Reinvesting Dividends Turbo-Charges Total Returns And Helps Protect Against Market Panic

Not every investor can reinvest dividends. Some retirees need them as current income to cover their spending needs. But in the accumulation phase of life, prior to retirement, reinvesting dividends is a core process in building assets. What can be surprising is the magnitude of the impact that dividend reinvestment has over time. I don't write much about total returns, because achieving them is not my main goal nor that of many dividend growth investors. We are focused on building the cash flows from our portfolios.

This article was inspired by numerous articles during October about increased volatility, potential market correction, and possible crash that investors were facing. One line that caught my eye was that these were trying times for investors. But that depends on your perspective. Investors who are reinvesting dividends are really having a different experience from investors who focus only on price charts. My own Dividend Growth Portfolio varied only 2% in total return during October on a weekly-close basis, which is how often I look at it, each Friday. I do not consider 2% variation to be "trying" as an investor.

Source: Seeking Alpha

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