Dividend

During a casual conversation, Vivian asked, "I just get this letter from the bank - it's about the stock that you bought for Euterpe. The question is simple: Shall we choose dividend in specie (以股代息)?"

My response was almost immediate, "Why! Certainly not. No, not that I have no confidence in the company,  but odd lot (碎股) is a pain in the neck. And a propagating pain too - by the next announcement, it becomes even more odd."

Although dividend specie is often regarded as a good way of long term investment, I consider it a kind of inadvertent diworsification. The reality is, if you have a tiny sum of money, you won't split it into, say, two shares of HSBC and three of CLP - even if they are sold in discount. What you should do is, really, to keep that money until it accumulates to the amount sufficient for one lot of the one company that you prefer, in which case there is some economy of scale, and you will have to review your investment portfolio - a good idea even for long term investor.

PS. Regular visitors of this site may know I buy stocks as birthday present for my two princesses, and I use their red-pocket money to buy some more when the price is good. There is, however, minimal diversification of their infantile investment, and the two only items that they hold are China Construction Bank and Standard Charter.