What are the downsides of investing with DRIPS? I'm a neophyte.
One of the downsides is the speed with which you could get any money out of your account, assuming you needed fast cash. One way to alleviate (not eliminate) that problem is to make sure that you request stock certificates to be sent to you when you accumulate round numbers, like 50 or 100, both of which can be more readily sold through a broker, minus commissions, of course.Fool-on!
Hey, goddogg!As one poster says, the speed of cashing in your shares "could" be a downside, but I've really been trying to brainstorm what real downside DRiPs have, and honestly I can't think of any.The one main "downside" people may point to is the fact that you can't time your contributions. By this I mean you can't for example send in a large sum on a specific day where a stock may be getting trounced. DRiPs are purchased on a specific day of the month, and you get your shares purchased on that day regardless of the price.But I don't see this as a downside, as the concept of DRiPs work in a "dollar-cost-averaging" method. You are buying more shares when the price is low, and less when the price is high.DRiPs are a beautifully painless way to save for the future, reinvesting dividends, and reaping rewards in the future. As far as the "speed of redemption" is concerned, I believe that if there's even a chance you will want to cash in shares quickly, DRiPs are not the vehicle to be using.Hope this helps,Tony...but I still am...Off2Aruba
Tony,I've been thinking about the downside of not being able to buy OCP's at market pullbacks, and it occurs to me that some DRIPs are charging as much as $5 to purchase OCPs. If that is the case, and if the pullback is a large enough savings, why not purchase new shares through something like Suretrade at $7.95 and pick your price. They don't charge to put the certificates in your name and those shares can be enrolled in the DRIP as well. I'm not suggesting that you not contribute regularly through the company DRIP, but for the occasions where something dramatic happens to lower the price, why not?ReneBet
<<I'm not suggesting that you not contribute regularly through the company DRIP, but for the occasions where something dramatic happens to lower the price, why not?>>Hey, Rene!I think you have a very valid point here, and I don't disagree with you at all. The fact is, if you think that certain factors have caused a great bargain in a company, whether you have that company in a DRiP or not, why not pick up shares in that company. As you said, you can always transfer those shares into the DRiP, or just hold them separately.This is an example of stock buying that's separate from the DRiP investing philosophy. DRiPs, as you well know, are a vehicle for future growth by making regular contributions in a dollar-cost-averaging method. But when fire sales occur, I say, go get 'em! ; )Tony...but I still am...Off2Aruba
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |