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Author: ferjen Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 50182  
Subject: Scottrade DRiP to Become Reality Date: 1/26/2013 10:26 AM
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http://about.scottrade.com/blog/blogposts/Frequently-Asked-Q...

January 20, 2013 11:27 AM
Both of my daughters have had Scottrade accounts for a good while, but I am also considering transferring both accounts in their entirety to another broker that allows dividend reinvestment. In the past, a DRiP wasn't a big deal. But, times have changed, and in the quest for yield, a DRiP is a must...
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Vickie K.
January 23, 2013 9:45 AM
Hi Ferrell,

We want to thank you for reaching out to us and letting us know the importance of this service in your investment strategy. We are currently working to bring a dividend investment program to our clients sometime this year. In the meantime, there are alternatives we can discuss to reinvest any dividends. Well be happy to have your local Scottrade office contact you to speak to you about this in more detail.

Thanks,

Vickie K
National Service Center


Stat tuned...
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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50058 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/26/2013 11:12 AM
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I think it's too bad they are doing this - it's not something that they will make money from. With trading fees so low, I think it's a idea whose time has gone.

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Author: Prospero13 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50059 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/26/2013 7:35 PM
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I disagree, reallyalldone. While Scottrade won't make money from implementing DRIPs, they will retain and attract the customers who want that feature. That was the main reason I left them. Otherwise, I was perfectly happy with them.

Most people aren't going to receive enough dividends from their holdings to reinvest manually, so the money will just be sitting there earning little to nothing in interest. While it may seem minuscule, those reinvested dividends will compound over time. I think it's even more relevant to DRIP in tax-sheltered accounts like IRAs since you're limited to the amount of money you can contribute every year and you don't need to report the cost basis to the IRS. It only makes sense to keep your commissions as low as possible--preferably no more than 2% of the capital you're investing. Once your holdings are spitting out enough cash so you can do that 3 or 4 times a year, it makes more sense to stop the DRIPs and reinvest those dividends in more timely investments.

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Author: CABob Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50061 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/27/2013 2:07 PM
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If and when it happens, be sure about any transaction costs and whether Scottrade will hold fractional shares. For the small investor a DRIP is not very valuable if there is a fee for the transaction and can only be done with a whole number of shares.

Bob

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Author: Yumoroz Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50062 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/27/2013 9:58 PM
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Kahuna, what is "Avoir"?
maybe cross between "Adios" and "Au revoir"?

about easy money transfers, I also was unhappy with them (and in general, they have not done a lot since I opened my new brokerage account with them 10 years ago), but now I am ok on this front: their "Money Direct"
is an easy and fast way to get money in (faster then regular ACH),
and I opened an online checking account with them which makes out transfers to be easy (at least for me), and in this case with regular ACH speed.

and on the main subject, DRIP, of course everybody's priorities are different,
but for me DRIP in not worth the trouble, either for investor, or for brokerage, and if I am not mistaken you (Kahuna) also in the past said something like "reinvestment of dividends in still an investment, and it's not always the best place to put your money in, the stock you just received dividends from", I would agree with that

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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50063 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/28/2013 11:26 AM
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The problem with reinvestment of dividends is that the time of the dividend is not necessarily a good time to buy.

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50064 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/28/2013 11:38 AM
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I've been investing since the late 70's and fully believe the time for dividend reinvestment has passed. I have been a customer of Scottrade for a long time and am dismayed that they are spending their time on this. Yesterday I could not view my gain/loss reports. I would prefer they have everything they are doing working rather than implement something new.

Sharebuilder.com exists for these customers, IMHO.

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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50065 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/28/2013 5:11 PM
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I've been investing since the late 70's and fully believe the time for dividend reinvestment has passed.

I'm interested in learning more. Is this change of strategy based on your personal financial situation, or more broadly based?

What's changed that you no longer believe in dividend reinvestment? I do this with PG / JNJ / IBM / FAST, and of course the S&P Index reinvests dividends back into the index. I have all of my individual equities on a reinvestment schedule. But aIll of these equities are in retirment accounts, either IRA or ROTH. I do not own individual equities outside of retirement accounts.

Outside of retirement accounts, the equities I do own are index funds. But again, dividends are reinvested into the index. Please, elaborate.

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50066 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/28/2013 9:47 PM
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What's changed that you no longer believe in dividend reinvestment?

I'm not him, but I'll take a stab at it anyway.

