I have a rather strange question. How do you know when to stop dripping? I'm a new investor, and rapidly becoming addicted to DRIPS. The problem is that I'm afraid with the amount I'll be paying each month, I won't be able to pay my bills. I recently inherited some money, so I'm okay for now, but it won't last forever (and I'm in the process of investing most of it, anyway). I already have three started (PG, HD, NOR), and six on the way (ABT, CIN, JNJ, KO, PEP, PFE). I feel like I need to stop and think about what I'm doing, but I get so excited about it that before I know it, I've signed up for another $10 special at Moneypaper. Any suggestions for restraint?Mardee
My two cents worth...Stop when you have so many companies that you can't carefully follow them anymore.Stop when you find yourself using money for your Drips that shold be used to keep the lights on.Stop when a company no longer meets your standards for a good investment.And Stop whenever you find yourself having to take the advice of complete strangers to determine when the above criteria apply.good luck, and drip on!T
Mardee,How many years do you have to DRIP on!I ask that (not really expecting an answer) because you say your investing an inheritance and your worried about not having enough to contribute after. At the same time it sounds like you've got considerable time and would like to build a solid nest egg.Well, once you've invested that amount you could sit back and just let the dividends reinvest. That would also be considered DRIPping and you could add to them on a when and if basis.Nothing says you have to add optional payments. But stay on top of your companies if you stop. Things can change quickly. Look at Compaq and Hewlett-Packard today! I have 16 DRIPs but I only put money into 6 of them regularly. The others I basically just let the dividends reinvest with an occassional optional payment.OB
You may want to sit down and sketch out a investment plan or strategy for your drips-- your time horizon, what your overall goal from having drips will be, how many you want in all, which sectors you want represented in your drip companies, which companies within those sectors, etc.There are a couple of ways to determine how many drips you should have in all. You may want to base the number of drips you have on how much money you can send to them per month--for me I want to be able to send money to each one of my drips every month. You may want to base your total number of drips on how many you can keep up with regularly and stay informed about--if I had 15 drips, I wouldn't be able to keep tabs on each company regularly, which could cause problems if one of the companies I invested in starts to veer off the track but I didn't find out about it until later. As MC Hammer would say, 'if you can't watch everybody, watch out.' Sorry, I had to throw that in.One you've settled on the total number of drips you want in your portfolio and how you want to allocate that number of drips among different sectors, it'll be a lot easier to determine if you're going to be overweighted in a particular sector, and it'll narrow down any future companies you may be considering. I noticed you had three pharmaceutical companies (ABT,JNJ,PFE) and two food/beverage companies in your current list (PEP,KO)--after deciding how to allocate your drips, you may decide that you only need one food/beverage company instead of two, or that you may only want two pharmaceutical companies instead of three.For my strategy, I decided that I wanted to have 9 drips in all to invest. I felt that I could fulfill the goals of my investment plan with this number of companies, plus I would be able to send OCPs to each company every month and be able to keep up with any new developments for each of my drips. On top of deciding I wanted 9 total companies, I decided that I only wanted one food/beverage company. After deliberation, I decided to make PepsiCo (PEP) my food/beverage pick. So going forward, I would only consider food/beverage companies in the future if I were to determine that the reasons I purchased PEP no longer applied to either my total investment plan or PepsiCo's business plan.Sorry if these seems lengthy. But I hope it helps you.myadidas
How do you know when to stop dripping? How...? When you begin to ask yourself this question:The problem is that I'm afraid with the amount I'll be paying each month, I won't be able to pay my bills. I'm new to DRIPping as well, with three new DRIP's coming my way within the next 8 weeks or so, so I understand your enthusiasm.When I first began, I created a list of roughly 3 companies I wanted. Then I realized that I wasn't too fond of one of the companies once I researched it, but I quickly replaced it with another. Then my eye caught another company, then another, then another, and so on...Pretty soon I had a list of roughly 20 stocks to look at. All companies I had heard of before, but never researched. Then I began adding more companies to the list, until it became mammoth. I didn't know where to stop. It was fun learning about all these new companies -- and somewhat addicting -- in a hunter-gatherer kind of way...Then I realized that I was buying companies, not collecting Baseball cards. So I started to pare down my list by putting them in a priority list -- eventually I began crossing companies off the list wondering why I ever thought of buying this or that...Now my list is down to five companies on my "for sure" list. My goal is to have signed up for six DRIP's by the end of the year. And if things work out the way I planned, I'll have my dividend payments stretched out so I have two payments in each month -- an almost bi-weekly schedule, if possible.I feel like I need to stop and think about what I'm doingIf you feel like you have to stop, then stop. Really. Don't buy a company on impulse today that you may regret owning next year.And like OperaBob said, you don't have to make payments every month -- that's why they call them OPTIONAL cash payments. You can set your plans up, then add to them when you feel comfortable.After all, look at the Fool's own DRIP portfolio -- it's been running since 1997 and it only has 5 companies...! You'll have nine companies before the end of your first year...Don't feel you need to rush into things all of a sudden because you've come across some extra money. Knowledge is power. Take the time to learn before leaping in headfirst.Personally, there was a moment in time a few weeks back that I was willing to just buy into five or six companies "just to get started". But I'm glad that I stopped myself from doing so because I was able to properly create an investment strategy and have more confidence in the companies I will be owning for the next 20 or 30 years.Anyways, I'm rambling now. Good luck with your investments.Keith...
