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DRIP (Dividend Reinvestment Plan)

A DRIP automatically uses your cash dividends to buy more shares of the same stock or fund instead of paying them out. This compounds your position over time, since every new share generates its own dividends. Most brokerages offer DRIPs for free.

Example

A $50,000 portfolio yielding 3% with dividends reinvested grows to roughly $90,000 in 20 years from reinvested dividends alone, before any price growth.

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