DRIPs or Index Fund?

[baselle]

Re: DRIPs or Index Fund?

I think doing a DRIP program off of an index fund is a fantastic idea for you. You might also want to look into doing something similar with a few of the ETF's out there.

Do you mean buying an ETF comprised entirely of dividend producing stocks and that you would reinvest the dividend back into the ETF?

[Russell]

Re: DRIPs or Index Fund?

Bringing this back up instead of starting a new thread.

How much of a pain are the dividend paying stocks/funds in terms of taxes (outside of Tax deferred/exempt accounts) ? Kristine mentioned they can be a headache but I always assumed you'd just get a 1099 or whatever from your broker (Scottrade etc) with all the calculations already done for you so it'll just be a matter of plugging in the numbers in TurboTax etc ?

[baselle]

Re: DRIPs or Index Fund?

The tax pain isn't in paying tax on the dividends every year - your assumption is right that you get 1099s from each transfer agent in January.

The tax pain comes when you sell your stocks. When you sell a round lot (100 shares) of lovingly saved up DRPs stocks of different values and fractions of a share - what's your cost basis? Calculating that is a pain.

At the very least, you have to save the end of year statements, so you know what you've bought, when you bought, and how much you've paid. Keeping track of your holdings via a spreadsheet is a must so you can do the calculations. (Fun fact: DRPs first became popular at the same time as Lotus 1-2-3). I also think that the IRS will let you average and estimate you holdings and I think you can select which stocks you considered that you've sold, but you'll have to double check that.

[Russell]

Re: DRIPs or Index Fund?

Thanks baselle, do you mind sharing what your spreadsheet looks like ? Would it look something like the attached pic ? Also, do you enter the data in your spreadsheet from the year end statements ?

I've been looking at directinvestments.com and thinking about buying a few DRIPS through them.

Thanks.

[baselle]

Re: DRIPs or Index Fund?

Russell - Screenshots aren't working for me tonight, and my spreadsheet's a bit more complicated. If you could email me at I'll send you a copy. If it helps, I modified it from the spreadsheet I found on this site:

http://dripinvesting.org/tools/dripspreadsheet.htm

[baselle]

Re: DRIPs or Index Fund?

Oh yes - I forgot. I enter data monthly or as the stock is bought. You get a notice from the company or the transfer agent after each buy. Also, most of the transfer agents will let you monitor your most current holdings online. I like the spreadsheet because online data tends to cut off after about 5 years.

[Russell]

Re: DRIPs or Index Fund?

Thanks Baselle, I downloaded the spreadsheet you linked this will do nicely for now! You may want to remove your email address from the previous post I'd hate to see you getting spam since these posts get archived and indexed.