Must I let Scottrade invest my earnings for me? Do I get paid?


I have a few stocks in my Scottrade account (now TD Ameritrade) that get sporadic earnings. It seems that they do "cash alternatives Purchase"-s with the earnings. What happened to that money? Should I tell them to stop buying alternatives and give me the cash? Do I benefit from these alternatives? Do they pay off?
beavoidSelf EmployedAsked:
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Dr. KlahnPrincipal Software EngineerCommented:
"Cash alternative" is a money market account which earns higher interest rates than a normal savings account.  It is called a cash alternative because it is equivalent to cash and you can withdraw that money at any time.

You can have Scottrade automatically reinvest dividends in the stocks that paid the dividends, but this is a good decision only if those stocks are (a) stable and paying good dividends greater than the rate of inflation, or (b) show good potential for future appreciation.
Martin NguyenHelpDesk TechnicianCommented:
Hi beavoid,
Are you referring to dividends that get distributed (probably quarterly) on the stock holdings you have? It sounds like your account is set to reinvest the dividends, which means any dividends you earn each quarter are used to buy more stock.

So if this is what is happening, you are benefiting because your stock ownership increases. My company buys me partial shares with whatever the dividend is, even if its not a whole share. You should see that you have more shares in certain stocks than other because it has been reinvested.

As long as the stock doesn't lose value you benefit and it pays off, but that's the risk of any investment in the market. Would you be better off with the cash? That depends on if you want that cash to sit in your brokerage account so you can buy different stocks, or if you want to cash it out and pay capital gains taxes on it.

Hope this helps,

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JohnBusiness Consultant (Owner)Commented:
The "Cash Alternative" Account as described above and as I have seen used from time to time should be available in an instant for purchasing a stock. Make sure this is the case by asking TD Ameritrade Support.

Do not accept any waffling answers  (which will likely mean there are limitations on getting the cash for trading).
beavoidSelf EmployedAuthor Commented:
thanks all
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