Investor Insights:
The stock market has been on a run for a while now.
The total return of the bellwether S&P 500 Index from the bottom in March 2009 is 500%.
But the run isnt over. Money on the sidelines continues to grow.
The Investment Company Institute reports money market funds now hold more than $3.6 trillion.
This measure peaked above $3.8 trillion in March 2009 just before the stock market began moving higher.
The funds current balance is the highest it has been since then.
Thats why I recommend you consider an easy, one-click investment that beats the market
Dividend reinvestment is when you use the dividends you receive to buy more shares.
From 1960 to 2018, reinvested dividends accounted for 82% of the total return of the S&P 500.
Take a look:
(Source: Hartford Funds: The Power of Dividends)
This means it makes sense to consider firms with a solid dividend history.
For those who are worried about a market drop, dividend stocks can serve as insurance. If the market drops, dividends will cushion the fall.
In the decade of the 2000s, stocks fell almost 1% per year on average. However, investors earned 1.8% from dividends. The drop would have been closer to 3% without them.
More importantly, though, investing in companies that grow their dividends the fastest can be very lucrative.
One exchange-traded fund (ETF) has proved this.
The iShares Core Dividend Growth ETF (NYSE: DGRO) has been public since June 2014. It buys U.S. stocks that grow their dividends year after year.
From its start to January 9 of this year, its total return is nearly 7% better than the S&P 500.
The biggest reason for the outperformance is its dividend.
The fund yields 2.25%. Thats more than the S&P 500s 1.82% yield.
You can reinvest your DGRO dividends through your broker.
You can call them to set it up. Or you may be able to do it online.
For example, at E-Trade, you can click on Dividend Reinvestment at the top of the page after you log into your account:
That will take you to a screen that allows you to select which securities you would like to reinvest your dividends into.
Its quick and easy.
And its cheap. Its expense ratio is only 0.08%. That means the funds operating costs will have a minimal impact on your investment.
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