Do you reinvest your dividends/capital gains?

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Re: Do you reinvest your dividends/capital gains?

Post by mcblum » Sat Sep 02, 2017 6:43 am

Wife and I are retiring at end of September. We are both going to take dividends from Roth IRA (both VBILX/intermediate bond fund) in cash. Principle will stay same ; less will be taken out of taxable and RMD as usual.
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Re: Do you reinvest your dividends/capital gains?

Post by The Wizard » Sat Sep 02, 2017 7:54 am

Ice-9 wrote:
Fri Dec 18, 2015 11:22 am
In tax-advantaged account --> I reinvest

If taxable account --> send divs and cap gains to money market account, so I don't have to track of cost basis of these smaller purchases
Same here. Then I put additional money in the MM settlement account and invest the whole amount.
Note that it takes three days for a transfer from checking to Vanguard settlement account to "settle" before you can buy a different fund with it...
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Re: Do you reinvest your dividends/capital gains?

Post by Doc » Sat Sep 02, 2017 8:34 am

The Wizard wrote:
Sat Sep 02, 2017 7:54 am
Ice-9 wrote:
Fri Dec 18, 2015 11:22 am
In tax-advantaged account --> I reinvest

If taxable account --> send divs and cap gains to money market account, so I don't have to track of cost basis of these smaller purchases
Same here. Then I put additional money in the MM settlement account and invest the whole amount.
Note that it takes three days for a transfer from checking to Vanguard settlement account to "settle" before you can buy a different fund with it...
If you initiate the transfer from the bank to Vanguard Brokerage the amount is available to trade with a minute or two. You cannot withdraw the money before settlement which may be only two days starting next September 5, 2017.
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Re: Do you reinvest your dividends/capital gains?

Post by grabiner » Sat Sep 02, 2017 3:31 pm

In my taxable account, I neither reinvest nor take the check. My dividends go to my money-market fund, and I then invest the money-market fund in the appropriate place, which is not usually the fund that the dividend came from. For example, I am currently underweighted in international small-cap, and overweighted in international large-cap. Therefore, all of my September dividends will go to my money-market fund, and those dividends, plus the spare cash I accumulate, will be used to buy Vanguard FTSE All-World Ex-US Small-Cap as soon as I have enough to buy 100 shares. I don't want to reinvest my dividends in Vanguard Developed Markets Index, because that fund is overweighted, and I would have to sell the reinvested dividends to rebalance.

My December taxable dividends don't even stay in the same account; I use them in January to make my IRA contribution.

In my Roth IRA, I do reinvest for convenience, as rebalancing there is free. If REITs are up, the shares purchased with the dividends I reinvested in REIT Index can be sold to purchase another fund, at no cost.
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oldzey
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Re: Do you reinvest your dividends/capital gains?

Post by oldzey » Sat Sep 02, 2017 3:38 pm

Here's what I do:

Tax-advantaged (Roth IRA): reinvest dividends/capital gains

Tax-deferred (403b): reinvest dividends/capital gains

Taxable (brokerage): dividends/capital gains sent to checking account
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Re: Do you reinvest your dividends/capital gains?

Post by The Wizard » Sat Sep 02, 2017 3:40 pm

Doc wrote:
Sat Sep 02, 2017 8:34 am
The Wizard wrote:
Sat Sep 02, 2017 7:54 am
Ice-9 wrote:
Fri Dec 18, 2015 11:22 am
In tax-advantaged account --> I reinvest

If taxable account --> send divs and cap gains to money market account, so I don't have to track of cost basis of these smaller purchases
Same here. Then I put additional money in the MM settlement account and invest the whole amount.
Note that it takes three days for a transfer from checking to Vanguard settlement account to "settle" before you can buy a different fund with it...
If you initiate the transfer from the bank to Vanguard Brokerage the amount is available to trade with a minute or two. You cannot withdraw the money before settlement which may be only two days starting next September 5, 2017.
I initiated a transfer on the Vanguard website of $1000 from my linked checking account to my taxable brokerage settlement account about a month ago. It took three days before I was able to move that money, along with a small amount of dividends, into VTSAX.
I may be doing this again in October after third quarter dividends are paid.
I'll see if it's any different then. I'll do the transfer from checking on a Monday or Tuesday to avoid any weekend issues...
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Re: Do you reinvest your dividends/capital gains?

