A Stock Market Investment Strategy That You Should Know About


Investing in the stock market is so accessible these days that everyone can do it. Commission-free trades make it possible for investors like you and me to try out new investment strategies.

One particular investment strategy that started to gain traction is DGI or dividend growth investment. For retail investors, this strategy was very difficult to do because up until a few years ago, each transaction had a flat fee. Now that you can invest without paying a commission and buy even fractional shares, you can reinvest even small amounts like one dollar.

The reason why dividend reinvesting is so popular now is that every single dividend payment can be reinvested. You do not have to buy a full share with the cashflow you are generating. You can buy a fraction of a share which in turn will generate more dividends. This continuous type of investment keeps compounding and accelerates the growth rate of a portfolio.

Certainly, nobody wants to keep on reinvesting their dividend payments into buying stock forever. The goal that most people set for themselves is to reach a certain dividend yield that would pay for their bills. For example, if you manage your own investment portfolio, buy your own stock, you can achieve dividend yield rates of about 5% if you are conservative about the companies in the hold. At 5%, if you have $500,000 invested, you generate about $25.000 yearly from dividends. It does not sound like much but if you continue reinvesting, doubling your portfolio only becomes easier. The longer you keep buying stock and grow your investment, the compounding effect will grow exponentially. It should take you much less to get from $100.000 to $200.000 than what it took you to get from $50.000 to $100.000. In the stock market, even if there are times of great volatility, consistency and long term investment always returns amazing gains.