DRIP (dividend reinvestment)

A dividend reinvestment plan uses each payment to buy more of the same holding instead of leaving the cash in your account. Some companies and funds run it themselves; more often it is a setting at your broker. Either way the result is a small extra purchase on every payment date, frequently for a fractional number of shares.

Why it matters

Reinvested payments start earning payments of their own, which is compounding in its plainest form. The bookkeeping consequence is less pleasant: a position with reinvestment switched on generates several purchases a year at prices nobody chose, so its average cost keeps moving and its share count ends in long decimals. A portfolio of ten reinvesting holdings can produce more transactions in a year than an active trader, and every one of them belongs in your cost basis.

How BullBenchmark shows it

Reinvestment purchases arrive in your export as ordinary buys, and we treat them that way: each one updates the share count and the average cost of the position it belongs to. Fractional share counts are read as they appear in the file, without rounding them into something tidier than the truth. The dividends that funded those purchases stay visible as received income, so the cash and the shares it bought are both on the record. You can see how the resulting positions are presented on the demo portfolio.

Related terms

Dividend · Cost basis · Accumulating and distributing funds

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