1) is the CK method of investing a continuation or extension of the Obviously Great Investments from"You Have More Than You Think"?2) Can you start buying some of the CK portfolio thru DRiPs? I figure this is a good way to start since your trading costs are low and you are holding the stock for a LONG time. Any thoughts?
Mainbinder,Thanks for the note. The CK Approach is indeed a continuation/extension of the section on Obviously Great Investments in "You Have More Than You Think." In fact, the section in the book is really an extension of the work done on the first two groupings of stocks ("Simpleton" and "MoneyHeavy") which are viewable in our 11 Steps to Cash-King Investing. For anyone who hasn't worked their way through the steps, check them out at http://www.fool.com/cashkingI think a DRIP program makes a lot of sense for CK investors, although some of our companies don't offer DRIP plans (Microsoft and Gap, for example). The only strike I have against DRIPs is that they're a bit of an administrative burden. With discount brokers trending down toward $5 per trade, I'm wondering if going that route isn't more convenient. That said, if you have a DRIP plan in place, I think using the CK model to further it makes a good deal of sense.Fool on, Fool!Tom Gardner
The only strike I have against DRIPs is that they're a bit of an administrative burden. With discount brokers trending down toward $5 per trade, I'm wondering if going that route isn't more convenient.Points well spoken. But really - if you have $50 to blow on some stock one month, it's not likely you'll send it to your broker - it would have to get down to $1/trade before your costs are under (or, more specifically, at) 2%. Many DRiPs charge nothing to make an OCP (optional cash payment). And what's more, with that $50 in your DRiP, you can pick up fractional shares if they aren't trading right at $50 even - and even that fractional share will start working for you right away. I think for a C-K position, DRiPs are an excellent (albeit high in administrative cost) option...
I invest in a number of DRiPs with most plans offering no fees or charges. However, some sponge-worthy companies that offer unreasonably expensive OCP charges (usually $3 per investment cyle) have been pressured to also offer automatic monthly check or savings EFT deductions for $1 per investment cycle. Basis 12 monthly investment cycles, you spend $12 bucks in fees per year per company to participate in such plans. Appears a cheap way to start.DRiP disadvantage - in appreciating, true bull, share appreciation environment...you're always under-invested relative to lumpsum strategies.Find attention to monthly investment activity detail via Quicken98 a virtually painless accounting method - so administrative cost really nil.Fishlip
For the benefit of someone not currently in a DRIP program but thinking quite seriously about it, could someone please enumerate for me the "administrative" headaches involved? Do these simply arise from having to track multiple purchases over time at multiple different share prices (i.e. for tax purposes upon redemption) or are there other factors?Thanks,Ben
>>>>For the benefit of someone not currently in a DRIP program but thinking quite seriously about it, could someone please enumerate for me the "administrative" headaches involved? Do these simply arise from having to track multiple purchases over time at multiple different share prices (i.e. for tax purposes upon redemption) or are there other factors?<<<<You call up the Company and request an enrollment form. You purchase the stock through a broker and tell them that you want the certificate mailed to you (about a three week process). You then mail in the certificate with the enrollment form. Check the box full dividend reinvestment.You're done! They mail you a statement with a purchase coupon attached after each purchase in order to confirm your most recent purchase and also to facilitate your next one. After a quarterly dividend is reinvested you get a cumulative statement showing the current year activity. To sell takes a few days (one disadvantage). Your paperwork will consist of the last cumulative statement of each year. When you sell you can pick off the costs from these statements to the extent of the number of shares sold. Compared to stocks purchased through a broker it's more paperwork, but it's really not that bad. This is especially true after the initial setup. (It's in fact better than any mutual fund especially when considering all the brochures and solicitations the funds send you.) Sales aren't frequent enough to be a factor. Afterall, you really shouldn't be purchasing in a DRiP a stock you plan on trading often.
>>>>For the benefit of someone not currently in a DRIP program but thinking quite seriously about it, could someone please enumerate for me the "administrative" headaches involved? Do these simply arise from having to track multiple purchases over time at multiple different share prices (i.e. for tax purposes upon redemption) or are there other factors?<<<<I responded in my previous post regarding the paperwork issue, but one other cool thing about DRiPs that I wanted to mention is that they offer another dimension to saving. Aside from the conventional "Pay yourself first" or "10% Rule", you can send money to the DRiP everytime money usually spent isn't. I realize you can do this with money markets, et cetera, but it's not as fun or inviting.Usually go out on Fridays and spend fifty bucks, but this Friday you didn't because you were sick--send fifty to the DRiP. This week you were away on business and lunch was on the boss--send it in!Ok, enough. I'll go over to the CK Strategy Board.
Enrolling in DRiPs needn't be as complicated as executing thru your usual stockbroker.Many programs offer direct purchase plans (XON, GE, AN) which only require a completed 1 page application with usually a $250 minimum initial investment. Others require an initial share purchase followed by paperwork enrollment in the DRiP. The Moneypaper (http://www.moneypaper.com) offers such a complete farrow to finish service for a $15 to 20 fee.Either procedure is followed by subsequent optional cash payment (OCP) investment cycles (once every 7 days for some companies, usually every 30 days for most). You mail checks to a transfer agent (FCTC, BankBoston) for investment. If a program charges fees, it is assessed at this point.As previously posted, I find Quicken 98 personal financial software as painless vehicle to manage investment activity including accurate cost basis for individual stocks accumulated via a DRiP.Most DRiP programs charge $5-10 fee plus 3-7c/share commission to sell stocks held within a particular program. Given the very long term nature of DRiP investing (20-30 years), such costs normally aren't considered pertinent.Good luck.Fishlip
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