BlackRock iShares recently changed several of their ETFs to a monthly distribution.  I don’t know the full details of the reasons behind the change, but I imagine that iShares is trying to attract people looking for monthly cashflow to meet their living expenses (retirees, etc.).  Unfortunately, the change comes at the expense of small investors still in the accumulation phase of their investing life since a monthly distribution means that a larger amount of shares will be needed to satisfy most synthetic DRIPs that require at least one whole share to be purchased.

For example, before the change to a monthly distribution, a holder of 100 shares of XDV received $19.25 the last quarter (June 2010); enough to purchase 1 whole share through a DRIP.  After the change, the same investor received $9.64 for July’s monthly distribution, not nearly enough to DRIP a full share at the current share price of $19.05.

To rectify the situation I believe iShares should issue a one-time 3 for 1 stock split for the ETFs impacted by the change in distribution pattern (since a change from quarterly to monthly divides the distribution by 3 on average).  The split will not impact investors looking for monthly income and will help those looking to accumulate more shares through a DRIP.  iShares will also benefit since the distribution will be reinvested in their funds (instead of sitting in cash in the investors accounts, etc.)

If anyone agrees, please let me know how we can convince iShares to issue a 3 for 1 split!  Hopefully they will listen to the little guys!

Disclaimer:  This blog has no professional association with any organizations or companies mentioned in the article.  The contents of the article are the personal opinion of the author at the time the article was posted and may be subject to change.  The blog and author are not responsible, nor will be held liable for any content posted by others in the blog comments.  Readers should complete their own due diligence prior to making any personal decisions.

Inspiration and education can come from unexpected sources. I was recently playing the game Mafia Wars on the iPhone 3GS and realized that it was an excellent reflection of important savings and investment concepts.

In the real-time simulation your character is a mafia boss looking to amass a fortune and grow the size of the mafia. Each hour you receive income from the mafia’s various business and have the option to spend the income on either investing in more businesses (to increase hourly income) or purchasing fancy cars, weapons and other fun stuff.

It was very interesting to see that the strategy needed to be successful in the game paralleled many important “rules” of personal finance:

Start Investing Early and Take Advantage of Compounding – Instead of purchasing fancy cars and weapons right away, start the game by re- investing the income in more businesses. The amounts may seem small at first but adds up over time.  By purchasing more businesses every hour you will see your income grow.  This is similar to investing in the real world where income from dividends may seem tiny at first but DRIPing over time can grow income into a substantial amount.

It’s Not Always Exciting in the Beginning – It isn’t very exciting re-investing the income every hour. The game is much more fun when you attack rival mafias and rob banks.  However, patience in the early stages of the game is a key to long-term success.  This is very similar to investing where the early stages aren’t always exciting and it is difficult to see the future rewards.  It may be tempting to trade in and out of stocks for the thrill; but this usually is detrimental to long term success.

Spend Less Than You Earn – The fancy cars, equipment, etc. all have maintenance costs that are deducted from your mafia’s hourly income.  If you spend more than you earn eventually you will have to sell some of the cars and equipment at a loss.  Only buy what you can afford.

Be Ready for Emergencies – You may incur unexpected medical expenses or need to replace cars and equipment when rival gangs attack.  Make sure you keep some cash on hand to pay for these unexpected emergencies.  In your real financial plan, always maintain several months of expenses in cash to handle unexpected situations.

Playing the game really helped bring the rules of investing and savings to life.  Instead of just reading articles and books I could see how the numbers and figures added up over time (albeit in a simulation).

We often hear about how unprepared and uneducated individuals are about their personal financial situation.  Hopefully, the younger demographic playing games like Mafia Wars will be able to take some of these concepts and apply them to their personal financial plans!

Readers, have you come across unexpected sources of investment inspiration?  Please share!

Disclaimer:  This blog has no professional association with any organizations or companies mentioned in the article.  The contents of the article are the personal opinion of the author at the time the article was posted and may be subject to change.  The blog and author are not responsible, nor will be held liable for any content posted by others in the blog comments.  Readers should complete their own due diligence prior to making any personal decisions.