What is reinvestment?
The prefix of the word makes it apparent that the meaning of word is a “repeatition”, or in our case, it is a repetitive investment. Re-investor makes investments repeatedly, thus, increasing their value. After receiving profit from investment he/she adds it to the main amount and then invests a larger amount once again. If he/she has received profit after investing into the PAMM account first time, he/ she can reinvest this profit together with the earlier invested money. This operation is called reinvestment. The amount of interest is added to the initial fund on the account again and again. Therefore, your money will give you more money instead of just “sit idle”
Specifics of investment to PAMM
When investing to PAMM account you can select several managers. Therefore, you can also reinvest funds into the several accounts. There are two types of reinvestment: long-term reinvestment is based on the regular reinvestments straight after the rollover and short term reinvestment, which is based on the distribution of the income on different PAMM accounts for faster profit.
How to make the best choice?
The investor can choose the best option of reinvestment suitable for him/her.
- Full reinvestment. You invest into the accounts of one or several managers and receive profit, which you immediately reinvest. Therefore, your money operates all the time accruing the volume. You can choose automatic reinvestment option, which will enable to add interest to the initial fund of the account after the rollover without your personal involvement.
- Waiver of reinvestment. You invest into one or several PAMM accounts, wait for the rollover (or initiated a rollover) and withdraw interest, leaving initial amount on the account. You will receive you profit but it will not be as big as in case of the full investment, as the amount on your account has not increased.
- Partial reinvestment. This is an option when you specify the amount of interest you are going to reinvest and withdraw the other part of the interest fund. Therefore, you can drive to a compromise: you increase the amount of your account (which enables you to receive higher profit) and at the same time you regularly withdraw some funds and have cash at your disposal.
Why do investors reinvest?
Prior to entering upon any activity a man of sense will ask a natural question “Why?” or “What for?” Investors, who chose to reinvest pursue a definite target. And the target is the same as the target of making investment. All investors wish to earn maximum revenue and this target is easily achievable with the help of reinvestment. Examples of real earnings at Forex show that 20% of $100 will give you $20, the amount of $1000 will help you earn $200. Just adding funds to the amount on the account an investor increases his/her profit after the rollover.
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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.