ETFs & Other Good Ideas

Article Excerpt

Management consultants are fond of telling their clients that they should be wary of good ideas that merely save money or make small profits. These good ideas can consume so much time that there’s none left for pursuing the great ideas that build world-scale companies. You can say something like that about investing. Some good ideas help you cut costs or avoid specific risks, while hindering your chances of long-term profit. Automatic dividend re-investment plans (also known as DRIPs) are an example. DRIPs let a company’s shareholders automatically re-invest their dividends in the company’s shares, often free of commission expense, sometimes at a discount to the current market price. These plans made great sense in the 1970s. Back then, brokerage commissions were fixed across the board and it cost 2% or more to invest small sums. However, some investors took this good idea to extremes and refused to invest in any company that failed to offer a DRIP. That cut their commission…