Automatic Reinvestment Plan
An investment program in which capital gains or other income received from investments are automatically used for reinvestment purposes. In the case of a mutual fund, for example, capital gains produced by the fund would be used to automatically purchase more shares, instead of being distributed to the investor as cash. Investopedia Says:
By using an automatic reinvestment plan, an investor is able to easily make use of his or her investment gains to produce further gains, taking advantage of compounding. Over a period of years, the added value produced by automatic reinvestment can turn out to be worth a substantial sum. Related Terms:
Compound Annual Growth Rate - CAGR
Compounding
Distribution Reinvestment
Dividend Reinvestment Plan - DRIP
Mutual Fund
Reinvestment
Rule of 72 |