I had discussed about the advantages/disadvantages of DRIP (Dividend Reinvestment Plan) and why I don’t do DRIP.
All 3 of my brokerage accounts (Regular, IRA for myself and IRA for my spouse) are with Scottrade and I participate in their FRIP (Flexible Reinvestment Plan). I didn’t start using this until early this year, but wish I had started it earlier.
FRIP has all the advantages of DRIP and none of the disadvantages. FRIP allows you to pool all your dividend payments (from the stocks you choose) into a separate holding area within your account. You can configure FRIP to automatically invest in stocks you pick (upto 5) on an interval (monthly/quarterly etc) you choose. You can pick up to 5 stocks to invest in as part of the FRIP transaction and this is commission free.
So this allows you to automatically invest on a regular basis without incurring commissions and it also allows you to pick and choose the stocks you want thus letting you invest in stocks that you believe are reasonably valued.
From what I have understood so far, this one sounds great and I don’t see any catch or drawbacks. Am I missing something 🙂
So far from early this year, I have accumulated few hundred dollars in my FRIP balance across all my 3 Scottrade accounts. I plan to invest this sometime in the near future when I have accumulated a sizable chunk of dollars. This could provide a means to invest small amounts without incurring the flat $7.00 commission per transaction.