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In my Fidelity Account I own a number of index stock funds. Historically I purchased mostly ETF's. When the dividends were paid on these investments they would put it in the cash account where it would collect up for as long as a year. At the end of the year I would see how much is in my cash account and then buy a new stock with the money. (But again the money sat in the cash account for a year not earning a dime.)
Then I discovered Mutual Funds. I like them better because my dividends are automatically reinvested every month into the fund. So I am always purchasing new shares with the dividend and my money seems to grow faster over time.
Most Brokerages (definitely Fidelity) allow you to select Dividend re-investment on stock/ETF's you own in "Street" name.
Call them and ask them to change that option on your account, Next time one of your stocks/ETF's make a dividend, the Next day (Fidelity) will buy that dollar amount of that stock/ETF.
You can typically have your brokerage automatically reinvest dividends of a stock or of an ETF via something called a DRIP: Dividend Reinvestment Plan. You get to the same place as a mutual fund.
2nd. With dividend reinvestment, over time your overall portfolio allocation can drift from what you want it to be. This happens with MFs, with ETFs, and with individual security ownership.
That's why you should rebalance a couple times per year. This entails selling a bit of your winners and buying a bit of your losers. Over time, you'll watch the total value of your portfolio grow much more than if you had not rebalanced.
You can typically have your brokerage automatically reinvest dividends of a stock or of an ETF via something called a DRIP: Dividend Reinvestment Plan. You get to the same place as a mutual fund.
2nd. With dividend reinvestment, over time your overall portfolio allocation can drift from what you want it to be. This happens with MFs, with ETFs, and with individual security ownership.
That's why you should rebalance a couple times per year. This entails selling a bit of your winners and buying a bit of your losers. Over time, you'll watch the total value of your portfolio grow much more than if you had not rebalanced.
The truth is the portfolio drift is caused by growth/losses because absent growth your allocation wouldn't change even with dividend reinvestment
I like mutual funds because they provide lower returns. I figure I'll just spend the money on stupid stuff so I'm happy to give the extra money to fund managers.
I like mutual funds because they provide lower returns. I figure I'll just spend the money on stupid stuff so I'm happy to give the extra money to fund managers.
This isn't necessarily true. In fact, many index funds are mutual funds. Index funds that don't settle until the end of the day are mutual funds. Ones that change price like stocks are ETFs.
I like mutual funds because they provide lower returns. I figure I'll just spend the money on stupid stuff so I'm happy to give the extra money to fund managers.
Yeah I don't understand your post either. The OP clearly said he was in index funds and ETFs. That strategy was supported by your graphic but not your words.
So what if there is no automatic reinvestment? Couldn't you still buy more shares on or shortly after the dividend pay day? I never choose automatic reinvestment of dividend of the mutual funds. I just buy more when it seems a good time to buy, such as when there is a dip in price. You could even buy the same amount as the dividend that was just paid. No automatic reinvestment doesn't mean you can't buy more shares.
Is automatic reinvestment preferable because it's a lazy method or what?
So what if there is no automatic reinvestment? Couldn't you still buy more shares on or shortly after the dividend pay day? I never choose automatic reinvestment of dividend of the mutual funds. I just buy more when it seems a good time to buy, such as when there is a dip in price. You could even buy the same amount as the dividend that was just paid. No automatic reinvestment doesn't mean you can't buy more shares.
Is automatic reinvestment preferable because it's a lazy method or what?
Transaction costs.
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