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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
According to the new guidelines investors who do not wish to receive dividend pay-out could opt for 'Dividend Transfer Plan (DTP)' wherein the dividend amount could be re-invested in any other open ended scheme of the Mutual Fund.
I wonder how the proceeds have been re-invested and the return on this astute bit of business i.e.
"Our status means that we can provide value-for-money leagues, with any surpluses that we do make being re-invested in the facilities to improve them for the future.
This is because Welsh Water is not for profit, does not have shareholders, but is instead owned by the customer with all efficiencies made re-invested either as below inflation bill increases or to improve services to customers.
Saihi pointed out that his group has always re-invested its profits in Tunisia and it is confident to overcome the present crisis and to reach its usual performance, i.e., about 100,000 customers a year.
Also, the income from mortgage notes will be re-invested into new mortgage notes.
As part of the transaction, Etancoa[euro](tm)s chief executive Ronan Lebraut has re-invested in the business and thus kept a 25% stake in it.
This has led to fears that black market profits from the looting could be re-invested in the drugs trade by the city's notorious gangs.
While 50 percent of the redemptions would be re-invested in 30-year Greek securities, the remaining 20 percent would be invested in a fund made of, supposedly, 'very-high quality' securities.
A total of pounds 5,000 has been raised to be re-invested into a Lozells project, pounds 1,200 from the sale of scrap metal from the scheme and an extra pounds 3,800 donated by Apollo.
"After finishing second in the league, transfer fees for Marc Twaddle and Gary Harkins were re-invested in anticipation of success and increased gates.
Furthermore he opined that any capital invested in Sri Lanka should be re-invested in order to allow the formerly war-torn economy to grow, as it should.