Aug. 9 marked the low point of our recent sell-off. During the
trading day, the S&P 500 hit a low of 1,101. It represented a
drop of 18% in a little more than two weeks.
On that same day, in the middle of the sell-off, I bought
SPDR Barclays Capital HighYield Bond Fund (NYSE:
portfolio at $37.09 a share. JNK closed at $38.32 a share on Sept.
I also purchased shares of the master-limited
Suburban Propane Partners (NYSE:
on the same day. It's already up 6%.
This begs the question -- do I have a secret for knowing when to
buy while the market hits a bottom?
The answer is yes, I do. But it doesn't involve spending hours
analyzing graphs or even taking an educated guess on when we'll see
a low in the market. In fact, to buy at the market bottom, I really
don't do anything at all.
You see, as chief strategist behind
The Daily Paycheck
my ai is to create a portfolio that pays me a
every day. So far, so good. In July alone, the portfolio generated
$1,412.08 in dividends.
But I don't simply cash these dividends and pocket them. Since I
started the portfolio in 2009, I've continually reinvested all the
dividends paid back into my holdings. Rather than receiving a
dividend check, I'm buying more shares of that company's stock
instead. This means my future dividend payments will be based on
even more shares, giving me higher dividend payments in the future.
It also means I'm automatically buying shares as the dividends are
paid. In up markets, I'm buying. In down markets, I'm buying. And
even when the market hits its lows like we saw in early August...
I'm buying more shares at bargain prices.
But automatically buying at market lows is just one part of the
benefit of reinvesting dividends. Reinvesting also offers you the
chance to grow your positions dramatically.
For example, in February 2010 I bought 200 shares of
The Aberdeen Chile Fund (AMEX:
The Daily Paycheck's
$200,000 real-money portfolio. But thanks to dividend reinvestment
and the fund's double-digit
, I now own 242 shares of CH in the portfolio.
This is 20% more shares than I originally purchased just 18 months
ago... and I bought them without having to invest another dollar of
my own cash.
And remember, I'm earning dividends on all these extra shares, too.
So in the last quarter, when the fund paid $0.52 per share to
investors, I saw a quarterly dividend of more than $125 ($0.52 x
241 shares) instead of $104 ($0.52 x 200 shares) if I hadn't
This may not sound like much of a difference, and in fact,
reinvesting dividends isn't a "get-rich-quick" strategy. But over
time, this difference adds up. At this pace, in just five years I
will earn double the quarterly dividends I receive from CH, had I
Now I'm not fooling myself. Dividend reinvestment doesn't
you will make money. Take a look at the banks -- they paid high
yields for years. But even if you reinvested those dividends, you'd
still be down following the financial crisis.
Action to Take -->
If you've already done your research and invested in a solid
company, then reinvesting your dividends can be one of the safest
way to increase your returns. And I am confident that this
technique can help you outperform in this tricky market.
To get started on your own high-yield
portfolio, be sure to read my free course on the topic -- "59
Dividend Checks a Month." There, I'll tell you all about my
strategy, and even give you several high-yield ideas to start your
own daily income stream.
Visit this link to read now
-- Amy Calistri
Disclosure: Neither Amy Calistri nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.