Part of the overall "total return" of the stock market is dividends. I always recommend reinvesting them. This is easy to do if you use a mutual fund. And your reinvested dividend will be automatically diversified into shares of the mutual fund, which holds multiple stocks. If the money is inside a tax-sheltered account such as an IRA, there is no tax consideration to this process. But if you are investing in an after-tax account, remember that you will pay taxes on the dividends -- even if they are reinvested.