Ask Doug

What Precautions Should I Take with Regard to Fees?

Q. I've read a few things about DRIP investing that tell me to watch out for fees. I take it there's a per-share fee in some cases as well as an upfront sales charge?

A. The warnings about fees are meant to help you pay attention to each plan's specific terms and make decisions about whether or not the terms make sense for your style and budget. The fee structure of a particular DRIP might change the amount you invest, or the period.

For instance, a DRIP with a flat $5 fee for additional purchases would make it unwise to invest $50 or $100 at a time, since the fee would be 10 percent or 5 percent of your total investment. However, if you really wanted to own that company, you might invest $500 at a time, since the fee would be only 1 percent of the total, a manageable percentage.