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


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


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.
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Cooperation between state government officials and criminal justice practitioners allowed the passage of Justice Reinvestment Initiative legislation and support for justice reforms and the reinvestment of resources.
This book is a timely examination of the Justice Reinvestment movement, with a concentration on the United States and the more recent adoption of it in the UK.
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Recommendation: Given the current practice of securities lending with cash collateral reinvestment, its role in 401(k) plan investments, and our findings that plans and plan participants can bear a disproportionate amount of any loss associated with the practice, Labor should take action to help plan sponsors of 401(k) plans and plan participants understand the role, risk, and benefits of securities lending with cash collateral reinvestment in relation to 401(k) plan investments.