DRIP PORTFOLIO
Bad Christmas Cards
Don't fill your stockings with debt

By Vince Hanks (TMF Elwood)

POINT EDWARD, ONTARIO (Dec. 16, 1999) -- The season of giving is upon us, and no doubt you've been clicking your way across the Web and race-walking through shopping malls, filling colorful bags with gifts for one and all. Surely, by the time you're finished, you'll have a present for all the loved ones in your life. Right? Is there someone you might be forgetting? Think hard. Is there someone truly special you've overlooked?

Me!

No, just kidding. That someone might just be you! Arguably the biggest gift you can give yourself this year, and one that will keep on giving for years to come, is something that you actually do not do. Do not charge this season's holiday gifts on your charge cards. Or, if you do, do so with the intent of and ability to pay off the entire balance before it comes due.

Heck, for that matter, don't charge anything at all this year without paying off the entire balance when it comes due. Yes, that may mean sacrificing a few things. You may have to put off that home karaoke machine for a few years and continue singing in the shower. You may have to buy hockey trading cards every other week instead of every other day. You may even have to load up the station wagon and pop in on your Uncle Tony in Arkansas for the family vacation rather than jetting off to Aruba to visit Tony Miller (TMF 2Aruba). But whatever it takes, stay out of the bottomless pit that is revolving credit card debt.

If you're like us at the Fool Drip port, you have a very modest savings stashed away and are adding to it monthly in relatively small amounts. We've been investing (saving) for a little over two years now and as of this writing have accumulated $4,037.87. This reflects a 24.81% gain (or 9.75% annualized) on our investment, which we began with $500 and have added $100 monthly since July of 1997. Not tremendous returns, but we're on our way.

Consider that the average American adult has a credit card balance of nearly $6,000 hovering over them, hungrily demanding 18% annual interest. That's $1080 a year down the drain like a scrubbing bubble. Worse yet, the majority of those with revolving credit are only paying the minimum due each month, which adds to that overall balance exponentially.

Think about what we'd be facing if we at the Fool Drip port were the average American adult. Nearly all of the $100 monthly contributions to this portfolio would be spent in credit card interest alone each year. Our investment in debt would cost twice what we're gaining with our investments annually. Now, we expect the Drip port to raise its performance over the years, hopefully up to or above our goal of 15.5% annually. Even at that rate, we'd be sinking.

It doesn't take a financial whiz to see why the second step in the 13 Steps to Investing Foolishly is "Settle Your Finances." If you get right down to it, credit card debt will eat away at your future.

The holiday season is notorious for beginning a yearlong slide into charge card receipts and cash-advances. It's an easy pit to fall into -- 'tis the season of giving, after all. Yes, generosity is a marvelous thing. Too much thoughtfulness, however, can be costly in the long run. When running down your holiday list this year, be sure not to overlook yourself. Pick up a pair of industrial-strength scissors for your charge cards. It'll add 10-23% to you annual savings.

That's all for tonight, Foolish Drippers. Me and the Ferret are going fishin'.

Drip on!

Related Links:
Fool Personal Finance - Handling Debt
Living Below Your Means message board
Drip Basics message board
Drip Companies message board

Drip Portfolio

12/16/99 Closing Numbers
Ticker Company Dly Pr Chg Price
CPBCAMPBELL SOUP-5/16$38.75
INTCINTEL CORP5/16$80.25
JNJJOHNSON & JOHNSON-1/32$94.63
MELMELLON FINANCIAL CORP-13/16$33.25

  Day Week Month Year
To Date
Since
7/28/97
Annualized
Drip .08% 2.36% -3.79% 12.70% 28.17% 10.96%
S&P 500 .39% .12% 2.14% 15.42% 51.13% 18.88%
S&P 500(DA) .39% .12% 2.14% 16.00% 53.75% 19.74%
S&P 500(DCA) n/a n/a n/a n/a 27.13% 10.58%
NASDAQ 2.57% 2.62% 11.36% 69.43% 136.69% 43.46%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
9/8/9722.3909INTC44.603$80.2579.92%
11/14/9711.258JNJ79.965$94.6318.33%
11/5/9828.3741MEL34.416$33.25-3.39%
4/13/988.174CPB54.586$38.75-29.01%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
9/8/9722.3909INTC$998.70$1,796.87$798.17
11/14/9711.258JNJ$900.24$1,065.29$165.05
11/5/9828.3741MEL$976.51$943.44($33.07)
4/13/988.174CPB$446.18$316.74($129.44)
  Cash: $24.36  
  Total: $4,146.70  


Key
• S&P 500 (DA) = dividend adjusted. Dividends have been added to the total return of the index.

Note
Drip Port launched with $500 on July 28, 1997, adds $100 to invest every month, and the goal is to own $150,000 in stock by August of the year 2017. Due to the slow nature of dollar-cost-averaging and our relatively significant starting costs, we do not expect to seriously challenge the S&P 500 for the first three to five years as we build an investment base. The long-term advantages of dollar-cost-averaging still overcome the short-term disadvantages, however. Final note: our investment in Campbell Soup is frozen due to fees instituted in its investment plan. Click here for a history of all Drip Port transactions.