Rethinking DRIP @ TDameritrade

[dallas27]

After reading this article, I'm rethinking thge intelligence of using automatic DRIP through my broker.... Thing is, doing it manually also create drag assuming a rising market on average. Might have to transfer assets to MFs in order to satisfy my OCD need for efficiency.


http://finance.yahoo.com/news/etf-drip-drag-121712885.html

 

[Texas Proud]

Not worth the worry IMO....


But, I do not own ETFs.... however, I do have stocks with auto reinvest of dividends....

 

[dallas27]

Fwiw, i only use vanguard ETFs


Sent from my iPhone using Early Retirement Forum

 

[LOL!]

I have quite a few brokerage accounts and quite a few ETFs. I reinvest manually and also use DRIP for a few of them.

The article does present the situation, but is not quite correct on everything. Each broker is different in the way it buys additional shares for a DRIP. For instance, Fidelity actually buys shares the day the ETF goes ex-dividend in anticipation of the dividend. TDAmeritrade buys the day after the payable date.

There is a bogleheads discussion on this that you should check out, too: https://www.bogleheads.org/forum/viewtopic.php?t=87742 and here is a good one with some data of reinvested prices for a bond ETF:
https://www.bogleheads.org/forum/viewtopic.php?t=52642

And if one manually reinvests the dividends, I think one will find that they do not stay on top of reinvesting in a timely fashion, but let the money sit in the account a few days or weeks. This is probably not good for bond ETFs. However, for equity ETFs, the prices go up and down. I'll bet that one can pay less a few days later in many instances than the article would have you believe.

The example of IST, an ETF with an average daily volume of a minuscule 4000 shares, is a total joke. One should not even bother with owning such an ETF in the first place. 4000 shares? C'mon!!

 

[Sunset]

I like the drips, especially once I have some account fully invested as I have various IRA accounts. Otherwise I'd have a small build up of cash, but the brokerage fee would outstrip the benefit.
Drips allow me to stay invested without a brokerage fee, and I can even have them buy a new stock (not currently held) to build up a position.

 

[splitwdw]

I like the drips, especially once I have some account fully invested as I have various IRA accounts. Otherwise I'd have a small build up of cash, but the brokerage fee would outstrip the benefit.
Drips allow me to stay invested without a brokerage fee, and I can even have them buy a new stock (not currently held) to build up a position.

Did not know you could do this. I thought that the dividend from each DRIP stock had to be reinvested in the same stock. Unless you mean you are not enrolled in the automatic DRIP plan and are reinvesting the dividends as you see fit. I've also been awake since 3:30 am with a migraine so brain may not be fully awake.