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Wednesday, June 16, 2010

DRIP ... DRIP ... Cash ... DRIP ... DRIP ... Cash ...

Previous $500 Challenge Project Balances:

The Three "Sisters":

Investing "Sister" Balance: $772.98
Trading "Sister" Balance: $1,894.63
Interest Bearing "Sister" Balance: $425.30

Total Challenge Project Funds: $3,092.91


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We have a bit of housekeeping in regards the "Challenge Project". Dividends were paid yesterday on the Johnson & Johnson (JNJ) stock. We recieved some partial shares of Johnson & Johnson (JNJ) as well as some cash.

How? Partial DRIP, that's how.

If you're just beginning to follow me, the dividend investing "sister" account for the Challenge Project ... well ... it's sort of split into two accounts at the moment. The 'happy accident' of this situation has allowed for a 'partial DRIP' to occur. Two different 'dividend investing' accounts, one that has the DRIP turned on and receives partial shares, and the other that owns the same stock and receives straight cash.

How did this happen? How is it that I have two dividend bearing investing accounts?

Some time ago I decided to start moving my accounts to one central broker, at "ThinkorSwim", from "Sharebuilder". But as I do everything slowly and with a 'bit of deliberation', I didn't just move everything over to ThinkorSwim all at once.

I moved some money over myself. I waited, and played with their platform a bit.

I then moved the Challenge Project "savings sister" account over to ThinkorSwim. I waited a bit longer.

I then moved the Challenge Project "trading sister" account over to ThinkorSwim.

About that time, I checked with ThinkorSwim, to make sure that they engage in a DRIP program, as not all brokers have, or engage in DRIP. I discovered that ThinkorSwim does engage in DRIP, but they will not give partial shares of a company, as Sharebuilder does. Sharebuilder will dole out partial shares (In other words, the dividend will be re-invested in more shares of the company and you'll receive 2.838692 more shares of a company at $59.38) But ThinkorSwim will only reinvest into whole shares, so they'd give you 2 shares, and some cash.

When I discovered this, I decided not to ACAT my shares of Coca-Cola (KO) or Johnson & Johnson (JNJ) to ThinkorSwim at this stage of the game. But I would average down on this position, by purchasing more of each stock at ThinkorSwim.

The result, is a partial DRIP. The best of both worlds. At the Sharbuilder account for the Challenge Project sub-accounts I received 0.0286 more shares at $58.391608. So at this account, I now have 3.13 shares of Johnson & Johnson (JNJ). At the ThinkorSwim account, I received $1.08 for 2 shares of Johnson & Johnson (JNJ).

New Three "Sisters" Project Balances:

Investing "Sister" Balance: $782.51
Trading "Sister" Balance: $1,894.63
Interest Bearing "Sister" Balance: $425.30
Total Challenge Project Funds: $3,101.36

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 14 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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