Reinvestment

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Related to Re-Invested: Reinvested Dividends

Reinvestment

Use of investment income to buy additional securities. Many mutual fund companies and investment services offer the automatic reinvestment of dividends and capital gains distributions as an option investors.

Reinvestment

The act or practice of taking profits or other proceeds from investments and making other investments with them. It nearly always means that one is investing in more of the same security. For example, one may take dividends from a stock and buy more shares with it or may take coupon payments to buy more of the same bond issue. Reinvestment often increases the value of a security.

Reinvestment.

When you own certain stocks and most mutual funds, you can reinvest the dividends or distributions to buy more shares instead of receiving a cash payout.

In a corporate Dividend Reinvestment Plan (DRIP), for example, a company offers you the right to reinvest any cash dividends automatically to buy more stock. When you open a mutual fund account, you're generally offered an automatic reinvestment option as well.

One benefit of reinvestment programs is that in most cases you can make the new investments without incurring the usual sales charges, so it can be a lower cost way to build your investment portfolio.

One potential drawback, if you're reinvesting in a taxable account, is that you acquire shares at different prices, so figuring the cost basis for capital gains or losses when you sell can be more complicated than if you made fewer, larger purchases. It's also true that you owe income or capital gains tax in the year the money is reinvested, which isn't the case in a tax-deferred or tax-free account.

You will also want to consider the impact of reinvestment on the diversification of your portfolio, since buying additional shares increases the percentage of your portfolio that is allocated to a particular stock or mutual fund.

References in periodicals archive ?
You can guarantee that anything that has not been recovered by West Midlands Police will have been moved on within 24 hours and the money will have already been re-invested in the drugs trade.
Non-contributing members can contact Steve in order for him to further explain the work of the Fund, all of this in an effort to increase the amount of money that can be re-invested into the sport.
Premier League chief executive Richard Scudamore said: "The Premier League has taken its commercial success and, in the main, re-invested that to put the show on that in some ways is the envy of the world.
These were not typical years because "after years of neglect, federal and provincial governments have re-invested substantially in health care over the past decade.
But Craig also says he and his brothers have done some things right and continue to put in the time, effort and re-invested dollars to keep the company on the right path.
The financial means resulting out of these divestments will be re-invested by way of the "buy and build" strategy of the strategic core activities: protective & outdoor fabrics, aerospace & armour composites, geosynthetics & grass.
Throughout Advance's 26-year history, the Company has consistently re-invested in its core operations, new development opportunities and value-added acquisitions.
Additionally, the solid consumer economy of the last few years has put money in corporate coffers, with businesses ranging from retailers, manufacturers and service providers such as hotel chains now flush with cash that is being re-invested in new projects.
Taxes and charges on air transport are not always re-invested in the industry, said Giovanni Bisignani, IATA's Director General, adding that governments were not making the strategic investments to support air transport and the economic gains that come from that investment.
Owners of a successful local waste company, Shirvanian and her brother were aware they would not make a profit for a while, and that if they did, the money would be re-invested in building schools in Armenia.
Also, any money made from the venture must be re-invested back into economic development projects.