Friday, January 5, 2018

DRIP - Getting wealthy at an exponential rate


Intro
Today I am going to talk about DRIP and how it can help you grow your wealth at an exponential rate. First of all, DRIP has nothing to do with water nor is it a metaphor for investing. DRIP stands for Dividend Reinvestment Plan and that is exactly what it is. DRIP is way for you to reinvest your dividends, usually back into the same equity that distributed the dividends.

Dividends for those that don't know are cash that a company pays its stockholder base on the number of shares you hold. If you read my passive income post you'll see that company like Enbridge (TSX: ENB) pays $0.671 per share on a quarterly basis. I hold 189 shares of Enbridge stocks and therefore I get pay around $127 on a quarterly basis.

How DRIP work is that instead of paying you the dividend ($127 from Enbridge) it will reinvest it for you by buying more shares. In my case, instead of getting $127 I get 2 whole share of Enbridge since they are trading around $50 per share right now and what ever cash remaining.

A screenshot from my investment account showing how DRIP works. Enbridge recently increased it's dividend payout, therefore this picture don't match the numbers above.
Getting Started
To set it up, you simply contact your investment broker and tell them that you want to setup a DRIP and they'll get you started. Just remember that for most cases, the dividend payout must be enough to purchase one whole share of the stock.

Benefits
There are a few benefits for setting up a DRIP. The first benefits is you don't have to pay any commission for the shares you purchase.

The second benefits is DRIP allows you to grow your investment at exponential rate by compounding. Then depending on the frequency of dividends payout you'll be compounding either monthly, quarterly or annually. Most people heard of compound interest and also learned it in school. This is the same thing, instead you are compounding your dividends. Below is a graph that shows the benefits of compounding and the different frequency of compounding.


Here is a quick calculator I found that helps you calculate the return on compound dividends. Calculator. Start investing and start DRIPing, let the power of compound work for you.

Tuesday, January 2, 2018

Neighbour Joe - January 2018 Net Worth

Happy New Year. Although this month is the beginning of a new calendar year it is not the end of the fiscal year therefore I won't be doing a year end summary till April.

As we entered into 2018, the first thing I did was make a lump sum payment into my mortgage with money that I have set aside. Here is my net worth as of today and the current breakdown.

Asset
Chequing: 433.41
TFSA Investment: $57,333.46
TFSA Mutual Fund: $3,840.08 (Invested in TD e-series index fund)
Real Estate: $224,000 (Purchase Price of my house)
Define Benefit Work Pension (Current Transfer Value): ~$153,000 (Last checked in Jul 2017,aprox $1000 a month of contribution)

*Automobile is not included (No monthly car payment)

Liabilities
Mortgage: $135,126.07

*Credit Card is paid in full every month

December Net Worth: $300,758.74 
Current Net Worth $303,480.88 (+0.9%)

Like a few net worth updates in 2017, the reason for my increase this months beside my usual salary income is from my investment portfolio. I re-consolidated all my marijuana investment and put it all into Canopy Growth (TSX: WEED). In the the last two weeks of 2017 the stock price jumped 48% giving me a unrealized gain of $3,540. I sold some of my holdings and realized about $350 gain on the last trading day of 2017. Hope all of you had a good holiday season and may all your financial goal be met in 2018.