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Turn Pocket Change into Millions 07/26/17

Turn Pocket Change into Millions with

These Seven Dividend-Paying Stocks


    It’s said that youth is wasted on the young. When it comes to investing, that slogan could not be more correct. If only our kids would recognize the enormous advantage they possess when it comes to acquiring wealth. That advantage is “time.”

    It’s not that they don’t have the money to invest. It’s more that they don’t really recognize the value. With enough time, even small amounts will compound into substantial wealth. But young people tend to be impatient and strive for instant gratification. The gambling table probably seems like a better idea than a boring long-term plan—even though the plan is virtually guaranteed to result in the accumulation of wealth.

    Our goal, as parents and educators, is to provide a persuasive argument for the latter course. Market timing is always just a gamble. It’s more logical to take the boring route—set your goals and establish a plan to reach them.

    For this article, our concern is how to develop such a plan even if you don’t have a fixed sum to invest. We’ll show you how even small amounts—your pocket-change--can turn into millions of dollars invested over the long-term in high-quality dividend-paying stocks that offer direct investment plans (where you can contribute as little as $25 quarterly to buy shares or fractions of shares).

    First the plan: Recognize how long a period you have in which to build wealth and how much wealth you think you will require. [To give you an idea, we are inserting a chart based on putting away less than $3 a day to invest $250 quarterly.] Then decide how much you will be able to put aside each month or each quarter and, depending on your resources, how many and which companies will provide sufficient diversity to protect you against some unforeseeable negative event. The longer the timeframe, the easier the effort will be! With a shorter timeframe, you’ll need to reserve more for investments.

    Start by looking at the fundamentals of the companies you are considering—how much does the company earn and are those earnings growing, how much does it spend to enhance its future earnings (also known as R&D), how credible is management according to available analysis at online financial sites or research firms, how much does it pay in dividends and what percentage of its earnings do those dividends represent (the dividend payout ratio). .

    Your plan should include your buying and selling criteria: for instance, what fundamentals will you look for in a potential acquisition and what events would cause you to sell a holding. And, most important of all, what device will you use to help you stick to your plan regardless of temporary market fluctuations. (Perhaps a pre-determined check list that you always apply before making any investing decisions.)

    This plan is based on your owning and holding high-quality securities and receiving dividends that grow in value over time and compound in your account to create real wealth.

    Investing through DRIPs achieves those goals on many levels. DRIPs make it easy to make regular dollar amount investments (instead of buying a certain number of shares) to build your holdings at a variety of price points—your predetermined dollar amounts will buy more shares when prices are low and fewer shares when prices are relatively high. DRIPs also offer the advantage of making it more difficult to trade. You can’t just click a link and sell.

    Often investors react emotionally to market volatility. It’s not easy to hold on when you see the value of your holdings plummet. More logical investors can take advantage of such opportunities to buy at more affordable prices. DRIP investors, whether they are logical or emotional, are somewhat shielded from the “noise” of the marketplace—that’s because you can set up an automatic investing program where the transfer agent will retrieve funds from your bank account on a regular basis. Busy students won’t be tempted to engage in market timing or the pressure to speculate.

    But can such a plan really result in a million dollar retirement fund? Can those few dollars you don’t spend on a candy bar compound into millions? The answer is a resounding “Yes,” providing you start early.

    The chart below assumes that you can invest only $250 a quarter ($1,000 a year). If you divide $250 by the 90 days in a quarter, you’ll see that you need to set aside less than $3 a day to implement this plan—pocket change!


    *Calculations were based on an average annual return of 8% with dividends reinvested (at an average annual dividend yield of 2%).

    Equity investments have provided better long-term results than any other investment class. Market research has established that it is reasonable to assume a 10% average annual total return over the long term--and an even larger return from a more selective portfolio. As you can see, after 40 years, your $2.78 a day investment would grow to about $531,246, after 50 years, to $1,443,560, and after 60 years, to $3,893,182. Imagine how much you could accumulate if you could afford to put away $5 a day!


    Here’s a seven stock portfolio you might consider to help implement your plan: Please keep in mind that our purpose in highlighting some companies is to point out that the company offers a DRIP and to suggest that it is “worth a look” because the company meets the following criteria:


      * The company is a solidly established industry leader;

      * The company is shareholder-friendly with a long history of paying, and even raising, regular dividends; and

      * The company does not charge a fee for investing through its DRIP..

    By “saving” in the stock of companies such as the ones in this portfolio (instead of in a bank savings account), that young investor has the opportunity to participate in the growth of the economy in the most efficient manner possible--utilizing the strategy of committing a set dollar amount on a regular basis (dollar-cost averaging).


    Suggested quarterly investment $250

    Here is a complete list of all U.S. companies that offer "No Fee DRIPs."

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