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.