Post by Broken Man 1999 » Sat Sep 02, 2017 3:46 pm

Yes, all dividends are reinvested, and any capital gains as well.

I would find it too unnecessarily complex to follow all the accounts sending money hither and yon. Plus I am very lazy and just reinvesting is so much easier.

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Re: Do you reinvest your dividends/capital gains?

Post by Doc » Sat Sep 02, 2017 5:21 pm

The Wizard wrote:
Sat Sep 02, 2017 3:40 pm
I initiated a transfer on the Vanguard website of $1000 from my linked checking account to my taxable brokerage settlement account about a month ago. It took three days before I was able to move that money, along with a small amount of dividends, into VTSAX.
The money doesn't have to be in your settlement account in order to trade.

Expand the "Available Balance" pull down and click on "Total credits and debits". Somewhere on the next page you will should see the transfer credit probably under "Trade date balances" or "Other pending activity".

I do this regularly to take advantage of my margin account at another broker. I initiate $'s from broker X to my bank and immediately pull from the same bank to Vanguard initiating the transfer at Vanguard. This way I get to use my margin at both brokers.

You can't go the other way without a margin account. Pushing money from the broker to a bank in a cash account requires you to wait for "settlement" before the money is sent.

Perhaps "move that money ... into VTSAX" meant that the VTSAX was in a different account. :idea:
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Re: Do you reinvest your dividends/capital gains?

Post by Artsdoctor » Sat Sep 02, 2017 6:54 pm

You can also try clicking on the Buy link of your Total Stock Market fund. See what options you have. You may be able to transfer directly from your bank directly to the fund and bypass the settlement account altogether. If this is not possible right now, you can work with Vanguard to open up direct transfer access.

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Re: Do you reinvest your dividends/capital gains?

Post by Doc » Sat Sep 02, 2017 8:47 pm

Artsdoctor wrote:
Sat Sep 02, 2017 6:54 pm
You can also try clicking on the Buy link of your Total Stock Market fund. See what options you have. You may be able to transfer directly from your bank directly to the fund and bypass the settlement account altogether. If this is not possible right now, you can work with Vanguard to open up direct transfer access.
Just tried that. Got ~ "your bank account will be debited in 2 or 3 days".

I assume that the trade date will be next business day since markets are now closed.

Interesting.

(Bank transfers are already set up.)
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Re: Do you reinvest your dividends/capital gains?

Post by BanditKing » Sat Sep 02, 2017 10:18 pm

Fully re-invest in tax-advantaged accounts. For taxable accounts, I have proceeds go to my sweep account, and then manually reinvest them into anything lagging in my overall Asset Allocation, or invest according to my overall AA.

I may take a portion of any taxable payout and put it into a High-Yield Savings account (at Ally Bank) I keep for any taxes on self-employment or 1099 income, or other income. When I pay my taxes, I withdraw that account down to $1000 and roll any excess into my taxable investment account or debt. Most of my taxable dividends are from municipal bond funds, so they are largely tax free. I don't retain any of their earnings in my tax escrow account.

Any interest from my High-Yield Savings accounts roll over to my tax escrow account for simplicity. I'll then access it as above at the end-of-year sweep.

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Re: Do you reinvest your dividends/capital gains?

Post by JustinR » Sat Sep 02, 2017 10:52 pm

Retirement accounts: reinvest

Taxable: cash the check, invest to rebalance. This lets you rebalance in your taxable without selling.

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Re: Do you reinvest your dividends/capital gains?

Post by Goal33 » Sat Sep 02, 2017 10:55 pm

oldzey wrote:
Sat Sep 02, 2017 3:38 pm
Here's what I do:

Tax-advantaged (Roth IRA): reinvest dividends/capital gains

Tax-deferred (403b): reinvest dividends/capital gains

Taxable (brokerage): dividends/capital gains sent to checking account
Same here
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Re: Do you reinvest your dividends/capital gains?

Post by Dandy » Sat Sep 02, 2017 11:31 pm

I am retired and will take my 1st RMD next year.

