Recently started investing in mutual funds, and when I placed the orders I had the options to reinvest capital gains and dividends. I said yes to both. But now I am wondering about the long term implications of that decision.
1) Is reinvesting going to make my tax returns a nightmare down the road? Are lots of little contributions from the reinvestment going to make it hard to figure a cost basis when I do sell (hopefully many years down the road)?
2) For those mutual funds in a taxable account, do I need to pay taxes on gains and dividends each year, even if they're reinvested?
3) Is reinvesting going to make it harder to do my annual rebalancing...that is to say, would it be easier if I had the dividends/gains paid as cash and then could move them whereever I wanted, versus having to sell some of one fund that went above its allocation % to buy another fund whose % had dropped?
Thanks for any input! I found this thread while searching but it didn't quite answer my questions. http://early-retirement.org/cgi-bin/...916258;start=2