October 12, 2006
Are DRIPs all wet?
DRIPs and direct purchase plans seem sort of old-fashioned now, but some folks still manage to get excited by what was once a very clever idea — buy stocks directly from the company and avoid outrageous transaction costs and minimum investment requirements of traditional brokers. There’s just one problem — traditional brokers are an endangered species. Thanks to deeply discounted online brokers, transaction costs can now be just $4 a trade or less — with no minimum investment requirement. Think ShareBuilder, SogoInvest, and others. These alternatives to DRIP plans also give you a heck of a lot more flexability. Don’t get me wrong…there’s nothing necessarily bad about investing through a company’s DRIP program. It’s just getting a lot harder to make the case that there’s any real advantage to DRIPs for most investors.
If you disagree, let me know why in the comments.
I agree with you 100%. I use to be a drip man but now I don’t use them at all. In the 80’s and 90’s they were the way to go BUT NOW with all kinds of brokers out there nobody really should use drips at all!!!! (Why? It cost less and have all your drips at one place,and still have dividends reininvested so why do people use drips?) UNLESS it’s free and they let you invest everyday, even then I still like all my stocks and ETF’s at one place. Some places you can buy 20 times and up to 200 times a month for $20.00 dollars. You can’t do that at a Drip !!!!! Just my thoughts. Vacman
Great points, Vacman — a deep discount online broker gives you so much flexibility, and you still get the benefits of dividend reinvestment.