The simple strategy that could double your returns

0
Written by:
06/06/2016
Investors are often encouraged to reinvest their dividends rather than take the cash and new research from Fidelity International reveals why.

It shows that an investor who invested £100 a month in the FTSE All Share index over the past 10 years and chose to take the income would be sitting on a savings pot of £13,600.

But had the same person in the same situation reinvested the dividends and bought more shares, the portfolio would now be worth £16,448 – a difference of nearly £3,000.

Over 20 years, the difference between the portfolios is even starker.

In this scenario, someone who wanted to take the income from their investment would now be left with a portfolio worth £30,645. If they instead reinvested their dividends their pot would have grown to £44,818.

But the true power of compounding is realised over 30 years. The investor who chose to take their income would have a portfolio worth £65,723, while the portfolio of those who chose to reinvest their dividends would be worth a whopping £132,368 – over double the return.

Tom Stevenson, investment director for Personal Investing at Fidelity International, said: “Reinvesting your dividends is one of those age-old investment strategies you can adopt to boost your wealth, especially when coupled with the phenomenon of compounding.

“The critical component here is time. It is the key factor of compounding and the reason why you should start to save as soon as you can. By investing regularly and reinvesting income over the long term, our figures show that this approach can help you double your returns.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

ISAs: your back-to-basics guide for 2018/19

Here’s everything you need to know to make the most of your unused ISA allowance ahead of the 5 April deadli...

A guide to Sharia savings accounts

A number of Sharia savings products have upped their game in recent months, beating more familiar competitors ...

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
Should you be worried about your Defined Benefit pension?

Defined Benefit schemes have come under the spotlight recently with the administration of BHS and Tata Steel. Should you be...

Close