I was researching brokers on TMF broker list and noticed that "dividend reinvestment" was lined through for ScottTrade. Is this a concern?I also started wondering, how does dividend reinvestment work in a discount brokerage account? Does the broker buy you fractional shares? Is there a fee for this "purchase?"I'm very new to this, and it seems there is a lot to learn.John
While most all brokers automatically reinvest dividends for mutual funds, not all do so for stocks and ETFs. Fidelity does, Scottrade does not. It is also possible if there is a stock split, such as a 3 for 2 split, which can 3 shares into 4.5 shares.Some companies I buy specifically for share accumulation through dividend reinvestment, but not all dividends are suited for that goal. So I own some companies through Fidelity and some through Scottrade. That's why you should always research your brokerages to make sure the one or ones you pick work best for you.FuskieWho has not heard of being charged transaction fees specifically for dividend reinvestment, but if you are concerned, check with your broker...
http://www.firstrade.com/content/en-us/accounts/drip all done automaticallywith respect to TD Ameritrade and Scottrade, you have to tell them to put on a Drip program.http://finviz.com/store/stock-brokers.ashxQuillnpenn -
with respect to TD Ameritrade and Scottrade, you have to tell them to put on a Drip program.Actually I don't think Scottrade has provisions for dividend reinvestment or fractional shares unless something has recently changed.My understanding is that the majority of discount brokers do have provisions for divident reinvestment, but, many do not.This is a concern only if you want to reinvest dividends. I prefer not to do so in a taxable account because of the additional record keeping for tax purposes.Bob
Thanks for the help. I'm planning on opening a Roth IRA, so I guess I'd prefer if dividends were reinvested automatically, but there seems to be a lot of other reasons to go with Scottrade (mostly cheap trades since I won't have a lot of cash to start with). I think not reinvesting the dividends would be OK since I'm not planning on investing in a lot of high- yield stocks.Thanks again!John
An easy alternative to dividend reinvestment is to let dividends accumulate in a money market within the account. Then reinvest all of them the next time you make a purchase.This keeps your money fully invested and minimizes paperwork and commissions.
I think not reinvesting the dividends would be OK since I'm not planning on investing in a lot of high- yield stocks.I do invest in high-yield stocks, but I don't do dividend re-investment. Instead, I let the cash accrue for a while in the account, and then when I make my next investment, I use the accrued cash to lower my out-of-pocket cost.I don't want to do dividend re-investment because buying the same stock that issues the dividend may or may not be the best investment opportunity for me at the time.culcha
CABob:Is the additional record keeping for tax purposes not provided by the broker via yearly 1099 in the case of a sale of that particular stock(s)? I am thinking particularly of the cost basis(es.Thanks.
CABob:Is the additional record keeping for tax purposes not provided by the broker via yearly 1099 in the case of a sale of that particular stock(s)? I am thinking particularly of the cost basis(es.I guess they probably do under current regulations. All or most of my holdings were purchased before that was a requirement. However, even if the broker provides the information and you want to do a partial, specific lot sale it might be somewhat complex.Bob
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