Have you ever wished your investments could grow all on their own, like a self-watering plant that keeps adding more leaves? Well, with dividend reinvestment at Merrill Edge, you can make that a reality! This lengthy guide will walk you through the process, step by step, so you can put the power of compounding to work for your portfolio.
Understanding Dividend Reinvestment (DRIP)
Before we dive into the "how-to," let's quickly grasp the "what" and "why" of dividend reinvestment, often referred to as a DRIP (Dividend Reinvestment Plan).
What is it? When you own stocks or ETFs that pay dividends, instead of receiving those dividends as cash in your account, a DRIP automatically uses that cash to purchase more shares or fractional shares of the same stock or ETF.
Why is it beneficial? The magic of DRIPs lies in compounding. By continually reinvesting dividends, you acquire more shares, which then generate even more dividends, and so on. This creates a snowball effect, accelerating your wealth accumulation over time. Many DRIPs also offer the benefit of commission-free reinvestment, meaning you save on trading fees for those additional share purchases.
Merrill Edge allows dividend reinvestment for most eligible stocks, ETFs, and mutual funds. They even allow for the purchase of fractional shares, which means your entire dividend payout can be put to work, rather than having leftover cash sit idle.
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| How To Set Up Dividend Reinvestment Merrill Edge |
Setting Up Dividend Reinvestment on Merrill Edge: A Step-by-Step Guide
Here's how you can enable dividend reinvestment for your eligible holdings at Merrill Edge.
Step 1: Access Your Merrill Edge Account Online
First things first, let's get logged in.
Open your web browser and navigate to the Merrill Edge website.
Locate the "Log In" button, usually found in the top right corner of the page.
Enter your User ID and Password.
Click "Log In" to access your dashboard.
If you're having trouble logging in, ensure you're using the correct credentials. If you've forgotten them, there are typically "Forgot User ID" or "Forgot Password" links available.
Step 2: Navigate to Your Account Settings or Preferences
Once logged in, you'll need to find the section where you can manage your account preferences and dividend distribution options. The exact wording might vary slightly, but look for something similar to:
QuickTip: Scan for summary-style sentences.
"Account Settings"
"Preferences"
"Account Management"
"Dividend Elections" or "Dividend Reinvestment"
These options are often found under your profile icon or a menu icon (like three horizontal lines) in the top right or left of your screen.
Step 3: Locate the Dividend Reinvestment Option
Within the account settings, you'll need to find the specific setting for dividend reinvestment.
Look for a section related to "Dividends," "Distributions," or "Reinvestment Plans."
You might see an option to manage dividend settings for all eligible securities in your account, or to manage them individually for each holding.
Merrill Edge allows you to set up DRIP for your entire account, meaning any eligible security you currently hold or purchase in the future will automatically be enrolled. You can also request individual positions to be enrolled if you prefer.
Step 4: Choose Your Reinvestment Preference
This is where you make the key decision: do you want to reinvest dividends or receive them as cash?
You'll likely see a toggle or a selection box that allows you to "Enable Dividend Reinvestment" or "Reinvest Dividends."
Alternatively, you might have options like "Cash," "Reinvest," or "Deposit to Bank Account." Select "Reinvest" or enable the DRIP feature.
Important Considerations for This Step:
Account-Wide vs. Individual Holdings: Decide if you want to apply DRIP to all eligible securities in your account or if you want to select specific ones. If you choose individual securities, you'll typically be prompted to select them from a list of your holdings.
Ex-Dividend Date: For your upcoming dividend to be reinvested, your DRIP application needs to be processed prior to the ex-dividend date of that security. This date is crucial, as it determines who is eligible to receive the dividend. Allow a few business days for your request to be processed.
Step 5: Confirm and Save Your Changes
After making your selection, it's essential to confirm and save your preferences.
Look for a "Save," "Apply," or "Confirm" button.
You may receive a confirmation message on screen or an email confirming your dividend reinvestment settings have been updated.
Step 6: Monitor Your Dividend Reinvestments
QuickTip: A short pause boosts comprehension.
Once you've set up your DRIP, you can easily track its activity.
Merrill Edge typically shows dividend reinvestment (DRIP) transactions in real-time on your "Activity" page or "Transactions" history.
You'll also see these purchases reflected in your monthly or quarterly account statements.
The reinvested position will reflect in whole and fractional shares, and the reinvestment price will be the prevailing market price at the time the order is entered on the payable date.
Regularly reviewing your account activity helps you see the power of compounding in action and ensures your settings are as intended.
