Spending vs Reinvesting

Lisa A. Tomaszewski, James Russo, & Michael Sheehan

Physician's Money Digest, April15 2004, Volume 11, Issue 7

Your investing goals should alwaysdictate what you do with your stock dividends.For example, if you created yourportfolio with the goal of income, youwill likely use your dividend income forexpenses. However, if you can afford it,reinvesting your dividends will give a bigboost to your portfolio's return. This isdue to the benefit of compounding, whichmakes reinvesting dividends particularlyhelpful to physician-investors who canafford the long-term play. Need proof?Just take a look at the S&P 500, which in2003 gained 26.4% on capital appreciationand gained 28.7% with dividendsreinvested. Furthermore, over the pastdecade, the S&P 500 rose 138.4% in capitalappreciation and 185.5% with reinvesteddividends.