The Dow Approach

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Tuesday, February 11, 1997
The Daily Dow FOOL GLOBAL WIRE by Robert Sheard LEXINGTON, KY. (Feb. 11, 1997) -- One of my favorite questions to answer concerns adding money to a Dow portfolio. Lots of new investors in the Dow Approach have just converted from the mutual fund arena and they're used to adding new money any time they want to, without any charges up front, assuming it's a no-load fund. That convenience of adding money every week or month or quarter is perhaps the single advantage mutual funds may have over investing in individual stocks, but it's not that much of an advantage. So what are the best ways to add money periodically to a stock portfolio and still keep costs in line? One of the least expensive ways is to set up Dividend Reinvestment Plans with the companies whose stock you own and then buy shares directly from the company. This is an excellent way to add money without racking up any (or at least relatively minimal) fees. The drawback to DRiPs, however, is that they're not very flexible. Your money is invested when the company invests it, on their individually set schedules. Also, the paperwork involved in buying shares frequently is a bit more demanding than with the simple annual Dow Approach. But if the paperwork and time requirements aren't a problem, DRiPs are one way to go. Another approach is to run more than one Dow portfolio at a time, with staggered anniversary dates. This way you have a number of windows each year when you can add new money to your portfolio without increasing the annual trading costs (since you're updating the portfolio anyway). Depending on how big your portfolio is, you might run anything from two to twelve Dow portfolios a year. Keep our benchmark of 2.5% in mind. As long as you keep your total trading costs for the year under 2.5% of your portfolio value, you're doing reasonably well. With the deep-discount rates available these days, it's a little easier to run multiple portfolios and still keep trading costs reasonable. A final way, and perhaps the simplest (but not necessarily the best) is to keep open an index fund in addition to your stock portfolio and place your periodic savings additions into the index fund until your next opportunity to add it to your Dow portfolio. In other words, there are many good options for turning your Dow portfolio into a life-long savings vehicle. Pick the right combination for your needs and use it to build wealth over the next several decades. Can't get much more Foolish than that. (c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.	The Current BTD 10 1. AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:T)") else Response.Write("(NYSE:T)") end if %> 2. *International Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:IP)") else Response.Write("(NYSE:IP)") end if %> 3. *Goodyear Tire <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:GT)") else Response.Write("(NYSE:GT)") end if %> 4. *General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:GM)") else Response.Write("(NYSE:GM)") end if %> 5. *Chevron <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CHV)") else Response.Write("(NYSE:CHV)") end if %> 6. Minnesota Mining <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MMM)") else Response.Write("(NYSE:MMM)") end if %> 7. Exxon <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:XON)") else Response.Write("(NYSE:XON)") end if %> 8. Texaco <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:TX)") else Response.Write("(NYSE:TX)") end if %> 9. J.P. Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:JPM)") else Response.Write("(NYSE:JPM)") end if %> 10. Philip Morris <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MO)") else Response.Write("(NYSE:MO)") end if %> ***NOTE: FOOLISH FOUR STOCKS ARE PRECEDED BY AN ASTERISK AND ARE ITALICISED Last Update: 02/11/97
Today's Dow Numbers Stock Change Last -------------------- T - 1/8 38.75 GM + 3/8 56.75 CHV +2 1/4 67.38 MMM + 5/8 84.13 Day Month Year Since 1996 FOOL-4 +0.87% -1.07% -1.55% 27.29% DJIA +0.76% 0.66% 6.36% 34.02% S&P 500 +0.53% 0.44% 6.59% 28.19% NASDAQ -0.29% -3.50% 3.14% 26.55% Rec'd # Security In At Now Change 1/2/96 155 3M 64.50 84.13 30.42% 1/2/96 198 Chevron 52.38 67.38 28.64% 1/2/97 231 Gen. Motor 55.75 56.75 1.79% 1/2/97 618 AT&T 41.75 38.75 -7.19% Rec'd # Security In At Value Change 1/2/96 155 3M 9998.09 13039.38 $3041.29 1/2/96 198 Chevron 10370.25 13340.25 $2970.00 1/2/97 231 Gen. Motor 12878.25 13109.25 $231.00 1/2/97 618 AT&T 25801.50 23947.50 -$1854.00 CASH $207.10 TOTAL $63643.48

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