Benefits of Dividend Reinvestment with Merrill Edge
Enabling DRIP at Merrill Edge offers several compelling advantages for long-term investors:
Automated Compounding: This is the primary benefit. Your money works harder for you by automatically buying more shares, accelerating your portfolio growth over time without any manual intervention.
Commission-Free Reinvestment: Merrill Edge generally allows commission-free reinvestment of dividends, saving you trading fees that would otherwise eat into your returns. This makes it highly cost-effective.
Dollar-Cost Averaging: Since dividends are paid periodically, reinvesting them allows you to naturally engage in dollar-cost averaging. You'll buy more shares when prices are low and fewer when prices are high, potentially lowering your average cost per share over the long run.
Acquisition of Fractional Shares: Merrill Edge supports fractional share purchases through DRIPs, ensuring that every penny of your dividend payout is put to work.
Simplicity and Discipline: DRIPs automate a key aspect of investing, removing the need for you to actively decide when and how to invest your dividends. This fosters a disciplined approach to building wealth.
Long-Term Wealth Building: For investors with a long time horizon, the compounding effect of dividend reinvestment can significantly boost overall returns and accelerate progress towards financial goals.
Potential Considerations of Dividend Reinvestment
While highly beneficial, there are a few things to keep in mind:
Tax Implications: Even though you don't receive cash, reinvested dividends are still considered taxable income in the year they are received in a taxable brokerage account. You will receive a Form 1099-DIV from Merrill Edge reporting these dividends. It's crucial to keep good records for tax purposes, especially regarding your cost basis, as fractional shares can complicate this.
Lack of Immediate Cash: If you rely on dividends for current income, DRIP might not be the best option. It's designed for growth, not income generation.
Concentration Risk: If you only reinvest dividends into a single stock, it could lead to an overconcentration in that one asset. Diversification remains important.
10 Related FAQ Questions
Here are 10 frequently asked questions about dividend reinvestment at Merrill Edge, with quick answers:
How to check if my stocks are eligible for DRIP on Merrill Edge?
Merrill Edge generally offers DRIP for most eligible U.S. equities, ETFs, and mutual funds. You can typically see the dividend reinvestment option for individual holdings within your account's dividend settings. If you don't see it, the security might not be eligible, or you can contact Merrill Edge customer service.
Tip: Reading twice doubles clarity.
How to change my dividend reinvestment settings for specific stocks?
Log into your Merrill Edge account, navigate to "Account Settings" or "Preferences," and look for the "Dividend Elections" or "Dividend Reinvestment" section. From there, you should be able to select individual securities and modify their reinvestment preference.
How to unenroll from dividend reinvestment at Merrill Edge?
Follow the same steps as enrolling: log in, go to "Account Settings" or "Preferences," find the dividend reinvestment section, and switch the setting from "Reinvest" to "Cash" or disable the DRIP option for the desired holdings.
How to understand the tax implications of DRIPs on Merrill Edge?
Reinvested dividends are treated as taxable income in the year they are received, even if you don't get cash. Merrill Edge will provide a Consolidated 1099-DIV for your taxable accounts, reporting these amounts. Consult a tax professional for personalized advice.
How to see my dividend reinvestment history on Merrill Edge?
You can view your dividend reinvestment transactions in real-time on your "Activity" or "Transactions" page within your Merrill Edge online account. They will also be detailed in your monthly or quarterly account statements.
How to determine my cost basis for shares acquired through DRIP on Merrill Edge?
QuickTip: Use the post as a quick reference later.
Merrill Edge is required to report the adjusted cost basis for "covered securities" (generally those acquired after 2011/2012). This includes shares acquired through DRIPs. You can usually find this information in your account statements or tax documents provided by Merrill Edge.
How to contact Merrill Edge customer service for DRIP assistance?
You can contact Merrill Edge customer service by phone. For Merrill Edge Self-Directed, you can call 1.877.653.4732. They are typically available 24 hours a day, 7 days a week.
How to know when my dividend will be reinvested?
Dividends are generally reinvested on the dividend payable date by Merrill Edge's clearing firm. For an upcoming dividend to be reinvested, your DRIP setting must be active before the ex-dividend date.
How to benefit from fractional shares with DRIP on Merrill Edge?
Merrill Edge allows for dividend reinvestment into fractional shares. This means that your entire dividend amount, no matter how small, is used to purchase additional portions of shares, ensuring no cash sits idle and maximizing the compounding effect.
How to assess if dividend reinvestment is right for my investment goals?
DRIP is ideal for long-term investors focused on capital appreciation and compounding wealth. If you need current income from your investments or prefer to manage your cash distributions manually for other purposes, then receiving dividends as cash might be more suitable.
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