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Are you taking distributions this year in cash or reinvesting?
At this point I'm taking a look at the distribution amounts in taxable & tax-advantage accounts. I realize age & investment style will play a part in your choices.
I do both depending on which holding is distributing the cash. Most of my distributions originate in my Roth account where currently taxation is of no concern.
For single equities I generally take the cash and reinvest it where I think it might do me the most good. For equity ETF's I tend to let the distributions just be reinvested because they are never that large to worry much about.
For my CEF funds I am split 50-50. Some offer a 5% discount to market price on reinvestments or reinvestment at NAV vs. market price. Those I tend to reinvest. Other CEF's don't offer those perks so their distributions I just let accumulate in my cash account for dry powder or where again I feel they do the most good.
With "near cash" funds (think, e.g. ICSH) in taxable accounts, I take all divs in cash. These funds tend to have monthly distributions.
Any time I wanted to take cash out of a "near cash" account, I would have to sell shares. If those shares were sold at a loss and divs were getting reinvested monthly, then the loss would be treated as a wash sale. That is, to the extent that divs within 30 days were reinvested.
Messy bookkeeping with reinvested divs. Besides, keeping the divs in cash doesn't cost much in the way of lost returns (vs. keeping in a "near cash" account).
Divs from all tax-sheltered funds are reinvested. I prefer to control the timing when I take money from a fund rather than take some money out simply because the fund chose Dec 31 to distribute income, or Dec 22 (or whenever) to distribute cap gains.
In a taxable account I'll reinvest unless I'm looking to make small allocation changes. Then I'll use the divs for buying different funds. This way I avoid realizing an additional cap gain by selling shares of the old fund. (Not an issue in tax-sheltered accounts.)
@Mark makes an excellent point about reinvesting divs anytime there's a DRIP program (stock or CEF) that offers extra shares at a discount. Don't leave money on the table.
I let the mutual funds reinvest the divs and cap gains in Dec, then typically shave off a few or several thousand $ in January. I take care of some self-imposed obligations that way. I've been reinvesting single-stock divs. Thankfully, we still do not need the money to pay current bills.
Comments
For single equities I generally take the cash and reinvest it where I think it might do me the most good. For equity ETF's I tend to let the distributions just be reinvested because they are never that large to worry much about.
For my CEF funds I am split 50-50. Some offer a 5% discount to market price on reinvestments or reinvestment at NAV vs. market price. Those I tend to reinvest. Other CEF's don't offer those perks so their distributions I just let accumulate in my cash account for dry powder or where again I feel they do the most good.
Any time I wanted to take cash out of a "near cash" account, I would have to sell shares. If those shares were sold at a loss and divs were getting reinvested monthly, then the loss would be treated as a wash sale. That is, to the extent that divs within 30 days were reinvested.
Messy bookkeeping with reinvested divs. Besides, keeping the divs in cash doesn't cost much in the way of lost returns (vs. keeping in a "near cash" account).
Divs from all tax-sheltered funds are reinvested. I prefer to control the timing when I take money from a fund rather than take some money out simply because the fund chose Dec 31 to distribute income, or Dec 22 (or whenever) to distribute cap gains.
In a taxable account I'll reinvest unless I'm looking to make small allocation changes. Then I'll use the divs for buying different funds. This way I avoid realizing an additional cap gain by selling shares of the old fund. (Not an issue in tax-sheltered accounts.)
@Mark makes an excellent point about reinvesting divs anytime there's a DRIP program (stock or CEF) that offers extra shares at a discount. Don't leave money on the table.