I think it was already said: The best thing to buy at the time you receive the dividend isn't neccessarily the stock that just paid the dividend.

In olden times, when "cheap discount" commissions were $65 (yes, I once paid that at a discount broker) DRIPS were good because they avoided the friction of the commission. These days with commissions at $8 or $5 or even $0, that reason is gone.

In a taxable account, the book-keeping to keep track of the *correct* basis for multiple-dozens of purchases is daunting. Even with computers.

I recently realized a fresh disadvantage of DRIPping. Not applicable to index funds, but is to individual stocks. If the company goes bankrupt and the stock drops to zero, you lose everything. All of the original stock purchase, plus all of the re-invested dividends.

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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50067 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/29/2013 10:23 AM
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I'm not him, but I'll take a stab at it anyway.

RAD is a woman who I think has an informed and balanced view of investing, which is why I asked her view.   But your view also has value, and appreciate the reply.   

In olden times, when "cheap discount" commissions were $65
(yes, I once paid that at a discount broker) DRIPS were good 
because they avoided the friction of the commission. These days with commissions at $8 or $5 or even $0, that reason is gone.

I also remember those days, but only since you reminded me.
Yes, DRIP investing back in those days was a wonderful way of low cost investing.   

In a taxable account, the book-keeping to keep track of the *correct* basis for multiple-dozens of purchases is daunting. 
Even with computers.

True, yet it doesn't impact my strategy of having dividend 
reinvestment on equity that is held in tax favored accounts.   
So, I've got that going for me, which is kind of nice.   

I recently realized a fresh disadvantage of DRIPping. Not applicable to index funds, but is to individual stocks. If the company goes bankrupt and the stock drops to zero, you lose everything. All of the original stock purchase, plus all of the re-invested dividends.

It can happen I know.  Spent a decade working for MCI when it was a growth company and the stock was sky rocketing.  It then "merged" with WCOM (they bought us) and bam - bankruptcy.  I'm fortunate to have not got along well with the new bosses WCOM brought in, was happy to choose to leave MCI, and quickly rolled my 401k into an IRA and dumped the stock that was provided as the 401K match to contributions.  Many a beer with past co-workers impressed on me how it feels to see a stock go to zero.   

While I'm aware of the dangers of losing initial investment along with any dividedends by reinvesting, for now, I view this as dollar cost averaging into individual equities.    I think the reasons you state are valid, but minimizing transaction cost is not the reason I choose this strategy.


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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50068 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/29/2013 10:25 AM
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Sorry 'bout that formating. I'll blame Apple.

I'm not him, but I'll take a stab at it anyway.

RAD is a woman who I think has an informed and balanced view of investing, which is why I asked her view. But your view also has value, and appreciate the reply.

In olden times, when "cheap discount" commissions were $65
(yes, I once paid that at a discount broker) DRIPS were good
because they avoided the friction of the commission. These days with commissions at $8 or $5 or even $0, that reason is gone.


I also remember those days, but only since you reminded me.
Yes, DRIP investing back in those days was a wonderful way of low cost investing.

In a taxable account, the book-keeping to keep track of the *correct* basis for multiple-dozens of purchases is daunting.
Even with computers.


True, yet it doesn't impact my strategy of having dividend
reinvestment on equity that is held in tax favored accounts.
So, I've got that going for me, which is kind of nice.

I recently realized a fresh disadvantage of DRIPping. Not applicable to index funds, but is to individual stocks. If the company goes bankrupt and the stock drops to zero, you lose everything. All of the original stock purchase, plus all of the re-invested dividends.

It can happen I know. Spent a decade working for MCI when it was a growth company and the stock was sky rocketing. It then "merged" with WCOM (they bought us) and bam - bankruptcy. I'm fortunate to have not got along well with the new bosses WCOM brought in, was happy to choose to leave MCI, and quickly rolled my 401k into an IRA and dumped the stock that was provided as the 401K match to contributions. Many a beer with past co-workers impressed on me how it feels to see a stock go to zero.

While I'm aware of the dangers of losing initial investment along with any dividedends by reinvesting, for now, I view this as dollar cost averaging into individual equities. I think the reasons you state are valid, but minimizing transaction cost is not the reason I choose this strategy.

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50069 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/29/2013 12:33 PM
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Yeah, depends on what you want and how you want to go about it.

Me, I usually have a list of things I want to buy but don't have money for. And most often that list *doesn't* have "more of XYZ" (where XYZ is a stock I already own). Sometimes it does, but not often.

