Cash distributions or reinvest? Trying to work out which one a beginner should default to

The holding period point you're half remembering is the one that should decide it, so here it is properly. In most repurchase plans the price you get depends partly on how long you've held the specific shares being repurchased, and shares held under a year are often repurchased at a reduced price. Reinvested shares are newly issued, so under a plan like that you're permanently holding a small, growing slice of shares that are the most expensive to sell. If you ever submit a full repurchase request, the plan works out which shares are which, and the recent ones get treated as recent ones.

That doesn't make reinvesting wrong. It makes it wrong for someone whose real plan is to test the vehicle for two years and maybe exit. If you're genuinely holding ten years, the drag is trivial and the discount on reinvested shares may well outweigh it.

So the question isn't cash versus compounding. It's how confident you are that you're staying. Read your plan's language on holding period and on the DRIP price, both are in the offering documents, and if they don't match what I've described then mine doesn't apply to yours.

I took cash on my first position for exactly the reason @bramble gives, and switched to reinvest a year later once I'd stopped second-guessing it. You can usually change the election.