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Investing foundations

Lesson 63 · Written for kid, teen, and little

Reinvesting Your Dividends

A DRIP takes your dividend cash and automatically buys more shares for you.

The idea

Some companies share a slice of their profits with the people who own shares. That payment is called a dividend, and it usually lands in your account as cash. You can spend that cash, or you can switch on a reinvestment plan — a DRIP — which automatically uses it to buy more shares of the same investment. More shares means the next dividend is worked out on a bigger position, though nothing is promised: companies can lower or stop dividends whenever they choose. 🔁

A

Words to know

5

Dividend

A payment some companies send to the people who own their shares. Own 10 shares paying $0.50 each and you receive $5.

DRIP

A setting that automatically uses your dividend cash to buy more shares. The $5 turns into more shares instead of sitting there.

Share

One small piece of a company that you can own. Ten shares is ten of those pieces.

Fractional share

A slice of a share, smaller than one whole share. If a share costs $200, $50 buys you a quarter of one.

Reinvest

To put money you received straight back to work instead of spending it. It is what turns one dividend into more dividends later.

Try it — no accountTrue or false

True or false? Swipe each card the way you think it goes.

Card 1 of 4

A dividend is money some companies pay to people who own their shares.

Swipe the card — or tap.

In the full lesson

  1. 1True or false
  2. 2Put it in order
  3. 3Make the call

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