Direct Investment Plans (DRPs or DRIPs) have been around since the early 1960s. They are offered by more than 1000 companies (many of which are among the highest quality U.S. firms–Microsoft and American Express as examples). These companies make it possible for individuals to register shares in their names on the company books. They don’t need to establish a brokerage account to buy shares.
Although investing through these provide many advantages over investing through a broker, they are used by relatively few people. Information about their availability is not advertised because when they were first approved, the SEC prohibited the companies from advertising the plans and limited usage to people with at least a single share of the company stock registered on the company books as opposed to having the share(s) registered on a stockbroker’s books with the stockbroker registered on the company books. Apparently, the SEC was protecting the business interest of the brokerages.
History of the company that has focused attention on DRP investing since 1984.
In 1984, Moneypaper, a monthly newsletter, which began publishing in 1980 as Moneypaper–a Financial Publication for Women, discovered that such plans were available. It quickly recognized that DRPs make it possible for small investors to take advantage of risk-reducing strategies that were, until then, only available to wealthy investors. Since that start in the early 1980s, Moneypaper has focused attention on these plans as a way to level the playing field so that both small and large investors could enter the market without excessive risk and follow a rational approach to build wealth over the long term.
But getting that first share in order to qualify for the plan was a problem. In 1986, Moneypaper developed a program called “Buy One Share” to do just that. Over the period since 1986, which is when Moneypaper and its affiliate Temper of the Times Investor Services first started to help individual investors gain access to the plans, more than two million DRP accounts have been opened in any of about 800 different companies. Although a lot has changed since Moneypaper first recognized the value of DRPs, the advantages of the DRIP investing strategy is more important now than ever—and still largely unknown.
That simple strategy, which will be described in more detail later, proved successful for Moneypaper subscribers and about 3,000 of them wanted to invest their IRA funds in that manner. To accommodate them, in 1999, Moneypaper organized the MP 63 Fund (symbol DRIPX). The 63 companies that made up the mutual fund were the components of a DRP Index that the editors had established five years earlier in order to compare the results of a representative group of companies that offered DRPs with the results of the popular indexes. Many of those 63 companies are still among the MP 63 component companies.
The MP 63 fund is defensive in nature and focused on long term results. The fund is most appropriate for patient long-term investors who are building wealth by making continuing (possibly, regular) investments for their retirement. While less rational investors are prone to withdraw assets when markets are under pressure, DRIPX shareholders have exhibited restraint, which has contributed to the fund’s success. To support its strategy and discourage redemptions (which, likely. occur when prices decline), and also to compensate existing shareholders for any disadvantage as a result, management imposes an early redemption fee.