Owning an etf that offers monthly dividends and reinvesting those dividends automatically is that going to offer a much higher reward?

Owning an ETF that offers monthly dividends and reinvesting those dividends automatically can indeed lead to higher rewards over time. This strategy, often referred to as dividend reinvestment, leverages the power of compound growth to amplify the returns on your investment. Here's how it works and why it can be beneficial:

1. **Compounding Returns**: When you reinvest dividends, you are essentially reinvesting a portion of your returns back into the investment, which can lead to the acquisition of more shares or fractions of shares. Over time, as the price of the shares increases, the value of your investment grows. This compounding effect can lead to significantly higher returns compared to simply receiving dividends as cash.
2. **Automatic Reinvestment**: Many ETFs and investment platforms offer automatic dividend reinvestment plans (DRIPs). These programs make the process of reinvestment effortless, as they automate the purchase of additional shares using the dividend proceeds. This eliminates the need for manual intervention and ensures that your investment remains active, taking advantage of potential growth opportunities.
3. **Leveraging Dividends**: By reinvesting dividends, you are effectively leveraging the income generated by your investments to purchase additional shares. This can be particularly advantageous in growing companies where dividends are expected to increase over time, as you not only receive the dividend but also acquire more shares at a potentially lower price due to the reinvestment.
4. **Tax Efficiency**: While dividends are typically taxable, reinvesting dividends can be more tax-efficient when compared to receiving dividends as cash. This is because the tax liability is deferred until the shares are sold, potentially at a later tax-deferred event such as a retirement withdrawal. However, it's important to consider the tax implications in your individual tax situation and consult with a financial advisor if necessary.
5. **Long-Term Growth**: The strategy of owning an ETF with monthly dividends and reinvesting them is most effective over the long term. It requires patience and a commitment to the investment strategy. Over decades, the compounding effect of reinvested dividends can lead to substantial growth in the value of your investment.

In conclusion, while owning an ETF that offers monthly dividends and reinvesting them automatically does not guarantee higher rewards without effort, it can be a powerful tool for growth-oriented investors. It's important to consider your investment goals, risk tolerance, and the specific features of the ETF or investment vehicle you choose, ensuring that it aligns with your overall financial strategy.