If you have a decent-sized account (5-6 digits), then every 2-3 months you've accumulated enough dividends to buy something new.

Doug Le Du (sp?) at CDx3 talks about "self-funding" dividend portfolio, when the accumulated dividends of the last few months is enough to buy another 100 shares of a dividend-paying stock.


I'm interested to see what RAD has to say.

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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50070 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/29/2013 12:57 PM
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Me, I usually have a list of things I want to buy but don't have money for. And most often that list *doesn't* have "more of XYZ" (where XYZ is a stock I already own). Sometimes it does, but not often.

Of the four stocks I listed above, JNJ / PG / FAST / IBM, I would like to own more, except maybe not more FAST as it's getting expensive. I may change the dividened reinvestment on that, but will probably do so when I sell some of the stock itself. The IBM is the most recent of the purchases, and only bought 35 shares. I would love to own more IBM, and as time moves along, will.

If you have a decent-sized account (5-6 digits), then every 2-3 months you've accumulated enough dividends to buy something new.

Well that's my goal as well, only the something new would be new travel, new dining experiences, new bicycles or kayaks, new sporting events to attend. I believe we're at different stages of our investing. You're retired, I just completed paying for children's education and can now focus more on aggressively saving for retirement. Which I hope to begin in 6 or 7 years, and do still believe in dividend reinvestment as a means of getting there. Then when I retire, I'll change over to receiving the dividends directly.

Doug Le Du (sp?) at CDx3 talks about "self-funding" dividend portfolio, when the accumulated dividends of the last few months is enough to buy another 100 shares of a dividend-paying stock.

An interesting perspective and may have to read up on him. However I don't have time to reseach additional individual stocks and not sure I want to buy 100 shares of someting else (unless it's a product or service I've fallen in love with). I'm primarily an index investor, but have some individual equities. Along with the four mentioned I also have BRK-B. I monitor these 5 stocks about once a month, for maybe 3 to 4 hours of reading. I don't want to invest the time to buy more individual stocks right now, but would enjoy owning more of what I already have and already follow.

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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50071 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/29/2013 1:02 PM
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The fool board format is Relentless.
No ability to edit.
I made an error on formatting an earlier post (again, it was the
Ipad's fault) and now all posts carry that error forward.

Good point made in your reply, and I'm only now beginning to
rethink the value of dividend reinvestment. I'm now done
with this thread, sorry for my miscue.

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50072 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/29/2013 1:18 PM
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This is a response to everything so far -

My original post was in response to Scottrade doing dividend reinvestment. As a customer, I definitely have different priorities and am dismayed they are going in this direction. There are so many other improvements they could make and IMHO, with this, they are looking for customers not like me.

With the changes in the world, I think the time has passed for dividend reinvestment. Investing in stock used to be expensive with additional fee for odd lots, etc. There is also the record-keeping aspect. My perspective is now as a widow and grandmother. I would never want to leave my kids with DRIP anything to have to deal with.

When I consider what was available when they were young, it was wonderful to be able to start mutual fund investing with $25 and have monthly investments. DRIPS were also the other way for low-cost investing. When I consider what I would do for grandchildren, DRIPS are not even on the radar. Scott has a $500 minimum. I think one of the downfalls of TMF is lulling people into underestimating their ability to handle risk. (Go back through 2008 posts if you don't believe me.) There are people investing in stocks who will be extremely dismayed if they lose most of it.

I don't have the time(and data is something I get paid to work with) but I would wonder what happens with once a year investing vs qrtrly(or whatever the dividend period). I probably am middle but on the side that timing can matter. When the big drops happen, DRIPS are not your friend(again, back in the days of tickers and checking newspapers for prices, everything moved more slowly).

Keep in mind all of this is only about ME. Right now I keep an eye when I can, set trailing stops and usually pay the most attention Feb-March when I have my kids' additional Roth money and my SEP(and now Roth) money to invest. I have also been working to have my taxable account provide a specific level of dividends(in case I need the income).

Next year this time, I will be thinking and projecting what I should be doing with tax-deferred money in case it is best for me to start moving it to a taxable account or converting to a Roth.

Did I cover everything ?

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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50073 of 50182
Subject: Re: Scottrade DRiP to Become Reality Date: 1/29/2013 2:24 PM
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Did I cover everything ?

Thanks Jackie. Always good hearing another perspective.
I'll give more thought to dividend reinvestment and if
the dividends may be put to better use.

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