some companies offer discounts on market price of shares. An investor can contribute small amounts to purchase fractional shares. This makes it practical to invest in more expensive stocks.
DRIPs allow investors to build a portfolio of stocks.
By investing a set amount of money at regular intervals you can achieve dollor-cost averaging. Every individual has the affordable opportunity to invest in common stocks. Dividends are reported as taxable income in the year paid even if the dividends are reinvested. DRIPs for the long-term DRIP investing may not be for everyone, especially those who rely on the advice of stock brokers or others, Gerlach said. In many cases, it's a complicated and lengthy process to sell shares in a DRIP account, so you can't quickly get your hands on cash from your DRIPs.