I'm a new fool and recently setup my broker accounts and begun a portfolio of dividend paying stocks. I have elected to reinvest dividends, but is it better to have them put into the sweep account for possible use in other investments?
I'm a new fool and recently setup my broker accounts and begun a portfolio of dividend paying stocks. I have elected to reinvest dividends, but is it better to have them put into the sweep account for possible use in other investments?I think different Fools do different things here. What I myself do is let the dividends accrue to the sweep account, and then when I decide to make my next purchase, I add in the amount of money that has been paid into the account by dividends.The reason is that I can't say that the date on which company X pays their dividend will be a good time to put more money into that company. So, I let the money sit until I determine that putting money into company Y is a good thing -- and then I include that money in the purchase amount for company Y.culcha
It's a matter of personal preference. The primary reason to reinvest dividends is to "painlessly" grow your investment in a company.OTOH I think the following considerations point out some downsides to dividend reinvestment.In a taxable account it creates a number of purchase lots which may make for a more complex tax return when you sell some or all of an investment.Putting the dividends into a sweep account allows you to make your purchase to whatever investment and at whenever time you choose rather than being tied to a specific stock on the dividend date.Bob
I think it depends on the amount of the dividends. If your portfolio is fairly small at this time, reinvest them. If your total dividends are enough to allow you to purchase a position every quarter or so with less than 2% commission,let them accumulate.BH
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