In this short explainer video from The Australian Finance Podcast, Kate Campbell and Owen Rask discuss the value of using a Dividend Reinvestment Plans (DRP) when you've invested in a share or ETF with a high price.
DSP/DRP: As I have mentioned before, Barefoot Investor was what got us into improving our personal finances and investing, so when I have started buying some shares/ETF's, I have followed Barefoot's advice and elected the DSP/DRP where it is available. But now I am learning a bit more, I am wondering if I should be thinking about the share price when I do this?
Our portfolio is still in the beginning stages, so if there is a share price in the hundreds, it's going to take some time (years) for the DSP/DRP to build up to a full share amount and be reinvested. I am thinking it would be better just to be paid the dividend and add it to my investing bank account, to then be used when I make my regular monthly investment. Would love to hear your thoughts on this
E.g. Share price around $100, paying $5 in dividends this year, $2,000 invested (20 shares at $100 per share), 1 new share in drp
No fractional shares, excess funds rolled over into next DRP ... read the PDS!!!
Consider whether you've got enough to make it worth it
You can just keep the cash in your brokerage cash account and invest it yourself
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