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.

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.

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.

References in periodicals archive ?
Details of the per-unit reinvested distribution are as follows:
Fang indicated that the reinvested company posted sales of RMB500 million (US$73.
Suppose you bought a mutual fund a few years ago for $10,000 and reinvested $2,000 worth of distributions over the years.
Also, we utilized an efficient tax structure which provided significant benefits to those who reinvested.
The cost savings that result from greater efficiencies can be reinvested in the relationship -- for example, toward activities such as trade spending for consumer-oriented promotions.
The legislative history of section 1033 indicates the rule was designed for taxpayers that reinvested the proceeds from an involuntary conversion in qualified business property.
When she left the retailer, she sold half of her shares and reinvested them in five companies including Circuit City, California Federal and PaineWebber.
1034 rollover provisions, which allowed taxpayers to defer the gain on a sale or exchange of a principal residence to the extent the sales proceeds were reinvested in a new residence.
Each subsequent fiscal year-end point plotted (or other more frequently plotted points), thus represents the value of that initial investment at each point, assuming that dividends are reinvested, To the extent feasible, the company should use comparable methods of presentation and assumptions in connection with all total return calculations.
Including reinvested dividends, the increase was SEK 61 per share (68), or 24% in 2006.
TORONTO: TDAM announced the final annual 2017 reinvested distributions for the TD S&P/TSX Capped Composite Index Exchange-Traded Fund (, TD S&P 500 Index ETF, TD International Equity Index ETF, and the TD Canadian Aggregate Bond Index ETF.
Considering that the European economy got out of the crisis, while the Macedonian economy registered positive movements, the new law stipulates that the reinvested profit should still be exempt from taxation and that the profit retained in the companies' accounts and not being reinvested should be taxed," Finance Minister Zoran Stavreski explained.