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Those conditions may well apply to me. Thankyou for the response. I'll check it out, but am most
wary of terms like "pre-invest". The whole concept of borrowing on margin gives me the willys, but
perhaps I just don't know enough about it, yet.

I'm still quite curious about continuously buying the number 2 stock. My wholly unproven theory is
that one could experience even more gain than the regular RP F4 method, because the stocks
would rotate in and out of that position. I think there's little danger of simply duplicating the DJIA
doing what I'm thinking of. In any event, clearly I need to do lots more looking and checking. I'll
post if I find anything of consequence either way.


Once upon a time, I wrote a fribble ( http://www.fool.com/Fribble/1996/Fribble961031.htm)
about using DRIPs to invest in the F4 on a monthly basis. I also followed the F4/DRIP approach outlined in said fribble.

A lot of water under the bridge later, I've abandoned the DRIP approach because the disadvantages outweighed the benefits.

My initial reason to DRIP was to avoid paying commissions, but now many DJIA companies charge steep fees in their DRIPs for optional cash investment and even for reinvesting dividends, which I find outrageous (how can it cost more to reinvest than it does to cut, mail, and process a check?). Furthermore, with deep discount brokers, commissions are low enough to be justified.

Another reason to DRIP was to invest regularly (as I was able to save money) and thereby benefit from dollar-cost averaging. However, I believe that higher returns are to be had by investing a lump sum at once. Currently I do this with a healthy dose (~20%) of margin.

While I don't have my figures in front of me, I was pleased with my returns from the DRIPped F4 approach, and while I did own 15 of the 30 DJIA stocks, I'd say only about 8 of my positions were significant (often I'd buy 1 share of a company so that I'd have it available since it *might* end up in the F4, but often it never did). Unless you feel you *have* to own all 30 DRIPs, you won't come close to duplicating the DJIA.

That said, I feel that a margined RP4 works better, and is a much smaller headache at tax time. The quarterly dividends pay down more margin than is accumulated in interest, the interest is tax-deductible, and I don't have to spend time keeping books on the DRIPs.

Perhaps one advantage to the DRIP approach is the "market timing" of buying new stocks as they enter the F4 - but now we can do this every 5 minutes with the F4 calculator. Not that we should...

Elysian
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