Reinvesting Dividends

This brings us to one of the most important rules of winning investing: that you have to reinvest any dividends earned. Like winning a pot in poker increases your stack and allows you to put more pressure on your opponents, reinvesting allows you to grow exponentially when the stock is running good, and even to grow when the stock price is decreasing or staying the same. For example, chemical giant DuPont’s (NYSE: DD) shares rose just 0.5% during the past five years, but reinvesting dividends led to an 18.5% gain, and Microsoft’s (Nasdaq: MSFT) numbers were 0.8% and 15.2%.