05-04-2014, 06:39 PM
$200/month, epecially at your age, is nothing to sneeze at. I think you've got a bright future.
I agree with cannew's idea with one caveat -- can you find enough no-fee DPP/DRIP plans in companies you want to invest in? With Computershare being the agent for a lot of plans, I'm seeing more and/or higher fees tacked on with more companies. I think we've mentioned that elsewhere here.
Another strategy would save save up 3-4 months investment capital and then buy one company. Yes, you'll lose couple months of possible compounding and the return on cash stinks but in the long run, you won't even notice. Same with the high fees. Sure, it would be about 1.4% give or take a couple hundred basis points but again, in the long run, it will average out a lot lower if you hold for the long term. No, the transaction fees will NOT eat you alive on a one-time transaction and you hold for the long term. Paying a 5% load or 0.5% management fee for the rest of your long life will. Why the recurring fees hurt is because as your account value gets bigger, so does the actual fee you pay. Don't cut off your nose to spite your face.
Because my wife's portfolio is so much smaller than mine, especially a few years ago as I was just starting to build her account, there were many times when I took a $500 or $600 tranch. The way I looked at it is the 1st and probably part of the 2nd dividend payment covered the transaction fee, every dividend after that was hers for the rest of her accumulation life.
There will come a time when you'll be buying in larger lots. In the meantime, those reinvested dividends keep adding up.
I agree with cannew's idea with one caveat -- can you find enough no-fee DPP/DRIP plans in companies you want to invest in? With Computershare being the agent for a lot of plans, I'm seeing more and/or higher fees tacked on with more companies. I think we've mentioned that elsewhere here.
Another strategy would save save up 3-4 months investment capital and then buy one company. Yes, you'll lose couple months of possible compounding and the return on cash stinks but in the long run, you won't even notice. Same with the high fees. Sure, it would be about 1.4% give or take a couple hundred basis points but again, in the long run, it will average out a lot lower if you hold for the long term. No, the transaction fees will NOT eat you alive on a one-time transaction and you hold for the long term. Paying a 5% load or 0.5% management fee for the rest of your long life will. Why the recurring fees hurt is because as your account value gets bigger, so does the actual fee you pay. Don't cut off your nose to spite your face.
Because my wife's portfolio is so much smaller than mine, especially a few years ago as I was just starting to build her account, there were many times when I took a $500 or $600 tranch. The way I looked at it is the 1st and probably part of the 2nd dividend payment covered the transaction fee, every dividend after that was hers for the rest of her accumulation life.
There will come a time when you'll be buying in larger lots. In the meantime, those reinvested dividends keep adding up.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan