AT&T Message Board - Msg: 1185875

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Technology Stocks : AT&T

T 26.89

+2.2%

1:42 PM EST

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To: Speed Racer who wrote (297)	4/14/1997 9:32:00 AM
From: James Wang	of 4298

H2O: DRIP seems to be a very good investment idea. Its main advantage is you no longer need to time the market. Over the long run, dollar cost averaging always work better. Also savings on commission could be significant if you are not using a discount broker. However, if you are a small invester owning just a couple hundread shares of a stock like AT&T, invest via DRIP could be more complicated than you think. Because you purchase just a few shares of the stock when you get the dividend, you will have to keep track of the cost basis of all the shares you own. Since DRIP purchases happen every quarter, this could be a difficult bookkeeping and accouting task when it comes to the time for you to sell your shares after many years. Plus, each year, you still need to figure out how much dividend have been paid to you so that you can report that to IRS and pay tax on it. What you pay your accountant to sort all this out will probably cost you more than you gain via DRIP. That is why I don't think it is a good idea for most small investors. By the way, the same happens when you select reinvest any capital gains when you buy a mutual fund. -- James

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