Automatic Reinvestment Plan

An automatic reinvestment plan is an arrangement whereby a mutual fund automatically reinvests any gains back into the fund. Most investors look upon mutual funds as a long-term investment and an automatic reinvestment plan is a simple way of keeping profits constantly working in the fund. An automatic reinvestment plan makes reinvesting capital gains and dividends simple and automatic and many investors would rather use an automatic reinvestment plan for gains and dividends rather than take profits out of a fund. The simplicity and automatic nature of an automatic reinvestment plan makes them perfect for many investors. While most funds allow investors to opt out of the automatic reinvestment plan, an automatic reinvestment plan purchasing additional shares in a fund can provide significant growth to an investor's stake in a mutual fund.