I’ve followed Ellen Roseman’s personal finance columns in the Sunday Toronto Star for more than a few years now, off and on, always looking forward to the possibility that I might find a new little financial gem of advice in there. Sometimes, I have. Most of the time I’m reminded and reinspired about what I do already know from reading I’ve already done. But
it’s rare to get the feeling “Hey, I’ve Already Written About That Myself!”:)
This Sunday’s column was all about DRIPPING! That’s right, it’s what I’ve been telling friends about for a while now and I’ve written about it already on this site in several places (and I’ve been doing it myself for almost a decade) — see some of the related posts below this one. Turns out that Roseman’s provided yet another public face in confirmation of these financial gems of solutions to your investing daydreams. Want to be invested, not sure how? Think it’s too expensive? Think you need to know alot of technical information before you can do it effectively?
Start simple with DRIPs.
Over time you can bring your effective cost to zero using DRIPs.
DRIPs are so easy to understand that kids can build their wealth with them, too.
The only worry I have with DRIPs going mainstream is that they become easier fodder for the brokers and regulators and provide new ways to take advantage of the small investor. I’m not sure exactly how this would happen but it’s always there in the background. Call me paranoid. The general idea has always been that DRIPs weren’t advertised and many people didn’t know about them, because if they did, brokers wouldn’t like the fact that they’d lose all their commissions to these fee-free plans. I have to wonder how many brokers actually use DRIPs themselves for their own finances. On the other hand,
a greater public eye towards DRIPs might be a good thing if enough DIY investors move away from the brokers so that they can save money – alot of money – through DRIPs.
And remember, I’m not talking about simply reinvesting your dividends on stocks you already hold at BMO Investorline or TD Waterhouse. Those aren’t really DRIPs. DRIPs are what you use when you invest directly with the company itself (going through their transfer agent, of course). But people have used this argument with Mutual Funds in the face of low-cost ETFs. The reasoning is that with the new low costs of ETFs, and their rising popularity, mutual fund costs should go down if less people put their money in them. We’ve already seen some of that in Canada – apparently we’ve all been sitting on, hoarding our cash this year rather than plopping it into the usual funds. But I can tell you that none of my mutual fund fees have dropped, and it doesn’t look like there have been any major trends that way across the board.
It took quite a bit of industry advertising to create the ETF boom we see today – they’ve really taken off since about 2003 or so in the mainstream, but even more more recently than that. For some reason, I don’t think DRIPs will ever become that popular. First, they require more work and individual attention and analysis (not alot by any means, but way more than you need to do with a broker, who does all of that for you). Second, they’re — shh! — *boring*. Yeah, that common criticism does ring a bell. They just do their work quietly behind the scenes. They’re long-term investments and if you can automate them, they’ll become duller than dry paint. But they work! Why introduce complications when you don’t need to.
Roseman will be doing a follow-up column next week. While it’s great to see, you can’t fit much into those three little print columns. Hopefully you will come back here too for more information on these plans. Send me your questions and comments. I can plan future posts around your specific inquiries (I already have). Tell me about your latest DRIP!
I should offer another plug for Roseman, too. You can read through all of her previous articles in a great archive on the Star’s site here. It’s wonderful if you’ve missed a week or just don’t subscribe to the Star. I know I skip through most of the front section and head right away to those back two pages in “Business” each Sunday. But if you’d like even more reading, Roseman has her own blog, too, which I highly recommend.Related Posts
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