Hi all, just wondering what everyone’s thoughts were on reinvesting dividends.
Do you reinvest dividends back into the company they came from, or add it to your pot and invest in something potentially better?
Wondering what’s best in the long run, or your preference and why.
Thanks in advance.
It depends at least in part on how you conceptualise money. We’re not dealing with physical cash so there’s really no separating some of the money in your account that you got from a dividend from some other money in your account that you deposited yourself; they both are just contributions to your balance.
Personally I’ve always had that attitude even when it is physical cash. That £5 I got for my birthday when I was a kid was no different from any other £5 I had so I didn’t treat it any differently. It was just money that I had.
It’s your money regardless of the source so when you get a dividend think of it the same as any other money that you’ve deposited. Would you put further deposits into the company that paid the dividend or do you think your money would work better for you elsewhere?
At the moment I just lump it together with my monthly investment and reinvest it into whatever is needed to be bumped up percentage wise.
When drip and fractionals turn on, I’ll probably switch it in and let it accumulate.
I’m really hoping for automatic portfolio rebalancing though, that would be ace!
I would do the same and lump it together. I just read something that the companies would prefer it if you reinvested the dividend back into them. As a shareholder we want the companies to grow, but we’re primarily in this for portfolio growth. Better opportunities may arise but would this be at the cost of another company who’s just paid dividends? Bit of a paradox (almost).
Hope that makes sense.