Author Topic: Automatic Reinvestment?  (Read 687 times)

Emergo

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Automatic Reinvestment?
« on: December 14, 2016, 06:02:00 PM »
I was reading Boggleheads and it mentioned this term and said it's an option I can turn on. So the question is: should i turn it on?

WildJager

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Re: Automatic Reinvestment?
« Reply #1 on: December 15, 2016, 05:18:48 PM »
If you're talking about dividend reinvestment, then yes, that's one of the most effective way to make compound interest work in your favor. 

spooky105

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Re: Automatic Reinvestment?
« Reply #2 on: December 17, 2016, 08:08:58 PM »
Yup. Always set up your mutual funds / investments to automatically reinvest dividends -- that way you'll have more shares that pay more dividends that buy more shares that pay more...you get the idea.

Spork

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Re: Automatic Reinvestment?
« Reply #3 on: December 17, 2016, 08:29:02 PM »
It depends.

Pre FIRE... probably you should... but there are arguments against it as well.  If you have a very well defined asset allocation and just let the dividends re-invest without ever looking at it again, you'll find out that the high paying accounts end up being heavy in your allocation. 

POST FIRE... we use the dividends as income.  The same warning applies from above, though in reverse.  High dividend payers may not appreciate as fast because you're pulling the dividend rug out from under them.  But it's easy.... there is an account there that just automatically refills itself over time.
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Joel

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Re: Automatic Reinvestment?
« Reply #4 on: December 17, 2016, 09:00:43 PM »
The reason to not automatically reinvest relates to tax management. You don't want reinvestments to cause wash sales. Many people don't reinvest so that they can control the timing of purchases.