We all know that the goal for investing is so our money can grow. When we put our money into an investment; for example, in a money market fund, equity fund, bond fund, or growth fund, our goal is to have that money grow within a certain period of time. Whether it’s a short-term or long-term investment, our goal is that a few months or years from the day you start investing, our money will be way more than it is at your initial investment.

Reinvesting your dividends

The question is, what are your options when it comes to the dividends that your investment has yielded? Do you go on a spending spree, or do you reinvest it? There could be good reasons to spend all your dividends, and on the other hand, good reasons not to spend the dividends. Note that no option is automatically better than any other. That means that it is up to you, the investor, to choose what’s best for your money, by answering the question: what do you do with dividend payments?

If your sole purpose of investing is income generation, then you’ll probably go with the option of spending your dividends and not reinvesting them. That is often an easy answer. However, keep in mind that this is not always your only option. Ask yourself this: how much of the dividends do I actually need for my income? This implies that if your investment has yielded way more than you need, then this is a chance for you to spare part of the dividends to reinvest for larger yields.

On the other hand, if your sole purpose of investing is just to grow the extra money you have, then you could reinvest that money so you can earn more interest. For example, say you’ve invested in one of ICEA LION’s unit trust funds and ICEA LION deposits your dividends in your unit trust account. If you don’t have any priorities on which to spend these dividends, why not liaise with your account manager to see how you can reinvest the dividends for further growth? Bottom line is, whatever you decide, if you put your dividends back in the market, you’re letting that money work for you to earn you more money. That’s investing!

For more information, get in touch with us at bettertogether@icealion.com or  unit-trusts@icealion.com or http://icealion.com/create-wealth/investments

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