Please stay tuned for important disclosure information at the conclusion of this episode.

Welcome to Investing Insights. I'm your host, Ivana Hampton. Are you putting enough thought into reinvesting your stock and fund dividends? You may have checked a box indicating a reinvestment

preference when you open your brokerage account. Your 401k provider likely checked yes for you

when you signed up. If you haven't given it a second thought since, the reinvestment election

deserves your attention. Does your decision match your financial goals?

And are you managing the necessary details?

Morningstar Inc. Portfolio Strategist.

Amy Arnott is here to explain tips for smarter dividend reinvesting.

Thanks for being here, Amy.

Thanks for having me. Well, let's focus on when

dividend reinvesting works as a strategy and when it doesn't. Who should consider reinvesting

their dividends? So if you're investing for long-term growth, normally you would want to reinvest your dividends.

And if you look at long-term returns for the

stock market, it's about 10% per year on average with dividends making up 4% of that. So if you

are looking to maximize growth and really tax advantage of compounding over time, normally you would want to reinvest your dividends.

When shouldn't an investor reinvest their dividends?

Yeah, so a lot of people when they start their retirement, they like to use dividend income

as one way to help cover their living expenses during retirement.

So if you're in that situation where you're retired and you want your portfolio to generate

income to help cover part of your expenses, normally you wouldn't want to reinvest your

dividends. Another case might be if you have a large holding

in an individual stock and you don't want to keep adding to it

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