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Automatic dividend reinvestment
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. ?
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If you bank / investment firm is not tracking cost basis today, you are with the wrong bank / investment firm.
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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.
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If you do not need the money for basic living expenses now, reinvest for the future. Broker will do the accounting.
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