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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 will be the first time for CSC to re-invest in an overseas iron-ore mining company to acquire stable supply of iron ore at a steady price.
His belief in the product is so strong that he will re-invest 30% of his proceeds back into working capital, helping fund the expansion.
According to The Sun, Chanderpaul is thought to have been persuaded to re-invest his prize money with Sir Allen Stanford companies and is now concerned he may never see it again.
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We want the new company to commit to maintaining current employment levels, and to re-invest in the various operations," she said.
The high copper prices have helped recyclers re-invest in equipment," says Groscurth.
Churchill retains the right to re-invest in Hollywood Park for up to eight years.
With an abundance of heterogeneous systems and the vast amount of corporate data stored in legacy systems, no industry can afford to continually invest and re-invest in static technology.
It is a key component of our overall business strategy to extract value from our properties continuously and re-invest the financial resources in an aggressive acquisition program.
What amount are the Fossilys required to re-invest in replacing their house and contents under the provisions of Sec.
Airlines use their monetary surpluses to re-invest in low-emission, fuel-efficient technology.
We believe it is the time to re-invest in the future of added value foods on a larger scale than ever before.