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Supercharge your investment by reinvesting your dividends

by , 25 June 2015

If you hold stocks that pay dividends, you have two choices. You can take the cash you receive out of your investment account or you can put it to work buying more shares.

So what is the best option for you?

Read on to find out…

Investing for income with dividends

If you’re investing for the long-term, chances are you’ve got some sturdy dividend paying companies in your portfolio. Over the years, dividends can contribute a substantial portion of your returns from investing in shares.

And the good news is you can boost this return even more by reinvesting your dividends instead of taking the cash. If you don’t need the income from your investment portfolio, this makes perfect sense.

Reinvesting your dividends boosts your returns

The biggest advantage of reinvesting your dividends is compounding. You accumulate more shares and increase the value of your position at a faster rate, the team of experts at Money Morning US explain.

By increasing the number of shares you own, you start to receive more dividends from the extra shares you buy. The longer you reinvest your dividends, the more shares you buy and the more dividends you receive.

Reinvesting your dividends is a great way to grow your wealth over the long-term.

When you reach retirement and need the income from your dividends, you can stop reinvesting. But if you’ve reinvested for a considerable period of time, you’ll have a tidy income from your dividends to look forward to.

The secret to making this work is time. The longer you do this for, the larger the effect of compounding.

So there you have it. How to supercharge your investment by reinvesting your dividends.

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Supercharge your investment by reinvesting your dividends
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