Ask Terry Questions dividend reinvestment?

dividend reinvestment?

By Terry Savage on August 26, 2016 | Investments

Is it best to let dividends roll back over to purchase more holdings of the same fund ... or to take as cash for use in purchasing other stocks.

Terry Says

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.



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