≈ It’s all about that DRIP, baby.≈
Stock investors get paid two ways: price appreciation and dividends. Most traders obsess over the former, but it’s the latter that can really supercharge your wealth building. In the short run, dividends seem quaint; in the long run, they’re quintessential.
Consider this eye-popping stat included by Jason Zweig in the revised edition of The Intelligent Investor:
“According to Professors Elroy Dimson, Paul Marsh, and Mike Staunton of London Business School, if you had invested $1 in U.S. stocks in 1900 and spent all your dividends, your stock portfolio would have grown to $198 by 2000. But if you had reinvested all your dividends, your stock portfolio would have been worth $16,797! Far from being an afterthought, dividends are the greatest force in stock investing.”
Most brokers will pay out dividends as cash by default. If you want them automatically reinvested (that is, use the cash to buy more shares) then you can have your broker enroll your portfolio (or a single position) in a Dividend Reinvestment Plan. It’s known as a DRIP.
Chart of the Day
What Dividends Giveth
What was the price of not reinvesting dividends if you owned SPY over the past quarter century? 300%! Don’t be a dum-dum. Reinvest dividends on your long-term positions.
Video of the Day
What are Dividends?
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