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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74856  
Subject: Re: DRIP V. IRA Date: 2/11/1998 4:35 PM
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Yo, Vtaeger.

<<Kdub asked if he is better off investing in an IRA or a DRIP. Pixy replied that you should compare the expected rate of return on the investment.

I have to disagree with Pixy. IRAs and DRIPs are forms of ownership not types of investment. AFAIK any stock that can be purchased as a DRIP can also be purchased in an IRA. First decide what you want to own, then decide how you want to own it..>>

An IRA is a form of ownership, but the DRIP is a direct investment in a particular firm. While it's true shares in a firm with a DRIP can be purchased within an IRA, it is not true that means you automatically participate in that program. I know of no firm that offers a DRIP that will assume IRA custodianship for this purpose. Some brokers do (USAA Brokerage Services for one), but it's not a true DRIP. Instead, the dividend is used to buy fractional shares without or at low cost out of the broker's holdings of those shares.

A DRIP is an investment in a particular stock. An IRA can be invested in virtually any security. Thus, given the wide latitude in the IRA, returns comparisons are most appropriate. If you recall the original query, the writer was asking which is better, DRIP or IRA. Tell me what the investment is in either, and perhaps returns can be estimated and a comparison made. Absent that, the question is unanswerable.


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