A dividend reinvestment plan enables investors to use the money they receive as dividends toward the purchase of further shares of the company.
This plan is offered by a number of different mutual funds. When investors invest money of these types of mutual funds, they are entitled to dividend payments, which are then automatically reinvested at the fund’s current net asset value (NAV).
This enables the investor to regularly receive compounded returns, which results in bigger returns over the course of the investment.