TIRA - reinvest all dividends - my brokerage CDs have no option to reinvest -- what to do with those dividends will be different each year.

Taxable - all dividends to cash. Since my TIRA is fixed income heavy and my taxable is equity heavy the combination of RMDs lowering my fixed income and equities tending to grow more than fixed income is likely to give me a rising glide path for equities. So, reinvesting taxable dividends in taxable equities would just add to that concern. Also, use taxable dividends to spend on things that upgrade my life style and gifts to kids/grandkids.

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Re: Do you reinvest your dividends/capital gains?

Post by Dandy » Sat Sep 02, 2017 11:32 pm

I am retired and will take my 1st RMD next year.

TIRA - reinvest all dividends - my brokerage CDs have no option to reinvest -- what to do with those dividends will be different each year.

Taxable - all dividends to cash. Since my TIRA is fixed income heavy and my taxable is equity heavy the combination of RMDs lowering my fixed income and equities tending to grow more than fixed income is likely to give me a rising glide path for equities. So, reinvesting taxable dividends in taxable equities would just add to that concern. Also, use taxable dividends to spend on things that upgrade my life style and gifts to kids/grandkids.

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Re: Do you reinvest your dividends/capital gains?

Post by The Wizard » Sun Sep 03, 2017 5:37 am

Artsdoctor wrote:
Sat Sep 02, 2017 6:54 pm
You can also try clicking on the Buy link of your Total Stock Market fund. See what options you have. You may be able to transfer directly from your bank directly to the fund and bypass the settlement account altogether. If this is not possible right now, you can work with Vanguard to open up direct transfer access.
Direct access works fine. I do that frequently.
But that doesn't pick up the small amount of dividends in my settlement account.
Even if I bought more VTSAX with my dividends and with new money (separately) on the same day, I'd probably end up with two lots.
My goal is to avoid small lots of only reinvested dividends...
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Re: Do you reinvest your dividends/capital gains?

Post by The Wizard » Sun Sep 03, 2017 5:45 am

Doc wrote:
Sat Sep 02, 2017 8:47 pm

Just tried that. Got ~ "your bank account will be debited in 2 or 3 days".

I assume that the trade date will be next business day since markets are now closed.

Interesting.

(Bank transfers are already set up.)
Right.
That feature allows one to buy on the dips by putting in a Vanguard mutual fund order at 3:30 ET when the markets are open.
But those new shares are provisional until the money transfer from your checking account completes...
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Re: Do you reinvest your dividends/capital gains?

Post by Doc » Sun Sep 03, 2017 7:44 am

The Wizard wrote:
Sun Sep 03, 2017 5:45 am
But those new shares are provisional until the money transfer from your checking account completes
They are not "provisional". You own them. You just will have a trade violation if you sell before settlement. It may be that the settlement date is longer than the normal time period because of the incoming funds.

The broker may be able to sell the position if you overdraw your checking account but that's either your problem or the bank's not the broker.

This is no different then selling a T3 (now T2) and buying a T1.
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Re: Do you reinvest your dividends/capital gains?

Post by The Wizard » Sun Sep 03, 2017 8:10 am

Doc wrote:
Sun Sep 03, 2017 7:44 am
The Wizard wrote:
Sun Sep 03, 2017 5:45 am
But those new shares are provisional until the money transfer from your checking account completes
They are not "provisional". You own them. You just will have a trade violation if you sell before settlement. It may be that the settlement date is longer than the normal time period because of the incoming funds.

The broker may be able to sell the position if you overdraw your checking account but that's either your problem or the bank's not the broker...
Whatever the proper word is, Vanguard Brokerage puts restrictions on those new shares until they are confident your ACH transfer was good.
As you mentioned, changes are happening to speed that up.
https://www.nacha.org/rules/updates
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Re: Do you reinvest your dividends/capital gains?

Post by Doc » Sun Sep 03, 2017 10:13 am

The Wizard wrote:
Sun Sep 03, 2017 8:10 am
Whatever the proper word is, Vanguard Brokerage puts restrictions on those new shares until they are confident your ACH transfer was good.
It is not the ACH transfer per se and it is not just Vanguard. It is an industry standard.
Vanguard wrote:But we can restrict trading in your accounts if your transactions violate industry regulations and the Vanguard Brokerage Account Agreement.
Read about trade violations here:

Trading violations & penalties - https://investor.vanguard.com/investing ... -penalties

In particular your question involves "Liquidations resulting from unsettled trades". In the bank transfer case it is the transfer that is "unsettled" and as long as you do not sell what you just bought (liquidate it) before the purchase money settles you are good to go.
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Re: Do you reinvest your dividends/capital gains?

