Dividend payments put right back to work, that can help you grow your portfolio it also costs and complications, but can.
For many people reinvest dividends may be among the most obvious and automatic rules for wealth creation, and with good reason-it is an easy way to more of the funds or shares, to get you already often cheaper than buying new ones with your trading account,.
Whether you it or not notice, often automatically reinvested dividends, which you will be paid for you especially if you own mutual funds. These dividend payments are an increasingly important part of the average person portfolio with yields on bonds close to historic lows.
Companies paying record dividends. The standard & poor's 500 index ($INX) company shareholders have $300 billion worth in the last 12 months, S & P data according to sent. The average dividend yield is little more than 2.5 per cent, and people flocked to dividend-paying stock fund, as they give up the bonds. Many brokers manage the reinvestment transactions for the shares, which help to keep their customers, less paperwork for the programs, which can be daunting. Fund companies offer them almost always for the funds, which sell them to investors.
But be careful. Reinvest dividend sometimes done through dividend reinvestment plans or drips, can be a burden for your savings, if you properly treat any payouts. Many people are not even aware what their dividends if they end up as money on their account. A look at how your account is set up, that fees to manage and optimize payouts serious money in the long term add up.
Here are things you can do to help ensure that you make the most of valuable dividends.
Make sure that you know how your dividends are paid
It sounds simple, but a lot of dividend payments are wasted or abused. You can set up your account, so that the payments directly into a money-market-go where returns are close to zero but have access to cash when you need it. Or they may automatically be reinvested in the Fund or stock.
"The reinvestment election can select or de selected at any time", says Steve Balaban, a financial consultant for Williams Financial Group. It applies to mutual funds, equity and debt, and individual stock positions, he adds. Bond are dividends payouts, which are normally a drip not part, unless you are a large investor.
The choice can be done automatically, but the decision was not to be.
If you reinvest dividends your should depending on overall investment needs. The reinvestment should reflect whether you build your savings or just before the time you need the income.
"If you long term invest reinvestment of dividends generally a good idea," says Arden Rodgers, financial consultant and principle of Arbus Capital Management LLC. "a large part of the total return of equity investments dividends."
Watch out for hidden fees
Sometimes you will be charged for the reinvestment dividends in shares of the company when you are in a drop. Even if you get a discount on the purchase of shares by 2 to 4 percent, a Commission for the reinvestment purchases of shares are added to the cost and was able to eat with the tee.
While there is often no direct fee for participating in a drip and it is usually cheaper than buying shares on the open market, possibly also a transaction fee for the purchase of shares for your account. Some reinvestment plans are some deduct the dividend payment fees. Each estate agents have their own kind of such shipping charges, so you need to check.
Also don't forget to check, you could make "Opportunity cost" of reinvestment in the same Fund or company again and again against what elsewhere. Note, that investment funds and companies often have a vested interest in their shares to keep, but it mind, may not be the best idea for your own retirement savings plans.
Make sure that your investment will raise not your assignments from the series
Don't like 1% or 2% on common shares as a big deal, especially when thinking about a dividend to pay themselves. But if you reinvested automatically into a speculative high-yield bond fund, which manages a 10-percent return, and become, it could throw your portfolio in a hurry out of balance.
Reinvestment of the still relatively small payouts can your assignments where you want them that gradually move. "In the course of time reinvestment of dividends your portfolio out of balance with your desired portfolio structuring push can," says Rodgers.
You make the best of compound interest by investing to stay
Re investment "stopping you with a cash drag for your return, if you immediately reinvest not the cash dividend," says Rodgers. The advantage with automatically add to your investment is that you no matter what. Behavioral finance studies show that savings automatic, rather you save if you must actively choose. In a study published by the National Bureau of economic research found Harvard University researcher Brigitte Madrian, that the number of participants at the workplace savings plans almost doubled when people were "Auto enrolled,", compared with the number who did it when they had to subscribe to a plan. The same principle applies reinvestment of dividends.
While people invest in stock dividends have often ignored, they are worth, attention and can really add too much money in the course of time. Rodgers writes that the S - and P-500-index is about 53 percent in the past five years. If you followed a plan of reinvestment of dividends on shares of S & P, your return would be 71 percent. So is the advantage is if you own shares required and their associated risk can handle and you do not require dividends for other purposes such as income.
"If the client in the distribution phase of their life is, I most recommend that they are not reinvested," says Balaban. "I don't think that the introduction of market risk into the equation in the interest of the customer is, if I know that the income will be deducted."
0 коммент.:
Post a Comment