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Author: kelbon Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8775  
Subject: Re: Reinvesting dividends Date: 2/24/2013 2:15 PM
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When the market appears to be fairly valued to overvalued as it seems to be at this point may be a good time to consider changing the settings on brokerage accounts to pay out cash instead of buying more stocks.

Rather than thinking about market valuation, it's probably a better idea to think about this option on a case by case basis. The most obvious scenario is if you have a particular stock that you believe to be very overvalued and, for whatever reason, you are reluctant to sell; capital gains tax, for example, then this might be an instance that could make sense. (Though my inclination would be to sell a stock that is demonstratively very overvalued, though greed: the hope that it will become even more overvalued, is sometimes a hard demon to slay.)

However, unless you are very lucky and/or very smart, passive dollar cost averaging by reinvesting dividends often makes more sense in the long run, that is, unless you need, or want, the dividend payments for income.

kelbon
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