Rethink a long-term buy-and-hold investment strategy paid usbank
In theory, investors believe they should buy when prices are low but rising and sell when prices are high but falling.
Imagine you invested $1,000 in the S&P 500 on January 1, 2008. That year, the S&P 500 lost 37 percent of its value.Consider the differing outcomes depending on whether you used a buy-and-hold strategy or chose to reinvest $630 into a savings account with a 3 percent interest rate, compounded monthly.
For the first 10 years, the investor adds $2,500 to the fund. Additionally, the investment grows by 7 percent – the annual rate of return – each year. In comparison, consider an investor who waits until age 30 to start investing. They contribute $2,500 per year for 10 years, and then stop adding to their portfolio. At age 50, this investor would have nearly $73,000.5. An early start could mean more dividends
Automatic dividend reinvestment expands your portfolio with minimal effort on your part. As you reinvest your dividend payouts, you’ll purchase additional shares that earn additional dividends. In other words, dividend reinvestment can help you leverage the magic of compound returns. Accumulating dividends can add significant value to your portfolio.The dividends you receive from Company A are automatically reinvested to purchase more shares of Company A.
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