Hack 38 · Automated Wealth Builder
Auto-Reinvest Dividends and Earnings
Automatic dividend reinvestment takes the cash your investments pay out and buys more shares with it instead of leaving it idle. It is a single setting that turns your returns into compounding rather than into small, forgettable cash deposits. Over a decade, reinvested dividends account for a substantial share of total returns.
How to do it
- Find the dividend reinvestment setting in your brokerage profile.
- Turn it on for your long-term holdings.
- Leave it on until you actually need the income.
What it typically saves
Meaningfully increases long-term returns through compounding.
Questions people ask
Why not take the cash?
Because small cash payouts tend to be spent rather than reinvested. Automating the reinvestment removes the decision entirely.
Are reinvested dividends still taxed?
In a taxable account, generally yes, in the year they are paid. That is worth knowing before you assume reinvesting defers anything.
When should I switch it off?
When you start drawing on the portfolio for income. Until then, leaving it on is the whole point.
Go deeper
This is the short version. The full walkthrough lives in Money on Autopilot, book 2 of The Everyday Money Upgrade — where this hack comes with where the setting lives at each major brokerage, the tax treatment in taxable versus retirement accounts, and when to switch reinvestment off.
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