Vanguard S&P500 DRIPs Program

DRIPs! (Yea, I know my image editiong sucks :/ )

I don't really say it much in my blog but some of you may know that I have Vanguard's S&P500 ETF, VOO, in my portfolio (but not shown).

A couple of reasons why I like this ETF:

1. Fairly liquid, despite not being the most heavily traded compared to SPY.
2. Passively managed.
3. Full replication of the S&P500 index.
4. Fully invested fund.
5. Lowest expense ratio (0.05% vs an average of 1.11%), also helps to reduce tracking errors and help compounding.
6. Survivorship Bias.
7. S&P500 trends better than STI which tend to range more.
8. I suck at picking growth stocks. US is more growth inclined and less dividends (the ETF pays little dividends too!), so it is a way for me to get a growth portion in my portfolio.
9. Portfolio diversification (My portfolio is mostly focused in Singapore)
10. No capital gains tax =) but there's withholding taxes for dividends =\ (good thing the ETF pays little dividends too!)
11. Odd lots, I can buy just ONE share of the ETF
12. Commission generally fixed for almost all trade sizes, kinda even better than Index Futures where it is based by contract (I'm looking at you Singapore, your brokerage fees are real expensive >_>)
13. Lastly, the DRPs program!

Do note that the DRPs (or DRIPs) program is not something you get automatically enrolled in, you have to send an email to your broker (mine's TD Ameritrade), to enroll into the program.

This is unlike REITs with DRPs in Singapore, i.e.Mapletree REITs (which sadly terminated their DRPs program. I only got my DRPs once...... :'( ) or bank stocks with scrip dividends, like OCBC, which sends you a letter asking you if you wanna opt for shares or cash.

So why DRIPs?

• Cheap way of accumulating shares as there is no brokerage fee
• Automated
• For those with small portfolios, it allows us to accumulate shares without waiting for the total dividends received to hit the amount of a single share

And for small retail investors like me who gets tiny amount of dividends because of the tiny number of shares I own, reinvesting your dividends may result in owning fractional shares of a position. The 30% withholding tax is still, sadly, present for that dividend, no way around it.

If that occurs, please be aware that:

• You cannot sell fractional shares of a security without first selling all whole shares of that security.
• If you sell all of your whole shares of a position for which you hold fractional shares, the fractional shares will also be sold as part of the transaction. 

Do you guys use DRIPs too?