Rebalance Your Portfolio Commission-Free
Dividend Reinvestment Plans, also known as DRIPs, are used by individual investors to repurchase shares of their existing holdings at no cost. While DRIPs are great for taking advantage of zero commission trades, they can artificially tilt your portfolio to the highest dividend paying and most expensive investments. Additionally, if you wanted to reinvest your S&P 500 index fund (RSP) dividend into an Emerging Market index fund (VWO), you would not be able to with a DRIP. Traditional DRIPs only allow you to reinvest your dividend in the investment that originally paid the dividend. To combat this limitation, Scottrade has come up with a solution called FRIPs or Flexible Reinvestment Program. FRIPs allow you to accumulate your dividends in a pool that can be used later to purchase other investments of your choice. For example, if you received dividends from RSP and IWM (Russell 2000 index), but wanted to reinvest those dividends in VWO, you could do that with FRIPs, but not with a traditional DRIP. The best aspect of FRIPs are that they are commission free. As you can see, the flexibility of FRIPs allows you to rebalance your portfolio more efficiently and utilize other strategies without cost. To learn more about how FRIPs work, go to www.scottrade.com
Have a question or need advice on how to manage your retirement accounts? Contact ACap Asset Management at email@example.com or 818-272-8511.
Ara Oghoorian, CFA, CFP® is the president and founder of ACap Asset Management, Inc., a “Fee-Only” investment management firm located in Los Angeles, CA specializing in helping doctors and physicians make sound financial decisions. Visit us at www.acapam.com