Last night I was at the hospital when someone asks me the famous question, “what the best investment?” All of my students know that if I am asked any financial question I will always give the same answer. “It depends.” First, you need to know: what are your personal financial objectives and the timetable for these objectives. Second, you need to know what your risk tolerance level is. This will give you a starting point for looking into investments.

The second question this gentleman asked was which mutual funds I would recommend. To that question I was able to give a very simple answer. I am creating and managing my own mutual fund. I am doing this by investing in various companies that offer Dividend ReInvestment Plans (DRiPs). This allows me to invest without incurring large broker commissions and not needing to purchase a round lot (100 shares of stock) of every company’s stock in which I invest. In addition, I am able to continue adding small amounts on a regular basis because most of the no- or low-fee companies require typically only a $50-100 additional investment once you are in the program.

A number of the companies allow you to start making your very first investment directly with them as long as you invest a minimum (usually $250 - $1,000) on your first purchase. As the name suggests, most people will have the dividends reinvested. These dividends are taxable in the year the dividend is paid and reinvested. But, when you start with a small amount, the dividends are also small and likewise end up having a small impact on your taxes. What you will see is as you continue to make these small investments the rules of compounding begin to be noticed. What starts as a rather small investment portfolio can end up being a very respectable nest egg with the continued investments and reinvestments of the dividends.

All of these companies require you to have a position in the company. Most companies require at least one share of their stock to make a position. But, not all of these companies offer you the ability to make the initial purchase direct with them. This is how I found The Moneypaper Inc. (Moneypaper) Vita Nelson started the Moneypaper in 1981 to broaden investing activity among women. Later they became a means for individuals to invest without brokers.

As explained on Moneypaper’s web site www.moneypaper.com:

In brief, here's how DRIPs work…

1. Instead of purchasing shares in a company through a broker, you can invest cash and buy however many shares (or fractions of shares) your money buys--depending on the market price at the time of the stock purchase within the plan.
2. Since investments in many DRIPs can be as little as $25, you could invest in 10 companies with as little as $250. The next month, or the next quarter, you could repeat the process--if you choose. You can determine how much and how often to invest.
3. Month after month, year after year--your stake in your holdings will keep growing based on the additional cash contributions he or she makes and also by having the dividends plowed back to buy more shares. (Which is why DRIPs are also shorthand for "dividend reinvestment plans.)

Not only does the Moneypaper provide the ability for individuals to purchase small amounts of a number of companies they also write and publish one of the best financial investment newsletters and maintain a database for the almost 2,000 US companies that offer DRiPs. They are making positions available in about the top 1,300 of these DRiPs. They also allow members to research their stocks.

For me, DRiPs give me the ability to choose the stocks I want to have in my investment portfolio; and to sell those investments to impact my personal taxes when I want and how I want to recognize my gains or losses.

Personally, I cannot sing enough praises for The Moneypaper Inc. They are allowing small investors to make regular deposits into investments of equities. It has been proven that equities produce far better results over the long haul than most any other investment.