Dividend Reinvestment is the Real Secret to Wealth
Every article I’ve read that asks self-made millionaires and early-retirees how they got to where they are can be boiled down to two essential pieces of advice:
And I definitely agree. All other financial advice is just detail. If you can follow those two core principles, you’ll improve your financial picture quickly and exponentially (especially if you’ve never done either of those things before).
But I think the word “invest” should come with an asterisk, and at the bottom of the page, the fine print should read: “MUST REINVEST DIVIDENDS.”
“MUST REINVEST DIVIDENDS.”
A dividend, by the way, is the amount a company pays you from their profits for owning a share of their stock.
So when millionaires who retire in their 30s, like Chris Reining, talk about having enough money invested to be able to live off their dividends each year, I worry they’re sending the wrong message to the vast majority of people who will never be in that position.
Withdrawing Your Dividends Halts Growth
Over the last 50 years, adjusted for inflation, the annualized return of the S&P 500 without dividend reinvestment has only been 2.3%. And when you consider that most brokerages charge upwards of 1% annually in management fees, you won’t see much growth in your portfolio without…