Post by scrabbler1 » Sun Sep 03, 2017 11:10 am

When I was still working, I reinvested everything. After I retired 9 years ago at age 45, I changed this. Originally, I took as cash the monthly dividends from my big bond fund and reinvested everything else. But a few years ago, I needed to take as cash a little bit more, so I began taking as cash the quarterly dividends from my main stock fund. The rollover IRA reinvests everything, of course. The irregular and more erratic cap gain distributions along with some smaller monthly muni bund fund dividends get reinvested, too.

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Re: Do you reinvest your dividends/capital gains?

Post by Artsdoctor » Sun Sep 03, 2017 3:37 pm

I can tell you what I've learned over the past couple of months. It shouldn't be this difficult, and in the general scheme, it's not that important. But I will freely admit that the process has been aggravating.

These observations pertain to the "upgraded" accounts which have settlement funds. We still have "old-fashioned" mutual funds accounts which behave a little differently.

You can transfer money in to the account from whichever bank(s) you have linked to Vanguard. I originally had been signing up my bank accounts one by one until my representative "did it all for me": the next day, I had multiple bank accounts linked to every Vanguard, which was pretty surprising.

If you transfer money in, it is sometimes held. (Sometimes, it is not; the money I transfer in from Fidelity is immediately available.) It's been my experience that the money is held "until it clears" from banking accounts but not online brokerage accounts.

Once you have it, you can begin trading immediately. However, you may wind up getting several alerts along the way telling you that you don't enough money to make the trade. In reality, this are called "soft alerts" and your trading will not be hindered. That money will be "tagged" until it's cleared; if you transfer it in to your total market fund, it's definitely there and starting to work for you. You could conceivably transfer it out somewhere else at Vanguard but the new money is still "tagged." You won't be able to transfer those uncleared funds out of Vanguard but you can still use it (this comes in handy when you transfer it to bond funds, for example).

Your settlement fund will tell you how much you have available to trade. If you can't seem to trade within that account, you can try to go up to the upper left quadrant of the screen and click "Buy and Sell." It'll ask for you to pick your account. Somehow, that can be the only way to purchase shares if all else fails.

There are other things that you can do force a purchase and I don't want to confuse the instructions. I've called Vanguard and the first representative admitted that she would have to transfer me to brokerage services. They seem to have right consistently.

For what it's worth, I am not technically set up for margin. However, I want to set up a buy limit order, it'll go through even if I don't have money in the settlement fund. If the trade executes, I can sell something to provide the money for the sale. If I'm not available for some reason (vacation without a computer, for example), Vanguard will find the money somewhere, sell the funds, and the purchase will go through.

I'm sorry if I've confused anyone. This has been a true learning experience which was started to make things easier. In the end, it is; however, it's been a real journey.

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Re: Do you reinvest your dividends/capital gains?

Post by Doc » Sun Sep 03, 2017 5:35 pm

Artsdoctor, you are confusing me. (I'm only addressing Vanguard Brokerage Service.)
Artsdoctor wrote:
Sun Sep 03, 2017 3:37 pm
If you transfer money in, it is sometimes held. (Sometimes, it is not; the money I transfer in from Fidelity is immediately available.) It's been my experience that the money is held "until it clears" from banking accounts but not online brokerage accounts.
There is a difference between initiating a transfer from a non-Vanguard account (push) and initiating a transfer from Vanguard (pull).

If you push the money the dollars first go to Vanguard's corespondent bank and Vangaurd doesn't know anything about it until that money gets there. If I push from Schwab it take two day's for Vanguard to know about it. (I gave up pushing from banks because it took forever and kept getting messed up.) If you pull from your bank Vanguard knows about it immediately and you can use it to buy something in the same account. You can do that right away even though the bank still doesn't know anything about the transfer for 2 or 3 days. You can't pull from another broker directly. That is a one way street. (You might be able to pull from Schwab bank but that is not a broker. It is a bank.)

