Key insights
- A Roth IRA investor using Schwab is confused by automatic purchases of gold ETFs, triggered seemingly by the 'reinvest dividends' setting. The investor questions whether this setting caused the unexpected purchases or if another factor is at play. This highlights a potential misunderstanding of brokerage account settings and dividend reinvestment plans, which could lead to unintended investment allocations.
Not looking for investing advice, just trying to understand how to navigate Schwab website to invest properly. I am using some small increments of my Roth IRA to invest in some ETFs for learning purposes. Last week I bought some shares in a few gold-related ETFs and had clicked the setting "reinvest dividends" because I had assumed it was like the funds in my TDF account and that nothing bad could come from clicking it.
The totals (cost basis) were $1000, $500, and $500.
Fast forward to today, I was checking my account and noticed some of my cash reserves were automatically used to buy more shares in the ETFS I bought last week.
The totals (cost basis) are now $1600, $800, $825. So Schwab had apparently auto-pulled $600, $300, and $325 from my cash and bought more ETF with it.
Is this because I clicked on "reinvest dividends" or is there something else I'm missing? It's just such a large and arbitrary number that it doesn't make sense to me how it could be related to selecting that option.