Making Money With DRIPs

You don't need to wait until you have $1,000 in the bank to invest, says Brooke Stephens, the author of "Wealth Happens One Day At a Time."

She explained on The Saturday Early Show it can be done with as little as $100 a month. Or even less.

Stephens says the answer to smart investment is Dividend Reinvestment Plans (DRIPs). The idea is to buy small amounts of stock in blue chip companies on a regular basis. Investors make money not just on the movement of the stock price, but on the cash dividends that automatically gets reinvested.

You can buy the stocks directly from the companies or through various websites set up for this purpose, according to Stephens.

Although the market is still a bit shaky, Stephens believes now is a good time to jump in to the market because the prices are soft. She suggests investing wisely on a regular basis.

Stay away from buying the hottest stock and the next technology breakout. Rather, Stephens says invest in blue chip companies that have longevity.

To get started, you can buy DRIPs directly through many companies' websites.

You can also call 888-OWN-A-STOCK to get a free informational kit. It offers information on which companies offer DRIPs. Other resources include:

netstockdirect.com
buyandhold.com
sharebuilder.com
brookestephens.com

Stephens says fees differ, but it's inexpensive to invest and you don't need to use a stockbroker. It takes a few dollars to get started, then everything is processed automatically.

Only the dividends are taxable, says Stephens. The earnings growth of the stock is tax-free until you pull it out. This differs from mutual funds, which require taxes to be paid for annual growth. And DRIPs are great birth presents or graduation gifts for children because they keep on giving.