Anyway with these thoughts in mind can you restate what you are seeing. It doesn't seem to agree with my actual experience.

The push or pull and the Vg Mutual Fund Account or Vg Brokerage account may be reasona for the differences.
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Re: Do you reinvest your dividends/capital gains?

Post by Earl Lemongrab » Mon Sep 04, 2017 1:05 pm

Many seem to be taking "reinvest" to mean automatic reinvestment in the same holding. The OP (by the way from 2015 so another resurrection) didn't say anything about that.

I don't do any automatic investing. I don't like having fractional shares of ETFs because that is often a pain when transferring, which I do a lot. However, all earnings are used to purchase shares in whichever allocation is lagging at the time.
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Re: Do you reinvest your dividends/capital gains?

Post by Artsdoctor » Mon Sep 04, 2017 1:42 pm

Doc wrote:
Sun Sep 03, 2017 5:35 pm
Artsdoctor, you are confusing me. (I'm only addressing Vanguard Brokerage Service.)
Artsdoctor wrote:
Sun Sep 03, 2017 3:37 pm
If you transfer money in, it is sometimes held. (Sometimes, it is not; the money I transfer in from Fidelity is immediately available.) It's been my experience that the money is held "until it clears" from banking accounts but not online brokerage accounts.
There is a difference between initiating a transfer from a non-Vanguard account (push) and initiating a transfer from Vanguard (pull).

If you push the money the dollars first go to Vanguard's corespondent bank and Vangaurd doesn't know anything about it until that money gets there. If I push from Schwab it take two day's for Vanguard to know about it. (I gave up pushing from banks because it took forever and kept getting messed up.) If you pull from your bank Vanguard knows about it immediately and you can use it to buy something in the same account. You can do that right away even though the bank still doesn't know anything about the transfer for 2 or 3 days. You can't pull from another broker directly. That is a one way street. (You might be able to pull from Schwab bank but that is not a broker. It is a bank.)

Anyway with these thoughts in mind can you restate what you are seeing. It doesn't seem to agree with my actual experience.

The push or pull and the Vg Mutual Fund Account or Vg Brokerage account may be reasona for the differences.
Your illustration of push and pull is very accurate. When I "pull" money into Vanguard, there is a clearing period of several days. I can trade that money even if it's "unavailable." When I "push" money into Vanguard from another brokerage firm, it's usually available the next day and all of the money is available when it's received by Vanguard. When I "push" money into Vanguard from a bank, as you say, there is more of a delay but the money is available whenever Vanguard receives it.

When I push or pull from or to a mutual fund, the transaction is generally faster than when I push or pull into the settlement account. I have a Vanguard Advantage account which acts like a checking account as well as a settlement account so it took me some time to get used to what I could and could not do.

Now that the settlement days have been decreased from 3 to 2, we'll see if this works out to be easier overall or not. There are pros and cons, depending on how an investor "uses" those 2 (or 3) days.

Getting back to one of the posters who prompted this discussion, the amount you see available in your settlement fund to trade is actually there and available to trade regardless of what alerts you might get. The one thing that has happened to me is that I generally do not reinvest dividends or capital gains, and I had been directing them into a fixed income mutual fund account (or money market fund); now, if I'm not going to reinvest into the fund paying, the dividends will be diverted into the settlement fund. I hope this might clarify some things, although it's still a bit more complicated that it used to be "in the old days."

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Re: Do you reinvest your dividends/capital gains?

Post by Doc » Mon Sep 04, 2017 1:51 pm

Artsdoctor wrote:
Mon Sep 04, 2017 1:42 pm
Getting back to one of the posters who prompted this discussion, the amount you see available in your settlement fund to trade is actually there and available to trade regardless of what alerts you might get.
Yes that warning can be misleading to those not familiar with the details of the rules but that is better than someone inadvertently having a trade violation.
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Re: Do you reinvest your dividends/capital gains?

Post by minesweep » Mon Sep 04, 2017 2:40 pm

We get this question asked at this forum every so often. Now we are getting a resurrected question from 2015. :shock:

I stopped looking once I got to page 4

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