Don’t Filter Away Your Profits

Article Excerpt

Everybody likes to save money, but some cost-cutting investment techniques can wind up costing you money in the long run. They can channel your investing away from good stocks and into bad ones, all in pursuit of lower costs. They can filter a substantial part of your profit out of your portfolio. For instance, participating in a Dividend Reinvestment Plan or DRIP is a good idea, if you only use it to cut commission costs on stocks you would have bought anyway. But letting the availability or lack of a DRIP influence your investment choices is a terrible idea. Some stocks that offer DRIPs are bad investments. Some income trusts that offer DRIPs are far worse. Investing in them deprives you of profits you might have made elsewhere, even after paying normal brokerage commissions. Besides, DRIPs offer much less advantage now than they did a couple of decades ago, when brokers charged commissions of 2% or more. Now, you can invest through…

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