Author Topic: Difference between DRIP and ESPP plans?  (Read 1825 times)

MVal

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Difference between DRIP and ESPP plans?
« on: November 03, 2016, 08:07:19 AM »
My employer doesn't have an ESPP, but they do have a DRIP. I do not know much about either type of employee investment plan, and I'm wondering what the basic difference is. Can someone explain this in fairly simple terms and if a DRIP is worth investing in? Here's the information I found from our company about our plan:

If you are a new investor, you may join the Plan by making an initial investment of not less than $1,000
up to a maximum of $10,000. In some instances, we may permit initial investments in excess of this
maximum if we approve your request for waiver.
Regardless of whether you are an existing stockholder or a new investor, you may purchase shares of
our common stock at a discount ranging from 0% to 5% (currently set at 2%) without paying any
service fees, processing fees or other charges. This discount applies to reinvested dividends, optional
cash payments and initial investments. However, no discount will be available for shares acquired in
the open market. We may adjust the discount in our discretion at any time and will announce changes
to the discount at least 30 days prior to the next investment date. If we approve your request for waiver
of the monthly volume limit, we may offer you a discount ranging from 0% to 5%.
« Last Edit: November 03, 2016, 08:53:03 AM by MVal »

seattlecyclone

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Re: Difference between DRIP and ESPP plans?
« Reply #1 on: November 03, 2016, 08:43:19 AM »
A 2% discount doesn't seem all that compelling.

Vagabond76

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Re: Difference between DRIP and ESPP plans?
« Reply #2 on: November 03, 2016, 09:17:08 AM »
My employer doesn't have an ESPP, but they do have a DRIP. I do not know much about either type of employee investment plan, and I'm wondering what the basic difference is. Can someone explain this in fairly simple terms and if a DRIP is worth investing in? Here's the information I found from our company about our plan:

• If you are a new investor, you may join the Plan by making an initial investment of not less than $1,000
up to a maximum of $10,000. In some instances, we may permit initial investments in excess of this
maximum if we approve your request for waiver.
• Regardless of whether you are an existing stockholder or a new investor, you may purchase shares of
our common stock at a discount ranging from 0% to 5% (currently set at 2%) without paying any
service fees, processing fees or other charges. This discount applies to reinvested dividends, optional
cash payments and initial investments
. However, no discount will be available for shares acquired in
the open market. We may adjust the discount in our discretion at any time and will announce changes
to the discount at least 30 days prior to the next investment date. If we approve your request for waiver
of the monthly volume limit, we may offer you a discount ranging from 0% to 5%.

What you describe is a ESPP and a DRIP.  The 2% discount applies to the initial purchase and any subsequent purchases, including reinvestments.  The discount might not be much but there are no brokerage or management fees either.

It makes poor sense to put your life savings into your company's stock, but a little bit ($1k to $10k) wouldn't set back most people that are regularly on this forum.

MVal

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Re: Difference between DRIP and ESPP plans?
« Reply #3 on: November 03, 2016, 10:23:25 AM »
My employer doesn't have an ESPP, but they do have a DRIP. I do not know much about either type of employee investment plan, and I'm wondering what the basic difference is. Can someone explain this in fairly simple terms and if a DRIP is worth investing in? Here's the information I found from our company about our plan:

If you are a new investor, you may join the Plan by making an initial investment of not less than $1,000
up to a maximum of $10,000. In some instances, we may permit initial investments in excess of this
maximum if we approve your request for waiver.
Regardless of whether you are an existing stockholder or a new investor, you may purchase shares of
our common stock at a discount ranging from 0% to 5% (currently set at 2%) without paying any
service fees, processing fees or other charges. This discount applies to reinvested dividends, optional
cash payments and initial investments
. However, no discount will be available for shares acquired in
the open market. We may adjust the discount in our discretion at any time and will announce changes
to the discount at least 30 days prior to the next investment date. If we approve your request for waiver
of the monthly volume limit, we may offer you a discount ranging from 0% to 5%.

What you describe is a ESPP and a DRIP.  The 2% discount applies to the initial purchase and any subsequent purchases, including reinvestments.  The discount might not be much but there are no brokerage or management fees either.

It makes poor sense to put your life savings into your company's stock, but a little bit ($1k to $10k) wouldn't set back most people that are regularly on this forum.

So for 2% discount, is it really worth messing with? I guess I could try it and just see. I think it says you can pull out any time, anyway. I've never invested outside of my 401K or Roth IRA, so I'm uncertain how this will work, but since our company is always telling us how we're growing by leaps and bounds every year, it might be interesting to do just a small amount like $1500 or so.

seattlecyclone

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Re: Difference between DRIP and ESPP plans?
« Reply #4 on: November 03, 2016, 11:17:10 AM »
Is it really worth messing with? That's for you to decide.

You could put in the maximum $10,000, pull it out the next day, and make $200 (give or take, depending on market movements). How often can you do this? How much trouble is it?