Investment calculator with dividend reinvestment
What your investment could grow to when dividends are reinvested, compared with taking them as cash.
The S&P 500 with dividends reinvested: buy & hold vs the InvestWealth strategy
The calculator above assumes smooth growth. Here is the real thing: the S&P 500 with every dividend reinvested (total return), bought and held, against the InvestWealth strategy that steps aside in downtrends. Choose a starting amount and a starting year.
Backtested, hypothetical results of the InvestWealth S&P 500 strategy vs buying and holding the index (total return), including estimated trading costs; they do not reflect actual trading and do not guarantee future results. Lump sum, no further contributions, before taxes. Free view: the most recent months are shown with a 3-month delay. Live performance is tracked from 16 Oct 2026 in the Research Terminal.
What dividend reinvestment does
When a company or fund pays a dividend, you can take it as cash or use it to buy more shares. Reinvested dividends buy shares that pay dividends of their own, so the number of shares you own grows every quarter, even if you never add money. That is compounding applied to income. A dividend reinvestment plan (DRIP) at a broker, or an “accumulating” fund that reinvests internally, does this automatically.
How big the difference gets
With the calculator's default inputs (10,000 to start, 500 a month, 3% dividend yield, 6% price growth a year, 15% tax on dividends, 25 years):
| Dividends reinvested | Dividends taken as cash | |
|---|---|---|
| Final value (including the cash collected) | 590,600 | 479,200 |
| Dividend income in the final year | 15,100 | 9,700 |
The gap of about 111,000 comes entirely from reinvesting: same contributions, same yield, same growth. Without monthly contributions the effect is even more visible: 10,000 becomes about 81,000 with reinvestment and 57,400 without.
What the inputs mean
- Dividend yield: the yearly dividend as a percentage of the share price. Broad stock indices have yielded roughly 1–2% in recent years; dividend-focused funds often 3–4%.
- Price growth: how much the share price rises per year on average, excluding dividends.
- Tax on dividends: in most countries dividends are taxed when they are paid, even if you reinvest them. Some accounts (pension or tax-advantaged accounts, depending on the country) defer or avoid this. Check your local rules.
- Total return = price growth + dividend yield. Index returns quoted as "total return" already assume that dividends are reinvested.
Reinvesting is not the same as being protected
Reinvesting increases how much you own; it does not reduce how far a portfolio can fall. In a crash, reinvested dividends fall with everything else. The S&P 500 with dividends reinvested still lost about 55% from October 2007 to March 2009. The real history below shows what that meant for an actual investment, and how a strategy that steps aside in downtrends compares.
Frequently asked questions
What is dividend reinvestment (DRIP)?
Dividend reinvestment means using every dividend you receive to buy more shares of the same stock or fund instead of taking it as cash. A DRIP (dividend reinvestment plan) at your broker does this automatically, often in fractional shares. Accumulating ETFs and funds do the same internally.
Is it better to reinvest dividends or take them as cash?
If you do not need the income, reinvesting usually ends with a larger portfolio and a larger income later, because the extra shares pay dividends too. Taking cash makes sense when you live off the income or want to invest it elsewhere, for example to rebalance into a different asset.
Do I pay tax on reinvested dividends?
In most countries, yes: dividends are taxable in the year they are paid, whether you reinvest them or not. Tax-advantaged accounts can defer or avoid this, and rules differ by country. Enter your dividend tax rate in the calculator, or 0% for a tax-free account.
Accumulating or distributing ETF: what is the difference?
A distributing ETF pays dividends out to you; an accumulating ETF reinvests them inside the fund, so the share price rises instead. Economically both can compound the same way, but the tax treatment can differ by country.
What return should I enter?
Split the expected total return into price growth and dividend yield. For a broad stock index, long-run total returns of roughly 6–10% a year are common in the history books, with very large swings in between. Lower inputs give a more cautious picture.
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Illustration only — not investment advice and not a forecast. Real returns vary from year to year and can be negative. Disclaimer.