Resolve to Be Wealthy

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Over the past year or so, I’ve written about the advantage of following a dollar-cost averaging strategy through dividend reinvestment plans (DRIPs) and holding on for the long term—the longer the better! With this strategy, even the smallest investor can efficiently invest in equities.

The advantages are substantial: You minimize the risk of entering the market at what might turn out to be the wrong time.risky investments

You naturally “average down” because your regular investments buy fewer shares when prices are higher and more shares when prices are lower.

What’s more, by holding high quality dividend paying stocks over the very long term (particularly companies that routinely raise their dividend payouts), the “magic” of compounding will turn even modest investment amounts into substantial wealth.

We provided examples to illustrate the effect of compounding. Here are links to my previous articles.

Many Weiss subscribers found these articles of use. There seems to have been particular interest in this article, which is where we demonstrated the astounding effect of compounding based on an average annual return of 10%.

How did we arrive at a 10% average annual return? First, understand that “average” means that while in some years the market may have plunged and in others it may have soared, the average over the long-term was positive.

We decided on 10% based on the findings provided in the annual compendium published by Morningstar Ibbotson: Stocks, Bonds, Bills, and Inflation Classic Yearbook. According to this source, the stock market has gained an average of 11.3% annually since 1926.

1You must keep in mind that we are talking about the market as a whole—not some specific portfolio. With this in mind, it is not unreasonable to expect even better results over the long term if you are very selective in your choices.

In the November 2015 article, we showed that if you start with $10,000 when you’re age 20 and invest $200 a month ($2,400 a year) for 10 years, your $34,000 investment would grow to more than $3 million by age 70.

Even if you delay your start until age 30, you’d have nearly $1.2 million by age 70! Again, these assumptions are based on the results achieved by the market as a whole. Your portfolio may do better or worse.

If you are among the enthusiastic readers of my recent articles, my question is “Have you acted on what you read?” And if you have not begun to invest for your future, “Do any of the following checked explanations describe your reluctance to do so?”

You must keep in mind that we are talking about the market as a whole—not some specific portfolio. With this in mind, it is not unreasonable to expect even better results over the long term if you are very selective in your choices.

In the November 2015 article, we showed that if you start with $10,000 when you’re age 20 and invest $200 a month ($2,400 a year) for 10 years, your $34,000 investment would grow to more than $3 million by age 70.

Even if you delay your start until age 30, you’d have nearly $1.2 million by age 70! Again, these assumptions are based on the results achieved by the market as a whole. Your portfolio may do better or worse.

If you are among the enthusiastic readers of my recent articles, my question is “Have you acted on what you read?” And if you have not begun to invest for your future, “Do any of the following checked explanations describe your reluctance to do so?”money-in-pocket-bigstock600x

  • You think that the process is too complicated.
  • You think you have missed the boat—in that you’re too old to build up meaningful returns.
  • You think that you don’t have enough money to set aside for investment purposes.  

As for not having enough money to get started: Your loose change—or the money you spend on coffee or cigarettes—can set you on the road to a secure retirement. That’s because many DRIPs accept investment amounts of as little as $25 or $50. You don’t have to have a stash of cash to start with, but you do have to start!

What’s more, Weiss Educational Services and the Moneypaper team have put together a course on DRIP investing. Click here to check it out.

Until Next Time,

Vita Nelson

Ms. Vita Nelson is one of the earliest proponents of Dividend Reinvestment Plans (DRIPs) and a knowledgeable authority on the operations of these plans. She provides financial information centered around DRIP investing. She is the Editor and Publisher of Moneypaper’s Guide to Direct Investment Plans, Chairman of the Board of Temper of the Times Investor Service, Inc. (a DRIP enrollment service), and co-manager of the MP 63 Fund (DRIPX).