Business / Taxes / Reinvestment: When you own certain stocks and most mutual funds, you can reinvest the dividends or distributions to buy more shares instead of receiving a cash payout. In a corporate Dividend Reinvestment Plan (DRIP), for example, a company offers you the right to reinvest any cash dividends automatically to buy more stock. When you open a mutual fund account, you’re generally offered an automatic reinvestment option as well. One benefit of reinvestment programs is that in most cases you can make the new investments without incurring the usual sales charges, so it can be a lower cost way to build your investment portfolio. One potential drawback, if you’re reinvesting in a taxable account, is that you acquire shares at different prices, so figuring the cost basis for capital gains or losses when you sell can be more complicated than if you made fewer, larger purchases. It’s also true that you owe income or capital gains tax in the year the money is reinvested, which isn’t the case in a tax-deferred or tax-free account. You will also want to consider the impact of reinvestment on the diversification of your portfolio, since buying additional shares increases the percentage of your portfolio that is allocated to a particular stock or mutual fund.
Business / Real Estate / Community Reinvestment Act Of 1977 (CRA): Community reinvestment refers to the responsibility of financial institutions to help meet their communities needs for low- and moderate-income housing. In 1977, Congress passed the Community Reinvest MORE
Business / Finance / Reinvestment Risk: The risk that proceeds received in the future may have to be reinvested at a lower potential interest rate. MORE