Understanding Compounding Returns and DRIPs

What is a Dividend Reinvestment Plan (DRIP) primarily used for?

• To sell shares automatically

• To diversify investment portfolios

• To reinvest dividends into additional shares

• To withdraw dividends as cash

In the example provided, how does the investor using a DRIP benefit compared to the one who does not?

• The DRIP investor avoids market fluctuations

• The DRIP investor has a higher number of shares over time

• The DRIP investor receives more dividends in cash

• The DRIP investor pays fewer taxes

After 20 years, how much more is the investment worth for the DRIP investor compared to the non-DRIP investor?

• $2,000 more

• $4,000 more

• $8,000 more

• $6,000 more

What advantage does a DRIP offer if the stock price drops?

• It guarantees a fixed return

• It prevents any loss in investment

• It increases the dividend yield

• It allows buying more shares at a lower cost

What is the first step to enroll in a DRIP for a new position using an online brokerage account?

• Select the Accounts tab

• Log in to your account

• Type in the company's name or ticker symbol

• Select the Reinvest Dividends checkbox