Drip Portfolio Report
Thursday, August 21, 1997
by Jeff Fischer (TMF Jeff)
ALEXANDRIA, VA (Aug. 21, 1997) -- Today we're firing off our first check, meaning that for the next few days, our fate rests in the hands of the U.S. Postal Service. Never in my life has any of my mail been lost, except once or twice, though Randy hasn't been so lucky. Randy complains that his subscription to the magazine How to Win a Bride: The Three Hundred Steps to Finding the Woman that Your Mom Wants You to Marry has consistently been stolen by his mail carrier.
We mailed our check to the Temper of the Times service in order to buy our first share of INTEL CORP. (Nasdaq: INTC). We sent $128.70. The recent high for Intel's stock is $102, the fee to buy the share and to be enrolled in Intel's plan is $15, and there is a 10% refundable cushion added in case the stock rises above $102 before it is purchased. Seeing how volatile the stock market is, anything is possible. Today Intel fell $2 1/8 to $98 3/8. It's very likely that we'll be getting some money back from Temper of the Times.
A little sidenote:
Folks, we had to use someone's service, and we feel that The Moneypaper and its Temper of the Times division offer a complete service, with accurate information, reasonable prices, and even better: their published material strongly supports investing for the long-term and suggests avoiding companies that charge fees. We take some heat from people on the message boards for using the service, or even talking about it. We had to use some service, though, and we happily chose this one. Of course, we want to provide complete information and we don't care what service you use, as long as you're happy. There are many ways to begin a DRP, and we listed some options last Friday. All Fools should do their own research and make their own decisions. We aren't baby-sitters or marketing hucksters, by any stretch of the imagination.
I just wanted to reiterate that point before we go into a commercial break. All Fools, please click the following link and read a word from one of our advertisers.
Serious again, a summary of the first purchase: we sent the check after filling out the simple one page enrollment form from Temper of the Times. We listed Intel as the stock that we're buying, ticker symbol INTC, recent high $102, and the fee to purchase one share and to be enrolled in Intel's DRP, $15. We put our name, address and phone number on the page, signed it, and sent it to Temper with the check for $128.70. If anyone has questions regarding the exact process with the Temper service just ask us. (We don't know other services precisely, as we're not using them, but we can try to help.)
As long as our check is in their hands by the 25th (it may be close, but we're not entering a race, so we're not worried if we have to wait another month), our stock should be bought by the first of September, and we will likely be enrolled in Intel's plan by the end of that month. That would be over five weeks. We have plenty to keep us busy in the meantime, including deciding on our next purchases.
Should you be Dripping, or Diving?
Whatever service you're using, before you send out a DRP check you should go over the Fool's School investing principles and make sure that you're in the right boat before you set sail.
The "13 Steps to Investing Foolishly" suggest that you have your debt paid off, learn what the market and stocks are (and how to track them), and then finally consider investing in stocks. The 13 steps first suggest an Index Fund, though. If you have at least $3,000, you can buy into the Vanguard's Index Trust Fund and match the performance of the S&P 500, which historically has been 11% annually. We're assuming that most of us don't have $3,000 to start, and so are investing in DRPs to begin. Or that we want to invest only in a few leading companies that we know and love, and put reinvested dividends to work.
The next step up the Foolish ladder is the Foolish Four approach, which has returned an average 23% annually over the past 25 years. It has been said that you can begin this strategy with as little as $4,000, and distribute the money into each of the four stocks. This only makes sense when using a discount broker, of course. There's a lot to be said for the simplicity of this approach, which has you changing stocks every 18 months (to take advantage of the new long-term capital gains tax rate) and buying the highest-yielding, lowest priced Dow heavy-weights. This approach is the foundation beneath the Fool Portfolio, and the Fool suggests that all investors consider the approach. The historic returns have been excellent -- doubling the average market return.
If you're ready to dive, consider using an index fund or the Foolish Four approach rather than entering the market by "dripping." Please give the Fool's School and the 13 Steps to Investing Foolishly a read -- if only to know some of the other options that exist.
That said, "Dripping" is a creature all its own and is something that people really enjoy doing. It's Foolish with a bold "F" and will probably be worked into the "13 Steps to Investing Foolishly" somewhere before, or between, the index fund and the Foolish Four strategies. Systematically saving and investing in leading companies that you know and understand without paying brokerage commissions, while having dividends reinvested in more stock, and doing all of this for the long, long term...
That's Foolish, baby. Very Foolish.
But there are many ways to get invested in stocks, and if you have large sums of money, the Foolish Four or the S&P -- or just investing through a normal discount broker -- are options that we'd be foolish not to mention again before we go forward with our Drip.
We were going to look at some of the risks that Intel faces in the future, but we're low on time -- and Randy did a great job with some risks in his Monday recap. Plus, we don't want to dampen the spirit by any means. We made our first investment today -- we sent our first check to Intel's DRP plan. We won't touch that money again for at least 20 years, and that's something to be celebrated. As a Fool wrote on the DRP message board recently, "I have posted my cheque for my first drip purchase.... It felt good."
We'll soon offer a full write-up on Intel to be permanently archived in the Drip Port, as we will for each purchase that we make. Not only will we see how right or wrong we are twenty years from now through our investment performance, but also by how accurate our early analysis is, too -- which will be recorded in these permanent buy reports. Accountable? Too much so, I think. I'll go on record right now with the guess that Randy will be married within twenty years.
--Jeff Fischer, Fool
Day Month Year History DRP: +0.00% 0.00% 0.00% 0.00% S&P: +0.00% 0.00% 0.00% 0.00% NASDAQ: +0.00% 0.00% 0.00% 0.00% Cash: $500.00 Add: $100.00 (August) Total: $600.00 Subtract: $128.70 (8/21/97:Intel Buy) Total: $471.30
(Please see the left navigation bar for information on this new portfolio.)