Reinvesting ETF Dividends

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pugchief
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Reinvesting ETF Dividends

Post by pugchief » Sat Sep 29, 2018 8:28 am

When you reinvest dividends in a mutual fund, you pay the closing price on the date of the distribution. How does that work for reinvesting ETF dividends?
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Re: Reinvesting ETF Dividends

Post by barrett » Sat Sep 29, 2018 12:53 pm

pugchief wrote:
Sat Sep 29, 2018 8:28 am
When you reinvest dividends in a mutual fund, you pay the closing price on the date of the distribution. How does that work for reinvesting ETF dividends?
I think this link from Investopedia will help:

https://www.investopedia.com/articles/i ... s-etfs.asp

The whole thing is only a few paragraphs but this might answer your question (or further confuse you):

"Some reinvest dividends at market opening on the payable date, while others wait until the cash is actually deposited, which is typically later in the day. Because ETFs trade like stocks and their market prices can fluctuate throughout the day, a reinvestment executed at 7 a.m. may buy a different number of shares than a trade executed at 10 a.m. This is one of the drawbacks of automatic ETF dividend reinvestment; the investor loses control of the trade and cannot "time" the market to his advantage."
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Re: Reinvesting ETF Dividends

Post by pugchief » Sat Sep 29, 2018 1:16 pm

I did an online chat with Schwab, and they said the time varies, but they 'try to get the best price', whatever that means. But since they are all Schwab proprietary ETFs and they are their own market makers, I find that hard to believe.
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Kbg
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Re: Reinvesting ETF Dividends

Post by Kbg » Fri Oct 05, 2018 5:21 pm

pugchief wrote:
Sat Sep 29, 2018 1:16 pm
I did an online chat with Schwab, and they said the time varies, but they 'try to get the best price', whatever that means. But since they are all Schwab proprietary ETFs and they are their own market makers, I find that hard to believe.
This is pretty standard brokerage language and it means they have to get you the best possible price at the time the trade was executed...which now includes any US market where there is an active quote. If they are creating or destroying an associated securities basket it will be at whatever the value of the basket is. You may get gouged a bit, but it won't be too out of line.

I don't have a Schwab account, but if they aren't charging you for it that's actually a good deal for ETFs.
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Re: Reinvesting ETF Dividends

Post by pugchief » Sat Oct 06, 2018 7:22 am

Kbg wrote:
Fri Oct 05, 2018 5:21 pm
pugchief wrote:
Sat Sep 29, 2018 1:16 pm
I did an online chat with Schwab, and they said the time varies, but they 'try to get the best price', whatever that means. But since they are all Schwab proprietary ETFs and they are their own market makers, I find that hard to believe.
This is pretty standard brokerage language and it means they have to get you the best possible price at the time the trade was executed...which now includes any US market where there is an active quote. If they are creating or destroying an associated securities basket it will be at whatever the value of the basket is. You may get gouged a bit, but it won't be too out of line.

I don't have a Schwab account, but if they aren't charging you for it that's actually a good deal for ETFs.
I'm pretty sure most of the major brokerages will do free dividend reinvestment on any stock or ETF.
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