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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.


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.


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 ?
This time, however, the company uses cash proceeds of $15,000 from the exercised stock options to reinvest in its operations.
He also said that the nation would reinvest in US Treasury bills.
If you do choose to reinvest your dividends, though, you will need to look to other types of investments to provide you with income, assuming you need some income from your portfolio, which may become more necessary during your retirement years.
The MOFCOM law does not explicitly require a CHC to reinvest its profits in its Chinese subsidiaries by increasing its registered capital.
So with over a billion dollars in SLAM-RAAM savings, we were able to reinvest that in (C-RAM) and also in upgrading the Patriot," Chiarelli said.
You simply have to buy equal or up and reinvest all the cash.
It is now also possible for NS&I customers to phone up in advance of their certificates maturing to give instructions to reinvest as soon as they mature.
They must reinvest their real and personal property dollars in a home and contents, or pay tax on the gain.
We will also reinvest profits to make Burt's dreams of orbital flights come true, and, one day, hopefully in our lifetimes, we would like to see a Virgin hotel in space,'' Branson said.
A YES, you can reinvest some of your maturing Tessa money into a special type of tax-free investment called a Tessa Only Individual Savings Account (TOISA) up to the amount you originally put into your Tessa.
Q: My Tessa has just paid out and I would like to reinvest some of this money.
Rather, it's to have a fact-based discussion about ways to work collaboratively to improve processes that benefit both parties, and reinvest the savings in more mutually valuable activities.