A full Distribution Reinvestment Plan (DRP) means the ETF or managed fund allows you, the investor, to take all of your monthly, quarterly, half-yearly or yearly distributions as new units in the ETF/fund.
Most ETFs/funds on the ASX will offer their investors a 'full or partial' DRP — giving them the option to take none, some or all of their distributions/dividends as new units in the fund.
After a full or partial DRP, the next most common type of DRP option is when a fund offers no DRP at all. This would mean all distributions are paid back to you as cash/direct deposit, regardless of whether you wanted to reinvest the distributions.
There is no right or wrong answer for what type of DRP is best. However, for flexibility, we're seeing more ETFs/funds offer their investors full flexibility by opting to go with a 'full or partial' DRP. Most large share registries offer this functionality for fund managers and their investors.
The ETF/Fund's Product Disclosure Statement (PDS) should tell you which DRP options are available to you and how it works.
However, it's easy to select your DRP option by following these steps:
Here's a list of the most popular share registries:
This brilliant (and free!) report is issued by Best ETFs Australia, a division of The Rask Group Pty Ltd. It is not a recommendation.
Speak to a financial professional before relying on this information and please read our Financial Services Guide (FSG).
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