By Robert Ross via Iris.xyz.
If it seems too good to be true, it usually is. But when I say you can juice your investment returns with the click of a button, it’s the plain truth.
I’m talking about reinvesting your dividends.
t may seem like a minor thing. But if you’re not doing it, you’re leaving a lot of money on the table.
In fact, investors who reinvest their dividends can outright double their investment gains.
Let me show you how…
Reinvesting Can Make a Big Difference
Say you own 100 shares of McDonald’s Corp. (MCD).
Every quarter, McDonald’s pays a dividend of $2.00 per share. That translates to $200 in income from your 100 shares.
When this happens, you have two options:
- Pocket $200 in cash or
- Reinvest $200 directly into McDonald’s shares.
Hint: Choose option two.
Now, McDonald’s trades for around $200/share. So instead of pocketing $200 in cash, you get one extra share.
Then you make the same smart choice the next quarter… and the next. True, it’s only one extra share each quarter. But over time, it makes a huge difference.
That’s because reinvesting your dividends takes advantage of compound interest.
Compound interest is the interest on your initial investment, plus interest on all interest earned. This means your interest—or in this case, your reinvested dividends—earns interest, too.
In other words, those reinvested dividends make your whole investment grow much, much faster.
Click here to read the full article on Iris.xyz.