Reinvestment

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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 ?
"Sil-Pro has always been committed to re-investing to better serve its customer base with world-class, cutting-edge technologies," said Sil-Pro President Kevin Carver.
"They saw the opportunity to acquire 300 Lighting Way at a good price and are in the process of re-investing in the property and re-introducing it to the market, bringing this class A building to a whole new level."
"The move is also a reflection of our firm commitment to the UAE market, where we are re-investing our hard-earned resources to help the real estate market expand further."
It sets the foundations for our longer-term aim to transform childcare provision using the full powers and resources of independence--enabling us to support more parents wanting to move into work by re-investing higher revenues from improved economic activity back into expanded childcare provision.
"We are committed to re-investing in the communities in which we work and successfully sourced all of our labour, materials and sub-contractors from the local area when building Bridgeford View, which helped us to reduce our carbon footprint."
According to Hyatt, the asset sales complete the marketing process for six hotels that the company began earlier this year and are consistent with the company's asset recycling strategy selling certain hotels, maintaining presence in respective markets by entering into new management or franchise agreements, and re-investing sale proceeds into new hotels and other growth opportunities.
We now have a robust plan in place that will touch the majority of the estate by the end of our next financial year, together with a longer term view of re-investing to keep our brands and venues up to date."
Our focus on seed planting and re-investing in our businesses, products, and services will continue because it's working.
Tony Fletcher, managing director of Cardiff Gate, said: "We are happy to be re-investing in old stock where we see plenty of long-term growth.
"We are currently heavily re-investing in our airport lounges and are rolling out our new portfolio of lounges, Aspire by Servisair.
But honestly, if I was the Arts 1 Council I'd be asking for my money back and re-investing it in a nice statue somewhere.
Lindsey Miller, head of the serious and organised crime division of the Crown Office and Procurator Fiscal Service, said: "We will continue to do all in our power to disrupt those who traffic and trade in human beings for profit, by depriving them of their ill-gotten gains and preventing them from re-investing in further criminal activities."