Reinvestment Strategy

[navyasw02]

Recent downturns and changes in my portfolio have gotten me thinking about a new strategy. Former top performers are now bottom performers and vice versa. I currently reinvest all positions automatically, but I'm thinking of only reinvesting stocks that are showing an unrealized loss and the unrealized gain stock dividends will also be reinvested into the underperformers. Is anybody doing something like that now and is it successful?

[Roadmap2Retire]

Hmmm interesting strategy. I dont use anything like that...I just have two holdings that cover my synthetic drip and drip both of them (KMI and OHI). Its a good way to automatically average down, the way you describe it.

[crimsonghost747]

I don't have a drip plan, I just buy more regularly. These new buys come from the dividends + additional cash I deposit. So I do not have a set plan of what to buy, I judge that based on my current weighting, the price of the shares and the outlook of the company.

I think this allows me to be much more flexible. Only thing is, I don't change the currency except when depositing new cash. So dividends paid in CAD will be reinvested as CAD, same for all other currencies except EUR since I often do EUR to USD or EUR to CAD.

[Caversham]

I'm relatively new to DGI, but I plan to employ a similar strategy. If I think a company is fairly/under valued I will reinvest the dividends back into the same company. If I think a company is *significantly* overvalued I will accumulate the dividends and reinvest them into different undervalued companies. Right now, all companies I own are DRIPing.

I'm not sure how well the unrealized gain/loss strategy will work over the long term. After 10 years, most of your positions should hopefully have unrealized gains.

[navyasw02]

(07-06-2015, 07:19 AM)Caversham Wrote: I'm relatively new to DGI, but I plan to employ a similar strategy. If I think a company is fairly/under valued I will reinvest the dividends back into the same company. If I think a company is *significantly* overvalued I will accumulate the dividends and reinvest them into different undervalued companies. Right now, all companies I own are DRIPing.

I'm not sure how well the unrealized gain/loss strategy will work over the long term. After 10 years, most of your positions should hopefully have unrealized gains.

Good point, maybe the metric for reinvestment should either be underperforming the market or the rest of the portfolio in the long run. I've only been doing this since October and I've seen some big swings which have led me to think about this strategy. WMT was my leader, now it's significantly trailing. AFL was trailing, now its leading. I think reinvesting in the current down stocks will pay back in the long run on recovery, but I have no proof that's sound logic.

[rayray]

Right now most of my stocks are dripping except in my brokerage account. In the brokerage account, all of my dividends are received in cash just for the reason it's less of a tax hassle down the road, I don't want to deal with partial shares and what not. In my ROTH, if a stock is beaten up or fairly valued, it gets dripped, if the the stock is overvalued, I take the cash. In my kplan retirement account, I buy the sector that is getting beaten up and I keep buying it and maybe continue buying after it starts rising until another sector looks like it's becoming a looser--basically the winner is bought until I see another opportunity. When a particular mutual fund gets around 15% of total portfolio I knock it down to 8 to 10% and put that cash in a another fund that has a lower percentage or one that took a hit.

[cannew]

All of our stocks get Full Dividend reinvestment. Don't collect the dividends in hopes of finding a better place to invest. Why pay a fee for small investment or hopes of timing the market. Just reinvest the dividends, whether the price is up or down. The changes are minor as far as number of shares bought, but with full at least I get fractions of shares with my purchases.

[twil]

Currently I full DRIP in both Roth/Regular accts.

My theory is, I have such little in divs coming in, we will say 10-20 per quarter per company, why not get fractional shares without having to pay the broker.

Maybe in the future when I get a more substantial dividend flow, I will change this strategy.

Hope that made sense. Good luck

[EricL]

I automatically reinvest in my IRA that continues to have regular deposits made. That way I can continue to build my core positions organically while also being able to take advantage of "sales" and add to positions with my new capital as it becomes available.

In an old IRA that does not have new capital being added I am taking my dividends in cash and accumulating until I have enough for a new purchase.

[Kerim]

I tend to agree with the general sentiment here -- if the incoming dividends are small, it makes sense to just reinvest and let the positions grow without the drag of fees. As the dividends grow over the years, the argument for accumulating the dividends and investing them in the best available opportunities starts to make more sense.

If you do accumulate and manually reinvest, you can choose from the whole universe of stocks though, and are not limited to just those in your portfolio that are "underperformers," which is I think what you are proposing?

[cannew]

(07-09-2015, 03:43 PM)Kerim Wrote: I tend to agree with the general sentiment here -- if the incoming dividends are small, it makes sense to just reinvest and let the positions grow without the drag of fees. As the dividends grow over the years, the argument for accumulating the dividends and investing them in the best available opportunities starts to make more sense.

If you do accumulate and manually reinvest, you can choose from the whole universe of stocks though, and are not limited to just those in your portfolio that are "underperformers," which is I think what you are proposing?

I would agree if one is in the accumulation mode and are adding money to the pot as well. Then you would be buying regardless and could add the dividends to your selection.

As we are retired and hold all of our positions, re-investing in the same stocks is what I would do, even if I added more funds. We have several stocks that pay us up to $3,000 per Qtr in dividends and like being able to reinvest at no cost.

[navyasw02]

(07-09-2015, 03:43 PM)Kerim Wrote: I tend to agree with the general sentiment here -- if the incoming dividends are small, it makes sense to just reinvest and let the positions grow without the drag of fees. As the dividends grow over the years, the argument for accumulating the dividends and investing them in the best available opportunities starts to make more sense.

If you do accumulate and manually reinvest, you can choose from the whole universe of stocks though, and are not limited to just those in your portfolio that are "underperformers," which is I think what you are proposing?

Yes, I contribute monthly to my account anyway of $X. I'm saying stop reinvesting in my stocks that are positive in the gains column and take those dividends $D and either re-invest into stocks I already like that are in the red at $X+D or into new positions. Since I would have invested anyway with a monthly contribution, there's no additional fees, just additional capital invested in underperforming stocks.