View Full Version : Automatic dividend reinvestment
JackB
02-14-2023, 02:57 PM
It is usually good to have dividends reinvested over the years but it has been a while so looking for some updated opinions. Formerly, in a taxable account, auto dividend reinvestment in individual stocks could be a pain because each reinvestment created a separate cost basis and if a portion of the stock holding was sold down the road one needed to account for each reinvestment cost which could be a pain. Lots of folks especially did this with utility stocks due to the high dividends. Would be interested in any comments on doing auto reinvestments of dividends currently relative to any changes over the years. Do brokerage firms keep better track now and provide records to help at tax time, any tax law changes made etc. ?
Stu from NYC
02-14-2023, 03:24 PM
It is usually good to have dividends reinvested OVER but it has been a while so looking for some updated opinions. Formerly, In a taxable account, auto dividend reinvestment in individual stocks could be a pain because each reinvestment created a separate cost basis and if a portion of the stock holding was sold down the road one needed to account for each reinvestment cost which could be a pain. Lots of folks especially did this with utility stocks due to the high dividends. Would be interested in any comments on doing auto reinvestments of dividends currently relative to any changes over the years. Do brokerage firms keep better track now and provide records to help at tax time, any tax law changes made etc. ?
Mostly invested in mutual fund were we do reinvest and fund managers keep good track of our cost basis.
Rainger99
02-14-2023, 04:48 PM
It is usually good to have dividends reinvested OVER but it has been a while so looking for some updated opinions. Formerly, In a taxable account, auto dividend reinvestment in individual stocks could be a pain because each reinvestment created a separate cost basis and if a portion of the stock holding was sold down the road one needed to account for each reinvestment cost which could be a pain. Lots of folks especially did this with utility stocks due to the high dividends. Would be interested in any comments on doing auto reinvestments of dividends currently relative to any changes over the years. Do brokerage firms keep better track now and provide records to help at tax time, any tax law changes made etc. ?
For any mutual fund or stock that was bought after January 1, 2011, brokerage firms are required to keep track of your cost basis. If it was bought before 1/1/11, you have to have the records - but some brokerages keep records before that date.
dewilson58
02-14-2023, 05:08 PM
If you bank / investment firm is not tracking cost basis today, you are with the wrong bank / investment firm.
retiredguy123
02-14-2023, 10:00 PM
Most of my investments are in mutual funds, but I have all dividends and capital gains distributions transferred into my money market account. No automatic reinvestment. Yes, the investment company, Vanguard, does track my cost basis either way, but I like to maintain control of when I buy additional shares. I can reinvest whenever I want to.
rjm1cc
02-15-2023, 07:38 AM
If you do not need the money for basic living expenses now, reinvest for the future. Broker will do the accounting.
Ecuadog
02-15-2023, 02:30 PM
Most of my investments are in mutual funds, but I have all dividends and capital gains distributions transferred into my money market account. No automatic reinvestment. Yes, the investment company, Vanguard, does track my cost basis either way, but I like to maintain control of when I buy additional shares. I can reinvest whenever I want to.
Controlling what you reinvest in also helps with rebalancing.
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