Stocks — DRIPS
Radio Transcript, 2 minutes 30 seconds, for use during week
of Oct. 1.
Description: Penny and Susan discuss DRIPS and mutual funds
Announcer: Invest Wisely comes to you from Iowa State University
Extension through a grant from the Investor Protection Trust,
providing investor education on the web at: investorprotection.org.
Susan: Penny, Ira told me that you’ve been talking about
different types of stocks and how these different categories
have different investment risks.
Penny: That’s right. For example, while income stocks
pay a high percentage of their earnings in dividends and are
generally low or moderate risk investments, growth stocks are
typically in new or fast-growing industries and usually have
Susan: One of my investment goals--saving for a comfortable
retirement--is a long-term goal. Does it still make sense
for me to consider income stocks? I’m interested
in having some stocks in low to moderate risk categories, but
I don’t really need the dividends now.
Penny: One thing to consider is reinvesting any dividends to
purchase additional shares. Some companies have dividend
reinvestment plans, known as DRIPS, which allow you to automatically
reinvest your dividends and purchase additional shares.
Susan: That sounds like something I might be interested in. The
dividends could be used to help me reach my investment goal.
Penny: That’s right.
Susan: I’m still concerned that I might not have the skill
or time to select and monitor individual stocks or enough money
available for investments to allow me to diversify adequately. Do
I have other options?
Penny: You might consider mutual funds, which pool money from
many investors to purchase a basket of stocks. Funds have
different objectives--growth, income, a combination of the two
or many other objectives.
Susan: So I could still choose funds based on my investment
goals and objectives?
Penny: Yes. You might be interested in something like
index funds , which are made up of the stocks reflected in a benchmark
index like the Standard and Poor’s 500. These can
be a good choice for people who want some exposure to the market,
lower costs, and aren’t interested in managed funds
that try to beat the market. Historically the return of
the S&P 500 has been around 10 to 11 percent.
Susan: Thank you, Penny. Once again, you’ve been
really helpful. I’m sure I will be back again with
Penny: You’re welcome. And remember, for more information,
visit the ISU Extension website at extension.iastate.edu and
look for ‘Invest Wisely.’