Beginning in shares/LICs

Discussion in 'Share Investing Strategies, Theories & Education' started by christianeatouggh, 17th Jun, 2019.

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  1. christianeatouggh

    christianeatouggh Member

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    Hi all

    I am hoping to draw on some collective wisdom. The question i have is around DRPs. I am wondering how many of the experienced members of this forum use this mechanism? I have researched and found the prices that you get on some DRPs are discounted (thus saving you both brokerage and getting the shares at a lower price than on ASX).

    Do you use the DRP mechanism or do you prefer to receive the money to then deploy it towards a LIC that is under valued? This would cost more (although brokerage is so low who cares) and it is not automated like the DRP is.

    Any thoughts?
    Cheers
    Christian
     
    christianeatouggh, 17th Jun, 2019
    #1
  2. D.T.

    D.T. Specialist Property Manager Business Member

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    I use it. I like the hands off style of investing where it continually reinvests for me.

    Some people dont like it because they prefer to pick and choose their entry points.
     
    D.T., 17th Jun, 2019
    #2
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  3. SatayKing

    SatayKing Well-Known Member

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    I have used DRPs sometimes, especially if an LIC had a special dividend. Never spent specials.

    And I used DRP for a bequest my kids received. Had enough effort making decisions for me let alone them. They were minors at that stage. I think a couple still use it as they don't need the income.
     
    SatayKing, 17th Jun, 2019
    #3
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  4. mdk

    mdk Well-Known Member

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    +1
     
    mdk, 17th Jun, 2019
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  5. PandS

    PandS Well-Known Member

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    it really up to individual, I don't DRP, I prefer to get the cash then I work out when and what to buy at a time of my choosing
     
    PandS, 17th Jun, 2019
    #5
  6. fuzzylogic99

    fuzzylogic99 Member

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    I invest in LICs and ETFs and I use DRP for all of them for below reasons:
    • I'm still in my early stage of my shares investing journey so I don't want to spend any of the dividends so that it can be reinvested so that they accumulate
    • I'm saving brokerage fee for each transaction
    • I don't tend to invest in individual shares so I don't usually want to have my money paid to my trading account and then decide what to do with it
    • Tax report seems simpler
     
    fuzzylogic99, 28th Jul, 2019
    #6
  7. Redwing

    Redwing Well-Known Member

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    I have set DRP to auto, I don't believe this is optimal, but it works for me, however I will also re-balance where necessary if bands are breached
     
    Redwing, 28th Jul, 2019
    #7
  8. Trainee

    Trainee Well-Known Member

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    Record keeping for drp can get messy if you do it for a long time.
     
    Trainee, 28th Jul, 2019
    #8
  9. lamecrocs

    lamecrocs Well-Known Member

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    I only DRP if there is a discount, otherwise take cash and reinvest whenever I feel like to
     
    lamecrocs, 28th Jul, 2019
    #9
  10. geoffw

    geoffw Moderator Staff Member

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    Not this one.

    As @Trainee says, it can get messy. When you sell, you will need to account for the cost base of all the shares you've bought over the years, to calculate capital gains tax. So make sure you keep records of everything.

    Make sure you claim franking credits each year. If you don't, the accounting at the end could be even worse.

    It's a small price to pay for all the advantages.
     
    geoffw, 29th Jul, 2019
    #10
  11. Trainee

    Trainee Well-Known Member

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    Drp doesnt change what you report as income each year. Just because you dont get the money doesnt mean its not taxable.

    Drp means you buy small lots twice or more a year. Cost base info multiplies.

    Drp is not simpler for tax.
     
    Trainee, 29th Jul, 2019
    #11
  12. willair

    willair Well-Known Member Premium Member

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    I have only just signed up again ..i did use that system for above 20 years till the Banking RC ..
    The only item with the DRP is what the Accountant we used in 1995 said and as others have said as you will receive 2 statements a year just about the same time as the div's --keep everyone of those statements ..

    That Accountant has passed on that gave that advice,the Accountant we now use said they can sort it out with the data linked ato --asx sites and time,but keeping everyone of those statements lets one study the dynamics of the entity and it's value position over time..imho..
     
    willair, 29th Jul, 2019
    #12
  13. fuzzylogic99

    fuzzylogic99 Member

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    My bad, I got myself confused between DRP and DSSP. Yes DRP will make tax more complex. DSSP is like bonus shares so ATO does not see it as income, hence not taxable, but you also forfeit franking credit.
     
    fuzzylogic99, 29th Jul, 2019
    #13