What Reinvest in Security does

Reinvest in Security is a Fidelity feature that automatically reinvests the proceeds from a security sale back into the same or a similar security. When you sell a stock, bond, mutual fund, or other holding, instead of leaving the cash sitting in your account, the system can route that money directly into a new purchase of your choice — often the same holding you just sold.

The feature is designed to keep your money working in the market rather than holding it as idle cash. It removes the step of manually deciding what to do with sale proceeds and can reduce the number of separate transactions you need to make.

Reinvest in Security is optional. You set it up once in your account settings, and it applies to future sales unless you turn it off or change the settings for a specific transaction.

Key Takeaways

  • Reinvest in Security automatically puts the money from a sale back into a security you choose, rather than leaving it as cash in your account.
  • You control which security the proceeds go into — it does not have to be the same one you sold, though that is a common choice.
  • The feature is optional and can be turned on or off at the account level or for individual transactions.
  • Reinvested proceeds are subject to the same trading rules and settlement times as any other purchase.
  • Tax consequences of the sale itself do not change; reinvesting does not affect whether you owe capital gains tax on the profit.

How to set up Reinvest in Security

You can enable Reinvest in Security through your Fidelity account settings. Log in to your account, navigate to the settings or preferences section, and look for options related to sale proceeds or reinvestment. The exact path varies depending on whether you use Fidelity.com, the mobile app, or a brokerage account type.

When you set it up, you will choose a default security for reinvestment. You can also set rules — for example, reinvest proceeds only from sales above a certain dollar amount, or exclude certain account types from the feature.

If you do not want to set a default, you can leave the feature off at the account level and choose to reinvest on a case-by-case basis when you sell. At the moment of sale, Fidelity will prompt you to select where the proceeds should go.

What happens to the money during settlement

When you sell a security, the sale settles (the money clears) on a set schedule — usually two business days after the sale for stocks and bonds. Reinvest in Security does not speed up or slow down this settlement. The proceeds still take the same amount of time to arrive in your account.

Once the sale settles, the reinvestment order is placed using the settled cash. This means there is a brief window between when your sale clears and when the new purchase happens. During that time, the money sits as cash in your account. If the market moves significantly, the price of the security you are buying may have changed.

You cannot set Reinvest in Security to execute at a specific price or time — it uses the market price at the moment the order is placed after settlement.

Tax implications of reinvesting

Reinvesting the proceeds does not change the tax consequences of the sale itself. If you sold a stock at a profit, you owe capital gains tax on that profit regardless of whether you reinvest the money or leave it as cash. The tax event happens at the moment of sale, not at reinvestment.

Fidelity will report the sale on your tax documents (Form 1099-B or similar, depending on account type). The reinvestment is treated as a separate purchase and will be reported accordingly. Keep records of both transactions for your tax filing.

If you are reinvesting in the same security repeatedly, you may accumulate multiple cost basis lots. This can matter when you eventually sell — you can choose which lot to sell first, which affects your tax bill. Fidelity can help you track this, but it is worth understanding before you set up automatic reinvestment.

When Reinvest in Security might not work as expected

If you set a default security for reinvestment but that security becomes unavailable — delisted, merged, or no longer offered through Fidelity — the reinvestment may fail or be redirected to cash. Check your account after a sale to confirm the reinvestment went through.

Reinvest in Security also does not apply to dividend reinvestment. If you own a mutual fund or stock that pays dividends, those are handled separately through dividend reinvestment settings (DRIP). You need to set those up independently if you want dividends reinvested.

In some cases, such as sales from retirement accounts with specific rules, or sales that trigger wash-sale concerns, reinvestment may be restricted or require manual approval. Fidelity will notify you if this applies to your transaction.

Alternatives to automatic reinvestment

You do not have to use Reinvest in Security. You can sell a security and leave the proceeds as cash, then decide later what to do with the money. This gives you time to think and lets you take advantage of price changes if you want to wait.

You can also set up a systematic investment plan (SIP) or automatic purchase schedule that buys a security on a regular basis, independent of sales. This is different from reinvestment but achieves a similar goal of keeping money in the market.

Some investors prefer to let sale proceeds sit as cash temporarily to rebalance their portfolio or to have funds available for other purposes. Reinvest in Security is a convenience feature, not a requirement.

Frequently Asked Questions

Can I change where the proceeds go after I sell but before they reinvest?

It depends on the timing. If the sale has not yet settled, you may be able to cancel the reinvestment order and redirect the proceeds manually. Once settlement is complete and the reinvestment order has been placed, you would need to sell the newly purchased security if you want to move the money elsewhere. Contact Fidelity right away if you need to change course.

Does Reinvest in Security work in retirement accounts like IRAs?

Yes, the feature works in most Fidelity account types, including IRAs, 401(k)s, and taxable brokerage accounts. However, retirement accounts have their own rules about buying and selling, so the mechanics may differ slightly. Check your specific account type in Fidelity's settings to confirm the feature is available.

What if I sell a mutual fund — does Reinvest in Security buy it back right away?

Mutual funds settle on a different schedule than stocks (usually one business day after sale). Reinvest in Security will place the order after settlement, so there will be a one-day gap. The price you get depends on the fund's net asset value (NAV) on the day the order is placed, not the day you sold.

Can I set different reinvestment targets for different securities?

Yes. You can set a default reinvestment target at the account level, but you can also override it for individual sales. When you place a sell order, Fidelity will let you choose where those specific proceeds go, even if you have a default set up.

Does Reinvest in Security count as a new transaction for commission or fee purposes?

Reinvestment is treated as a regular purchase, so it follows the same fee structure as any other buy order. Most Fidelity stock and ETF trades have no commission, but mutual funds and other securities may have fees depending on the fund and your account type. Check your account's fee schedule or ask Fidelity before setting up automatic reinvestment.