A John Heinzl article in the Globe and Mailquotes a person, Jay from Montreal, who doesnt like reinvesting dividends inside a dividend reinvestment plan (DRiP). That’sbecause he doesnt have control over the timing of the purchases. Outside of a DRiP, he can let the dividends accumulate until a market downturn comesand lets him buy at lower prices.
Jay seems to be saying he can time the market. But what if the market goes on an extended bull run at some point? I worry that he may end up waiting a long time for the market to turn down and by the time the dip comes, he will have accumulated a huge pile of dividends that will have to be invested at a higher level.
Also, reinvesting inside a DRiP has some perks that you may not want to give up. There are no broker commissions on reinvesting dividends. And DRiPs often come with Share Purchase Plans (SPP), which let shareholders buy additional shares without broker commissions, and often at a 3% to 5% discount to the market price.