What's your opinion on this? Specifically for a taxable brokerage account, long term hold and don't need the money/plan on touching it for another 10-15 years.
10:46a, 4/29/24
Yes--dividends should be reinvested in similar/different securities as long as the money is not needed for living expenses. That's the basis of compounding/compound interest.
As to how exactly to go about reinvesting dividends... Are you indexing or valuing and buying individual positions?
If you are indexing, just reinvest the dividends automatically as another form of dollar cost averaging.
If you value and buy individual securities, I recommend letting the dividends pool in the account and using them to purchase more of the securities you already hold or initiate new positions based on your own calculations of price to intrinsic value (which is the very essence of valuing and buying an individual security and purchasing when security price represents a discount to security intrinsic value).
As to how exactly to go about reinvesting dividends... Are you indexing or valuing and buying individual positions?
If you are indexing, just reinvest the dividends automatically as another form of dollar cost averaging.
If you value and buy individual securities, I recommend letting the dividends pool in the account and using them to purchase more of the securities you already hold or initiate new positions based on your own calculations of price to intrinsic value (which is the very essence of valuing and buying an individual security and purchasing when security price represents a discount to security intrinsic value).
A noble spirit embiggens the smallest man.
11:00a, 4/29/24
In reply to Toros23
This should depend on your portfolio.
Really the key that I use is, does my portfolio need more equity or debt? Is the distribution from equity or debt? Is the valuation of the security still good (or at least ok)? Then I either reinvest or let it gather in a sweep account and purchase what is a good value rather than blindly purchase something at the top of the market.
I use CAPE Shiller to watch the value of the market and I have a few ideas on regression to the mean. I did a good bit of data analysis about a decade ago and settled on about a CAPE of 30 as transition point for equities valuation for the S&P. It is slightly more complicated than that, but you get the idea.
Really the key that I use is, does my portfolio need more equity or debt? Is the distribution from equity or debt? Is the valuation of the security still good (or at least ok)? Then I either reinvest or let it gather in a sweep account and purchase what is a good value rather than blindly purchase something at the top of the market.
I use CAPE Shiller to watch the value of the market and I have a few ideas on regression to the mean. I did a good bit of data analysis about a decade ago and settled on about a CAPE of 30 as transition point for equities valuation for the S&P. It is slightly more complicated than that, but you get the idea.
1:16p, 4/29/24
I started out in the 90s as a big proponent of Dividend Reinvestment overall. I participated in a number of company-sponsored DRIP programs, and reinvested in my brokerage account wherever it was allowed. My purpose was dual - save on commissions, and have a routine disciplined approach to investing which benefitted from compounding.
Then, brokerage commissions dropped from $100 to $40 to $0 per trade in less than a decade, and it made the expense-savings part of it moot to me. The discipline part was never that big a deal for me, as I always considered those earnings "earmarked" for investments, and had my eye on something else to invest in vs. spend it on a new boat or somesuch.
So today, my strategy is to reinvest only for mutual funds (all very long-term holds - I prefer ETFs now, mainly due to option trading and tax flexibility), and use the cash dividends to fund future purchases.
The only warning is that you need to pay periodic attention to your asset allocation, as dividend reinvestment naturally probably keeps you relatively close to your initial targets, while reinvesting cash in new things can get you out of whack much more quickly.
Then, brokerage commissions dropped from $100 to $40 to $0 per trade in less than a decade, and it made the expense-savings part of it moot to me. The discipline part was never that big a deal for me, as I always considered those earnings "earmarked" for investments, and had my eye on something else to invest in vs. spend it on a new boat or somesuch.
So today, my strategy is to reinvest only for mutual funds (all very long-term holds - I prefer ETFs now, mainly due to option trading and tax flexibility), and use the cash dividends to fund future purchases.
The only warning is that you need to pay periodic attention to your asset allocation, as dividend reinvestment naturally probably keeps you relatively close to your initial targets, while reinvesting cash in new things can get you out of whack much more quickly.
8:34p, 4/29/24
Money begets money...but it's offspring begets more.
Benjamin Franklin
Personally, I'm a firm believer in reinvesting dividends back into the stock.
Benjamin Franklin
Personally, I'm a firm believer in reinvesting dividends back into the stock.
10:39a, 4/30/24
I think it really depends if the stock is something that you want to hold for a longer horizon (years) or if the stock is something you are moving in and out of. If you don't have a strong desire to hold the stock then why reinvest the dividends into said stock? If discipline is not an issue and the money is staying buying a different stock then it is somewhat of a moot point. Your overall account will increase anytime you have the dividend payments.
12:31p, 4/30/24
I reinvest all my dividends....buying more shares when the stock is cheap and less when expensive. The goal of dollar cost averaging.
If I don't like the equity enough to buy more then I should sell it.
If I don't like the equity enough to buy more then I should sell it.
