Drip Portfolio Report
Monday, September 15, 1997
by Randy Befumo (TMF Templr)


ALEXANDRIA, VA (Sept. 15, 1997) -- Okay, folks. First things first. Due to the overwhelming response we received when we asked for your opinion about splitting the Dividend Reinvestment Plan (DRP) and Direct Investing Plan (DIP) message boards into two separate boards, we have done so. Stop sending those e-mails, cards, and faxes, although the non-monetary tokens of your affection can continue. (Remember kids, that address is 123 N. Pitt, Alexandria, VA, 22314.)

We will have two folders on the Web. The first one will be entitled DRIP Investing - Learning the Basics. This is for all of you folks out there who still have basic questions about DRPs, DIPs, and other forms of direct investing. This is where to ask for phone numbers, tax info, what the Drip Portfolio is about, how to start a DRP, and the whole spiel. I would encourage readers to take a look at the articles Jeff and I wrote before the launch of the Drip Portfolio as many of the questions that appear in the folder are answered there. Not that someone won't answer them, but heck... don't you feel a little silly when the answer to your question was right under your nose the whole time?

The second folder will be called DRIP Investing - Possible Investments. This will be for the people who want to run a worldwide online investment club, scouting out possible investments for their DRP Portfolio. This is where I will be looking most of the time from now on. A few ground rules, though. Let's try to bring one piece of information there for every question we ask so the folder doesn't read like a series of "What about XXX Company?" posts. Almost anything counts as information, from personal product experience to relatives who may work at the company.

On another housekeeping issue, Vince Hanks (TMF Elwood) has joined the Drip Portfolio team to man the message boards. Because Jeff and I have not been getting out to the boards as much as we would like, we have asked David Forrest (TMF Bogey) to grace us with a Message Board Stroller who can help to answer a lot of the novice questions. Vince is our solution and hopefully his informative, helpful posts will start showing up in the next few days. Vince will be looking at both America Online and the World Wide Web.

Now, let me drag out my soapbox for a moment and talk a little about what I think DIPs and DRPs are good for and what they are not good for. Though it may seem like it, they won't save the planet or the whales. What I think they are great for is building savings a little at a time in a very low cost way. If you already have thousands of dollars, unless you really want dividend reinvestment or you are contributing low dollar amounts to a company on a monthly basis to buy stock, a brokerage account may actually be bettert for you. Many people want to use DIPs and DRPs to cut out the brokerage no matter how small a cost commissions are relative to their portfolio. Folks, let's not have the commission tail wag the investment dog.

I see it thusly:

(1) You have a small amount of money to invest and want to invest a small amount every month. Congrats! DIPs and DRPs are perfect for you. Keep on keeping on.

(2) You have a medium or greater amount of money to invest and want to invest a small amount every month. This is where the mixed DIP/DRP and brokerage combo makes sense. Have your broker put one share of the company into a certificate so you can join the DIP/DRP plan and then invest your small amount of money into the DRP. Keep the bulk of your shares in the brokerage in case you want to sell.

(3) You have a medium or greater amount of money to invest and want to reinvest your dividends. If your broker won't reinvest them for you for free, you might want to join the DRP to have it done.

(4) You have a medium or greater amount of money to invest and just want to avoid brokerage commissions. Whoa! DIPs and DRPs involve fees as well. You have to figure out what the fees will be relative to the money you are investing and do what is most cost effective.

In the end, everyone's situation is different. DRPs and DIPs are a great tool for many people to build wealth and that is why Jeff and I are excited about the possibilities for the portfolio. However, DRPs and DIPs are not for everyone. You have to figure out what is best for you.

--Randy Befumo