401(k) Opportunities
...the DRIP's best friend

Brian Graney (TMFPanic@aol.com)

ALEXANDRIA, VA (Dec. 16, 1998) -- "Opportunities are seldom labeled."

This line from John Shedd is one of my favorite Foolish quotes of all-time. I stumbled upon it again last night while reading and it got me thinking about why we make the decisions we make as we journey through this ever-changing field of opportunities called life.

In investing, taking advantage of the opportunities presented to you can make all the difference. They come in all different shapes and sizes and some of them might be right under your nose (or listed at the bottom of this column, if the DRIPs of a few industry-leading companies are something that may suit your fancy.) There are two elements to opportunity: First, the opportunity must be found. Second, the finder must then have the courage to seize it. Mr. Shedd's advice notwithstanding, investors will often find it easier to accomplish the first part of the opportunity equation than second part. This is where DRIPs can come in.

Fool SocialSurvivor shared these thoughts on opportunities and DRIPs recently on the Drip Companies message board:

"I didn't start investing until I learned about DRIP's, precisely because of the anxiety surrounding stock investment. I feared I'd never be able to deal with this aspect, or have enough knowledge to do anything but gamble my money away in stocks.

"The DRIP investing style has given me a much greater sense of security. While initially I still worried, I now have learned the "joy" of investing. Now I can do research with a peaceful, in the driver's seat attitude, rather than be in a frantic race to beat & time the market.

"I'm happier with my DRIP than my 401(k), at least until there is an option for me to do a self-directed DRIP in the 401(k). But I suspect those fund managers will see me in hell first, rather than miss out on their cut."

Amen. Young investors such as myself can sympathize with SocialSurvivor's pre-investment anxiety about stocks and the big, bad market in general. And they can also admire the fact that someone actually is on such firm footing as to dare place the words "joy" and "investing" within the same phrase.

However, the DRIP versus 401(k) issue deserves a closer look. For young investors with long-term goals, these two tools for building financial security go hand in hand. But if you're new to DRIP investing like I am, then maybe some lessons on seizing opportunities can be more easily garnered from the 401(k) world.

One major opportunity that nearly every newly-minted long-term investor can seize with confidence right away is the much-ballyhooed 401(k) plan, that mishmash of numbers, letters, and punctuation that sounds like some kind of ultra long distance road race. If you're employed full-time, then you probably have a 401(k) or its public sector sibling, the 403(b). And if you're Foolish, then you are probably taking advantage of the unparalleled opportunities for long-term tax-deferred growth it offers.

There are plenty of similarities between a DRIP and a 401(k) plan. Both plans stress long-term growth through small, regular contributions. Ultimately, the performance of both is determined by commitment, discipline, and patience over long stretches of time. And both are ideal ways for new investors to get started on a personal life-long investing journey.

The Fool's School has all of your answers about 401(k) plans right behind this link. If you are a new investor or if you are not currently maxing out your contributions to your 401(k) plan, then here's your chance to learn why this investment vehicle is a great long-term partner to DRIP plans.

Here's an opportunity. And I'm labeling it.

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FoolWatch -- It's what's going on at the Fool today.

12/16/98 Close
Stock Close Change JNJ 80 9/16 - 3/16 INTC 114 1/8 -1 13/16 CPB 55 1/8 + 1/8 MEL 65 7/8 - 3/4
Day Month Year History Drip (0.73%) 1.74% 29.85% 10.58% S&P 500 (0.08%) (0.15%) 19.74% 22.14% Nasdaq (0.16%) 3.07% 27.96% 26.07% Last Rec'd Total # Security In At Current 11/02/98 8.055 CPB $52.880 $55.125 09/01/98 9.727 INTC $80.238 $114.125 11/09/98 8.578 JNJ $74.090 $80.563 10/07/98 1.000 MEL $48.560 $65.875 Last Rec'd Total # Security In At Value Change 11/02/98 8.055 CPB $425.95 $444.03 $18.08 09/01/98 9.727 INTC $780.50 $1110.13 $329.63 11/09/98 8.578 JNJ $635.55 $691.07 $55.52 10/07/98 1.000 MEL $48.56 $65.88 $17.32 Base: $2200.00 Cash: $262.88** Total: $2573.98

The Drip Portfolio has been divided into 93.111 shares with an average purchase price of $23.628 per share.

The portfolio began with $500 on July 28, 1997, adds $100 on the 1st of every month, and the goal is to have $150,000 in stock by August of the year 2017.

**Transactions in progress:
10/24/98: Sent $40 to buy more INTC.
11/24/98: Sent $100 to buy more MEL