Do you have a preferred way to reinvest dividends?
- Thread starter Kevin_mat
- Start date
I prefer to reinvest dividends in the same way I would any other investment: by looking at the ROI.
Say I have $1,000 and I want to invest it. If I can earn 5% on that investment, that means it'll grow to $1,050 after a year. But if I can earn 10%, it'll grow to $1,100 after a year. That extra $50 is worth more to me than the other $50 because of how much time it takes for me to get there (as opposed to if I just got 5%).
So when it comes time to reinvest my dividends, I look at what they're paying out and compare them with what else is available on the market in terms of their ROIs. Then I choose the one with the best return for me based on my personal preferences for risk tolerance—which is different for everyone.