Masters Series: The One Phone Number Every Investor Needs to Know

Editor's note: The power of compounding interest is one of the market's best-kept secrets. And as Extreme Value editor Dan Ferris explains, you can employ this strategy with one quick phone call.

 

Dan is a world-class business analyst and value investor. His strategy of finding safe, cheap, and profitable stocks has earned him a loyal following – as well as one of the most impressive track records in the industry.

 

In today's edition of our weekend Masters Series – adapted from The Stansberry Research Starter's Guide for New Investors  – Dan introduces a hassle-free way to make your money earn more money.

 

Most investors don't know about this strategy. But your broker likely offers it free of charge...

 

 

The One Phone Number Every Investor Needs to Know

By Dan Ferris, contributor, The Stansberry Research Starter's Guide for New Investors

 

Do you know the one number to call to generate long-term wealth?

 

I'm not talking about the numbers you see on late-night infomercials for "get rich quick" investment strategies. I'm talking about a single number to dial... and the one short conversation every investor should have.

 

In five minutes, you can put one of the universe's most powerful forces to work for you. You just need to dial that number.

 

I did it myself. The number I called was 800-454-9272. That's not necessarily the right number for you. But your number should be easy to find...

 

Let me explain...

 

Many online brokers offer an incredible benefit to their clients.

 

Many of them will – automatically and for free – reinvest the dividends you receive back into the stocks that pay those dividends.

 

This strategy is called a DRIP – a dividend reinvestment plan. And it's a great way to harness the "king" of all investment ideas: compounding.

 

By "compounding," I mean making your gains generate more gains.

 

The key to this strategy is owning a high-quality dividend-raising stock. These "World Dominating Dividend Growers" (or WDDGs) are highly competitive, cash-rich businesses with growing dividends. Investing in these stocks allows you to compound your money at high rates over long periods of time.

 

We'll use one of my WDDGs, software giant Microsoft (MSFT), as an example...

 

Let's say you buy 100 shares of Microsoft at $30... And let's assume the share price will grow about 5% a year. You'll collect $80 in dividends in year one.

 

Now let's say you use those dividends to buy more shares of the stock... and the company continues to raise its dividend like it has since 2005. By year two, you'll collect $92 in dividends... which you can use to buy more stock.

 

If you keep putting your dividends back into shares of the stock, by year 10, your initial $3,000 investment will be worth $7,595. By year 20, it'll be worth $35,322.

 

 

Buying great, dividend-paying companies, holding them for the long term, and reinvesting your dividends is the only sure way I know to safely and easily generate real wealth.

 

And it's so easy to get started. All you need to do is call your broker. The number I mentioned is for Ameritrade, one of the brokers I use.

 

It really is that simple. To take advantage of it, all you need to do is call up your broker or send a short e-mail and say, "I'd like to enroll my stock in your free DRIP." (If your broker doesn't offer free dividend reinvesting, seriously consider finding a different broker.)

 

Using free, automatic dividend reinvesting on high-quality stocks is one of the easiest ways you can start building wealth immediately.

 

Just pick up the phone.

 

Good investing,

 

Dan Ferris

 

 

Editor's note: We've packed The Stansberry Research Starter's Guide for New Investors with terrific insight from some of the most successful investors we know. Their advice cuts through the nonsense you hear from Wall Street and the media and simplifies the path to wealth into easy-to-understand concepts like how to limit your risk... the biggest factor in your investment success... why popular investments are often a bad idea... and much, much more.

 

These are the ideas we wish someone had taught us before we invested a single dollar. Claim your copy of The Stansberry Research Starter's Guide for New Investors  right here.