Dividend Stocks For Dummies
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Investment vehicle is a fancy term used to describe an investment product other than basic stocks or bonds. Sometimes the term "investment vehicle" refers to a product, such as a fund, which holds many different stocks or bonds. Other times, it refers to a way to purchase stocks or bonds other than a straightforward purchase. Some examples are

  • Dividend reinvestment plans (DRIPs): Many companies that pay dividends allow investors to enroll in DRIP programs, which automatically reinvest dividends to purchase additional shares. This strategy is usually a great way to compound returns.

  • Direct stock purchase plans (DSPs): DSPs allow you to purchase shares directly from the company rather than through a broker, which can save you some money on commissions and fees. They’re also called direct purchase plans, or DPPs.

  • Dividend-focused mutual funds: The main benefit of a dividend-focused mutual fund is the same as that for any mutual fund — it provides an easy way to diversify your holdings. In exchange, you relinquish your control over picking individual stocks to the mutual fund manager.

  • Exchange-traded funds (ETFs): An ETF is basically an index mutual fund that trades like a stock. Quite a few ETFs focus on dividend investing.

  • Foreign dividends: Some foreign companies pay dividends, too, and with foreign dividend investment vehicles, you don’t even have to worry about trading in your yens, euros, and shekels for dollars.

About This Article

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About the book author:

Lawrence Carrel is a financial journalist and served as a staff writer at TheWallStreetJournal.com, SmartMoney.com, and TheStreet.com. He is the author of ETFs for the Long Run: What They Are, How They Work, and Simple Strategies for Successful Long-Term Investing (Wiley).

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