A Reader Writes: "What about DRIP's?"

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember to check with your professional investment advisors prior to acting on any information on this website as I am just an amateur investor.

I have been trying to catch up a little with my "homework" on this site, and answering my emails is one of the important tasks. I was fortunate enough to have an article mentioning "Stock Picks" in the local paper, and received a few letters about things since then.

One of the letters I got follows:

Hi Bob,

I was happy to learn of your blog in Sundays paper! I had heard of blogs, but have never taken the time to investigate them, and would enjoy sharing my interest in stocks with others. I see in your recent blogs, you talk of your trading account, do you also discuss long term investing of buying and holding?

What are your thoughts on "drips" for long term investing? If you were to pick a Company to directly purchase $300.00 worth of their stock per month for one to two years would you have some thoughts?

My enjoyment in the stock market over the years has been to keep adding Companies, like Fastenal, Microsoft, G.E.,etc. and watch them grow to valuable levels through stock splits.

Look forward to hearing from you,

Al B.

Let me try to comment on this letter which raises some excellent questions. First of all, am I a "trader" or a "long-term investor"? I would rather not be pigeon-holed on that one. When I buy a stock, I hopefully will also be holding on to it for years and years! However, I do not stick my head in the sand when a stock declines. I sell it. In fact, if it drops to an 8% loss after holding it for 24 hours I will sell the stock without hesitation. In that case, I am a "trader".

However, I am trying hard to buy stocks that I might hold on to for years just like you do! I look hard at identifying stocks that have growth characteristics much like Fastenal has had, or Microsoft or GE in years past. That is, steady revenue and earnings growth year after year! In that case, we are thinking much alike.

What about "DRIPS"? For some people, they are a great way to buy into a stock with small amounts of money. There isn't anything wrong with doing that. In fact, it works quite well. It just isn't my style.

Perhaps if you can build up a portfolio of five or six stocks using a "drip" technique and arbitrarily set the "cost" as the average price, you could then start implementing a more active management plan more like I do if that was your interest. Otherwise, I have never said that my approach is the only way at all...only that it is the method that I have been using recently.

Once one has a portfolio set up, I would prefer to add money in the form of cash on a regular basis, and use the cash to make periodic purchases if called for by the sale of portions of a holding at a gain. If you follow....

Thanks so much for your question and your participation here on the website. Please DO feel free to share your interest, thoughts, experience, etc. There are many different ways to invest in stocks and I try to learn from all of them!

If you have any other comments, or if anyone else has comments, please feel free to leave them right here on the blog or email me at bobsadviceforstocks@lycos.com.

Bob