I set my limit of DRIPs at 5 good ones. I also have a S&P 500 index fund and a total stock market index fund. I have a couple of other sector funds. That is about all I want to keep up with.
Well, I would say that the obvious answer is the first sit down and write out a budget. I have a good feeling for how much to expect each month for mortgage, electricity, telephone, cable, Internet access, ect. These are recurring. I also set aside something for vacation, some to simply save, and some for my DRiPs. Doing this allows you to confidently send money each month to the companies you have selected.How many DRiPs should you own? Well, my spin on that can be found here: http://www.fool.com/dripport/2000/dripport000530.htm and here: http://www.fool.com/dripport/2000/dripport000606.htm.Cheers -george
OperaBob,Glad to see there is someone else who has more than 4 or 5 DRIPs. I seem to have accumuated 20 DRIPs, and that is enough for me. They are well diversified, into several sectors)Some I add to on a regular basis, but there are others that just sit there reinvesting the dividends. (There are a couple that I don't add to as the number of shares has really multiplied, due to several splits).I thin it is a personal thing - how many can you handle without outside help? If it is too much for you, maybe you could consider selling a couple of the less attractive ones. If all seems manageable, then keep it as it is and add to the ones that seem to be the best future growth stocks.Happy DRIPping.Kathy
Kathy,Re: Our mutual love of DRIP accountsOne thing I have is 3 Canadian bank stocks. In Canada we have what are referred to as "The Big 5". The Royal Bank of Canada-recently renamed RBC Financial as it expands into the US. Canada's largest bank.The Toronto Dominion Bank of Canada-better known to you as TD WaterhouseThe Bank of MontrealCanadian Imperial Bank of CommerceThe Bank of Nova ScotiaCanadian banks have historically returned 15% and trade at lower multiples than US banks.The Royal and TD do not have DRIPs. BMO, BNS & CIBC do.As one bank in Canada does so do they all so it would seem senseless to DRIP all three. But there is a logic here:About 3 years ago the Royal was set to merge with BMO and TD with CIBC. Hads that occured the resulting 2 banks would have been in the top 10 largest banks in the world. So I've been DRIPping the 2 extra banks in anticipation of this event.Unfortunately at the time an election was going on and it was deemed politically correct to nix the mergers at the time. The public was complaining about reduced competition and bank charges. Whenever people do that to me I always ask, "Why don't you buy some bank stocks then and get your fees back as dividends?" They always answer, "I can't afford to buy bank stocks." At this point my wife, "Buffy the Berkshire Killer's" eyes roll up as I answer, "Have you heard about DRIPs?" and then I proceed to bore the heck out of everyone at the party except for the other investing nerds.As the election has become a distant memory it appears the federal government is setting the stage to allow the mergers to proceed (although now it looks like TD will go solo and BMO and BNS might merge). This will be a "natural selection" method to reduce the number of DRIPs I have and at the same time be a great benefit to me.OB
OB,The Royal and TD do not have DRIPs. BMO, BNS & CIBC do.It should be noted that the only one of these DRIPs open to U.S. citizens is that of Bank of Montreal (BMO). BMO also owns Harris Savings Bank, which sold its DRIP transfer agent organization to Computershare. BMO adminsters its own plan and invests monthly (Nil-$40,000/year) with no fees. Sending in OCPs may cost a tad more in postage (for U.S. residents), since it goes to Montreal, but there's a dual stock listing (Symbol BMO on both the NYSE and the TSE).dave fish/moneypaper
Dave,We should also add that BMO's fee free DRIP accepts OCPs as low as $1.00 Canadian. (About $0.64 US today).OB
While, as the owner of 8 drips with a focus in 4 -7 sectors, depending how you categorize them... I think GLSmyth had some very salient points regarding the amount of time to follow the co and ensure they were still following the directions which had you purchase then at the time ...I think the most I personally can handle is 8-12. I am actually more than a little conflicted about this as I am VERY BULLISH right now on buying and investing when the traders are running for the hills...Buy low sell high. Well, with some careful research, we have that opportunity right now. But I am not letting my contrarianism go to my head ... [its big enough already]However, the crux for me right now is to stick with my strategy and buying criteria... which I feel gives me the opportunity to consider buying 4 more drips at the most ... for a total of 12 ... Even with 8, keeping up with the news, mgmt chgs and decisions, financials, and competition is a challenge. Carefully consider how much time you truly have to give these drips the scruitiny your portfolio deserves ...Monthly investment, no fees, value and growth and buy and hold [within reason] are where I lie. So right now I am researching the possible addition of WEN and BP ... both presently a little high priced IMHO, but they meet almost all criteria except price ...Food for thought,Irina
Thanks to all of you for the very informative responses. Yes, you all are right -- I need to sit down and actually plan my investments (what a concept!). For the record, OB, I'm 46, so I have slightly less than 20 years till retirement. However, I'm planning on going to law school in the fall of 2002, so I need to make sure I have some cash available. Of course, I'll continue working full-time while in school, so I still have income coming in.Anyway, I've printed out all the advice, including your articles, George (thanks for the links), and have blocked a time into my calendar to come up with a plan and a budget. By the way, has anyone taken the Fool course on picking stocks -- I think it's called Find the Best Stocks for Your Portfolio? I just wondered if it was worth $44, or if I could figure it out on my own. Or does anyone have any tips for good BASIC guides to investing they'd like to share? I love to research, and have about 25-30 library books dealing with the subject on my kitchen table -- but I'm feeling slightly overwhelmed by them all, since I really don't know enough to know what advice is good and what is bad when it comes to picking stocks.Mardee
OB,We should also add that BMO's fee free DRIP accepts OCPs as low as $1.00 Canadian. (About $0.64 US today).Yes, but U.S. residents have to add a little postage, so I guess you'd have to pay about 55 cents to send in that check for 64 cents...:)d.
