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Author: TomsFoolishness Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19886  
Subject: Dividends and Capital Gains? Date: 6/8/2000 4:53 PM
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(Mistakenly posted earlier on the RB Beginners Board.)

Please excuse my ignorance -- I'm just getting started with investing in equities. I'm getting ready to rollover a 401(k) into an IRA using an AmEx brokerage account (to Foolishly avoid having to pay buy/sell commissions.) Over the years I've had that 401(k) invested in several Vanguard mutual funds. To prepare for the transition, I've read all 3 Fool books, studied this online board extensively, and have developed an investment philosophy that will let me sleep at night. The RM approach will be the core of that strategy, which will also include the RP4 and a bit of RB as well.

My question has to do with dividends and capital gains. What does one do with them? They were never an issue with the Vanguard funds -- they were automatically re-invested as fractional shares in the particular fund whenever they were issued. But in the IRA they will be deposited into my brokerage account. In all likelihood they will not be large enough to purchase additional shares of the stock. As an alternative, I believe I can setup a Drip to have those gains plowed back into fractional shares of the stock. But not all the stocks I may want to invest in provide a Drip. That being the case, what other alternatives would I have? And how do I account for these distributions when tracking the performance of each stock? Won't that distribution show-up as a drop in the stock price?

Any help clearing up my confusion would be greatly appreciated.

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