Portfolio Clarity Foundations
Dividend Reinvestment
Definition
The automatic or manual purchase of additional shares using dividend income received rather than taking the cash.
Why it matters
It compounds return over time by increasing the number of shares held without additional capital outlay.
What most investors miss
The gap between what the term means and how it is usually applied.
They assume all dividends are reinvested when some brokers pay cash by default. Untracked reinvestment creates cost basis complexity.
How to read it
Record every reinvestment as a new purchase transaction with its own cost basis. Automatic reinvestment does not exempt it from tracking.
Multi-account lens
How this term reads differently across brokers and accounts.
Dividend reinvestment across multiple accounts is handled differently by each broker. Some reinvest automatically others pay cash. Without explicit tracking the total shares held and the cost basis are incorrect.
Related terms
Terms that connect to dividend reinvestment.
Dividend Income
The cash or reinvested shares received from holdings that pay regular distributions.
Fractional Shares
A partial ownership stake in a single share allowing investment in high-priced stocks with small amounts of capital.
Cost Basis
The original purchase price of a holding used to calculate the gain or loss when the position is sold.
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