It is better to reinvest dividends rather than getting cash. Dividend reinvestment should be considered in order to take advantage of the power of compounding. As long as a company continues to prosper and your portfolio is well-balanced, reinvesting dividends is preferable to receiving cash. Reinvesting dividends in mutual fund investments is always recommended. As this increases the amount invested and provides superior returns to dividend distribution options. Reinvesting the dividend is a good strategy as it is very cheap. One need not incur extra costs of investing if they opt for dividend reinvestment. Once one opts for reinvestment, it gets automatically processed every time one receives a dividend. Every time the dividend is reinvested, the average cost of investing goes down. This will help in boosting returns.