Why You Should Be Reinvesting Dividends
I’ve been investing in a few dividend stocks lately because savings account rates have been pretty abysmal. The prospect of earning a percent or two on my money is great for an emergency fund but lousy for anything long term.
One of the important ideas behind dividend investing is that you should reinvest the dividends if you don’t need the income. Public companies offered dividend reinvestment plans, or DRIPs, that let you buy shares directly from them and have your dividends reinvested for free. Nowadays, many brokers offer this service for free and I take advantage of them.
However, just because everyone says it’s a good idea doesn’t make it a good idea. Why should I reinvest my dividends?
The main argument, as far as I can see, for reinvesting dividends is because you get to dollar cost average additional shares at no additional cast, assuming your broker offers free dividend reinvestment (and many do). It’s recommended that you reinvest dividends because it lets you buy more of a company you had confidence in at absolutely no cost.
You still ...
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Categories: Uncategorized Tags: Confidence, Dividend Stocks, Dividends, Dollar, Emergency Fund, Investing, Savings Account