For the record, OB, I'm 46, so I have slightly less than 20 years till retirement. The bad news is that if you are looking at Social Security, then it'll be slightly more than 20 years, as your benefits have been pushed back to requiring you reach the age of 67, not 65.With the reduction of the surplus due to the failing economy and the recent tax rebates, tune in to see if they decide to push your benefits back even further (they are now considering dipping into Social Security to fund spending increases).Sorry to ruin your day. <g>Cheers -george
Mardee,For the record, OB, I'm 46, so I have slightly less than 20 years till retirement. I'm 50 so your 20 years to go looks good to me! ;-)An example of "lump summing" it and just letting the dividends reinvest I've used before:1982 my parents purchased 500 shares of BCTel at $6 per = $3000 total investment.Over the next 16 years they just let dividends reinvest and made no further OCPs.In 1998 they had 850 shares @ $55 per = $46,750This equals a 19% annual rate of return.At the same time the 850 shares were paying approx. $1200 /yr. dividend.This is a 40% return yearly on their original $3000 investment.This is all without making a single OCP.That's in 16 years (which is under your 20 yr. time horizon).But as I said you have to stay on top of things. As you know the telecoms have been having a rough go. BCTel merged with Alberta's Telus to form TELUS and TELUS has been active in reinventing itself as Canada's second national carrier. As there is a lot of uncertainty the shares have fallen to about $25. But the dividend is purchasing 48 more shares per year at the moment. As I don't see TELUS going under I'm quite happy at the moment picking up the extra shares in my own account.OB
Dave,Yes, but U.S. residents have to add a little postage, so I guess you'd have to pay about 55 cents to send in that check for 64 cents...:)55 cents!!They charge us 60 cents the other way!! scr*w*d again!No! wait a minute! That's 60 cents Canadian. So let's see:60 x .64 = 38.4 cents USWhoopee! Wait'll the sock puppets hear this!OB
Mardee wrote--"However, I'm planning on going to law school in the fall of 2002, so I need to make sure I have some cash available. Of course, I'll continue working full-time while in school, so I still have income coming in."I can tell you from experience that unless you are going to night school, you are much better off NOT working full-time during law school. There's just too much material coming at you all at once and you can't afford to miss it by focusing on too many other things. Part-time is good, especially if it's school related--e.g. research assistant.Law school is like trying to drink out of a fire hose.congrats on your decision to go to law school though.T
OB,60 x .64 = 38.4 cents USWhoopee! Wait'll the sock puppets hear this!To tell the truth, my 55 cents was just a guess. I'm not sure; it could be 42 or 48 or ?d.
OB,I checked with the postal service and its about 60 cents.Ginny
I can tell you from experience that unless you are going to night school, you are much better off NOT working full-time during law school. There's just too much material coming at you all at once and you can't afford to miss it by focusing on too many other things. Part-time is good, especially if it's school related--e.g. research assistant.Actually, I will be going to night school -- 3 nights a week. I would love to be able to stop working, and go full time during the day, but since I'm the only income-producing member of my household right now, I don't think that's possible. So school will take a little over 4 years, rather than 3. congrats on your decision to go to law school though.Thanks very much -- I'm excited about it. I take the LSAT in about 3 weeks, so I'm busy cramming for that right now.
Mardee1000,Keep in mind there are 3 major asset catagories (cash, bonds,equities)and 8 industrial sectors. To have a balanced portfolio, investors should have exposure in all.Hope this helps,Geo FisherPI w/D (Power Investing w/ DRIPs)
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