The Awesome New Feature From Wealthsimple
New Feature Introduction
Wealthsimple has released a great new feature to help automate your finances and save you time and make money. This feature is called automatic dividend reinvestment. Now you don’t have to lift a finger to keep earning money.
Automatic Dividend Re-investment
If you don’t know what a dividend is click here.
If you have some experience investing, you will know that dividends are a great way to receive passive income. However, traditional dividend investing is not completely passive because you receive money and must choose which stocks to buy. Instead, Wealthsimple allows you to activate a feature that lets them automatically buy more of the same stock every time to receive a dividend. If that stock can be bought as fractional shares, 100% of the dividend is re-invested. With a DRIP program, you can only buy full shares at a time. The remaining money sits in your account until you manually re-invest it.
For example: With today's price of $60.28, if you own 50 shares of Bell Canada (BCE.TO) that’s $3014.00. Owning these stocks would pay you a dividend of $48.38 per quarter. Without doing any extra work, that dividend would buy $48.38 more of BCE.TO or 0.8026 shares of the stock. For the next dividend, you would own 50.8026 shares of Bell which is $3062.38. This time owning the stock would pay you a dividend of $49.15. That is about 1.5% more than the last dividend.
If you repeat the process, you own 51.6180 shares or $3111.53. The dividend payout is $49.94. Or 1.6% more than the last dividend. As you can see, compound interest starts to work its magic! These are relatively small amounts but when you have lots invested your money grows even faster.
Let’s look at the example of a 10-year graph starting with 50 shares of Bell.
Assume 4% percent inflation per year. Final account value is $5560.85.
Assume 4% percent inflation per year. Also, the stock price and the amount the dividend payout is go up by 5%. Final account value is $9013.10.
These examples show that by automating dividend investing it can be much easier to keep your money growing.
Disclaimer: Stocks don’t always go up. The stock price could drop or the company could cut its dividend. Always do your research and be cautious when investing.
Pros
Hands-free automation to re-investing dividends.
You are taking advantage of dollar cost averaging.
Every single penny is re-invested (For fractional share enabled stocks only).
No stock picking is required.
It can easily be deactivated.
Cons
You cannot choose which specific stocks to automatically re-buy.
You never see the cash in your account if you’re attempting to time the market.
Fractional shares are harder to track and could be complicated for tax purposes.
Takeaways
Automatic dividend re-investment is a fantastic tool for those looking for a hands-off approach to investing. If you prefer the control of deciding exactly when to buy stocks and how many, this is not the right tool for you. Get between $5 and $3,000 in cash to invest! Use this code UG7FDQ or the link below to sign up.
If you don’t know how to start investing check out our investing page.