About 400 a month going in, twelve holdings, commission-free platform with fractional shares, taxable account. I could turn on automatic reinvestment per holding, or let dividends sit as cash and deploy everything quarterly into whatever is furthest below target weight. I do not want to spend an hour a month on this. Which way do people go and why?
One warning for a taxable account: automatic reinvestment creates a new tax lot every quarter for every holding. After a few years you have hundreds of tiny lots, and if you ever sell partially or move brokers it is genuinely tedious. Not a reason to avoid it, just know it is coming.
This is the actual argument against DRIP and it almost never comes up. My twelve year old position has 48 lots in it.
I pool because I enjoy choosing, and I accept that is a preference rather than an optimisation. Being honest about which parts of this are hobby helps a lot.
@coast_fi_casey · 5mo ago · 3 replies
With fractional shares and no commissions, reinvest automatically and stop thinking about it. The rebalancing benefit of manual deployment is real but small at this size, and the failure mode of manual is that cash sits uninvested for months because you were busy. What I would do instead: DRIP the dividends, and point your 400 monthly contribution at whichever holding is most underweight. You get the rebalancing effect from new money without touching the dividends at all.
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@nightbus_nina · 5mo ago
That split is elegant. Contributions do the rebalancing and dividends just compound.
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@coast_fi_casey · 5mo ago
It also keeps the record keeping simpler than manual reinvestment, which matters more than people expect in a taxable account.
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