Gyroscopic Investing

For taxable accounts - I was wondering what folks do or what the official position is (if there is such a thing) on whether any dividends or capital gains went straight to cash portion of HB PP or one reinvested automatically.

For me it seems like it would be easier to not reinvest capital gains and dividends share tracking wise - but deal with this as part of rebalancing -  I am just about to implement the HB PP in a taxable account for first time and was intending to so with ETFs.

Likely this has been addressed before but I did not see it in a quick search.

Thanks in advance 

If I remember correctly most of the seasoned posters do not re-invest dividends, mainly because not-reinvesting makes tax time less of a headache. Same as your logic 

Yeah, I think conventional wisdom is to sweep fund distributions and coupon payments into the cash allocation.  They only get reinvested indirectly through the usual rebalancing mechanism.

As you said, this approach makes tracking cost bases easier.  Also it avoids the (small) transaction costs involved in reinvestment.  And, if you're living off the portfolio, you will probably only need to sell stock/bond/gold every few years, so again less transaction expense.

The disadvantage is that, during accumulation, it takes longer for the dividends and interest to migrate into the volatile assets, which collectively have a higher expected rate of return.

IMO the pros/cons are a wash.