Definition of Automatic Reinvestment

Automatic reinvestment is an investment option in which the money earned from a fund’s dividends or capital gains is used again automatically to buy more units in the funds.

Points to Remember:

• Using this investment strategy, an investor can benefit from the power of compounding.
• Investors usually adopt this strategy if the fund is already making them profits.
• The gain from the funds is not distributed to the investor. Instead, it is used for buying more units of the same fund.