6:42p, 4/30/24
In reply to I bleed maroon
This is what I more or less do. I only own six individual stocks and they are all in one account (except for one outlier) so when I get cash dividends in that account I usually just reinvest that cash back into one of the six stocks that I think is the Best Buy at the time. Occasionally, I'll add a new stock.
I bleed maroon said:
I started out in the 90s as a big proponent of Dividend Reinvestment overall. I participated in a number of company-sponsored DRIP programs, and reinvested in my brokerage account wherever it was allowed. My purpose was dual - save on commissions, and have a routine disciplined approach to investing which benefitted from compounding.
Then, brokerage commissions dropped from $100 to $40 to $0 per trade in less than a decade, and it made the expense-savings part of it moot to me. The discipline part was never that big a deal for me, as I always considered those earnings "earmarked" for investments, and had my eye on something else to invest in vs. spend it on a new boat or somesuch.
So today, my strategy is to reinvest only for mutual funds (all very long-term holds - I prefer ETFs now, mainly due to option trading and tax flexibility), and use the cash dividends to fund future purchases.
The only warning is that you need to pay periodic attention to your asset allocation, as dividend reinvestment naturally probably keeps you relatively close to your initial targets, while reinvesting cash in new things can get you out of whack much more quickly.
This is what I more or less do. I only own six individual stocks and they are all in one account (except for one outlier) so when I get cash dividends in that account I usually just reinvest that cash back into one of the six stocks that I think is the Best Buy at the time. Occasionally, I'll add a new stock.
12:47p, 5/1/24
It also is worthwhile to look at how the "dividend" is received.
I own 2 MLP's whose dividends come as a distribution. I get a K-1 that historically has shown the business to be losing money, so it helps on my taxes.
I look at it as passive income, using it when needed while it accumulates in a WFA cash acct.
I own 2 MLP's whose dividends come as a distribution. I get a K-1 that historically has shown the business to be losing money, so it helps on my taxes.
I look at it as passive income, using it when needed while it accumulates in a WFA cash acct.
Ronnie '88
2:23a, 5/17/24
In reply to billikenag
Extremely newb question. I know that if I buy a fund (looking at VOO and/or SCHD) before or after the ex-div date I will not receive the next dividend payout. My question is, will I receive the dividend payout at all, or do I have the wait for the ex-dividend date to be announced?
I would rather throw a little $ monthly to invest rather than quarterly to start off but did not want to invest before or after the ex-dividend date if I will never receive the dividend.
billikenag said:
Yes--dividends should be reinvested in similar/different securities as long as the money is not needed for living expenses. That's the basis of compounding/compound interest.
As to how exactly to go about reinvesting dividends... Are you indexing or valuing and buying individual positions?
If you are indexing, just reinvest the dividends automatically as another form of dollar cost averaging.
If you value and buy individual securities, I recommend letting the dividends pool in the account and using them to purchase more of the securities you already hold or initiate new positions based on your own calculations of price to intrinsic value (which is the very essence of valuing and buying an individual security and purchasing when security price represents a discount to security intrinsic value).
Extremely newb question. I know that if I buy a fund (looking at VOO and/or SCHD) before or after the ex-div date I will not receive the next dividend payout. My question is, will I receive the dividend payout at all, or do I have the wait for the ex-dividend date to be announced?
I would rather throw a little $ monthly to invest rather than quarterly to start off but did not want to invest before or after the ex-dividend date if I will never receive the dividend.
7:04a, 5/17/24
I prefer to set it up to automatically be reinvested.
That way I don't have to worry about it flowing into cash and just sitting there earning little to nothing. At least that was the case in the past, but with cash earning about 5% that's not as important.
As long as you're diligent about managing your uninvested cash, I don't think it matters too much either way.
That way I don't have to worry about it flowing into cash and just sitting there earning little to nothing. At least that was the case in the past, but with cash earning about 5% that's not as important.
As long as you're diligent about managing your uninvested cash, I don't think it matters too much either way.
10:32a, 5/17/24
In reply to txag614
If you hold shares on the ex-div date, you will receive a dividend on those shares. So if you purchase and settle before the ex-div date, you get a payout.
If you buy after the ex-div date, you will need to wait until the next dividend payout to begin receiving dividends.
If I understand your question correctly ...txag614 said:
Extremely newb question. I know that if I buy a fund (looking at VOO and/or SCHD) before or after the ex-div date I will not receive the next dividend payout. My question is, will I receive the dividend payout at all, or do I have the wait for the ex-dividend date to be announced?
I would rather throw a little $ monthly to invest rather than quarterly to start off but did not want to invest before or after the ex-dividend date if I will never receive the dividend.
If you hold shares on the ex-div date, you will receive a dividend on those shares. So if you purchase and settle before the ex-div date, you get a payout.
If you buy after the ex-div date, you will need to wait until the next dividend payout to begin receiving dividends.