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Don’t Stop Adding To Your Investments


Last time, I shared how our 4 plex did in 2013. It’s not generating positive cash flow, but it’s getting close. Unfortunately it’s not the right property for us and we decided to sell and take a little profit. We’ll probably profit about $50,000 and many comments said that it’s probably better to keep the rental. Fifty thousand dollars is nothing to sneeze at, but in the grand scheme of thing, it’s not that much money. That’s only about a year in expenses. The important thing is to reinvest that money and grow it over the next 20 years. That’s the key to growing your wealth. You need to keep investing and put off withdrawal as long as possible.

Stock Market

The stock market seems pretty high at the moment, but the one thing I learned is to keep adding to your investment through the ups and downs. I started investing in the stock market in 1996 and consistently added to my investment every month. You don’t have to be a genius to grow your wealth, but you do have to keep at it.

Let’s take a look at how the stock market did since 1996. We’ll use Vanguard’s S&P 500 index, VFINX.

don't stop adding to your investment stock market reinvestment

The stock market had two big crashed since 1996 – the dot com bubble and the Great Recession. If you invested a $50,000 in January 2000 and don’t add to it at all, then you’ll gain about 25-30%. That’s around $15,000 in profit, but inflation would eat all that up.

However, if you reinvest the dividend, you’ll boost your return by a huge percentage. Just by putting the dividend back into the fund, your return will increase from 25% to 75%. That’s huge. Here is the chart from Moringstar that includes dividend reinvestment.

reinvest profit investment dividend

Can you imagine how much better your ROI would be if you add just a hundred dollars or two every month for 14 years? I tried to calculate how adding $100/month would impact the ROI, but it’s a bit difficult. I can get the price from Yahoo Finance, but that doesn’t include dividend. Adding $100 every month would boost ROI by about 65% over 14 years without reinvesting the dividend. I guess we can just add 65% to the chart from the 75% we got from Morningstar. We’ll get about 140% increases if you reinvest the dividend and add $100/month. That’s just an estimate but I think it is close. If you know a good stock market calculator that can handle initial investment and monthly investment, please let me know.


Invested in Jan 2000Return in May 2014
$50,000 and spend the dividend$63,000
$50,000 and reinvest the dividend$85,000
$50,000, reinvest dividend, and add $100/month$120,000


So you can see that it’s imperative to consistently add to your investment for your wealth to compound. Dividend needs to be reinvested and any extra money added will smooth out the ups and downs of the stock market. If you’re younger than 55, you should be happy when you see a stock market crash because it’s a great buying opportunity. When you get closer to 60, then you need to be more conservative and shift some money away to bonds and other fixed income investments.

Reinvestment is the key

We’ll reinvest our profit from the 4 plex in the stock market or perhaps another property. I’m still optimistic about rentals as a source of income. We just need to find the right property for us. The important thing is that we’re not blowing the money on a sports car or anything like that. We’ll invest it and reap the benefit in 20 years when we’re both fully retired.

What about you? Do you keep investing through the bear and bull markets? It can be tough to add money when stocks are on the way down.

A useful tool for investors

Tracking all your investments can be a pain. Personal Capital is a great tool that can help you keep track your net worth and make it easy to see how you’re doing over time.

If you need help with financial planning, consider signing up with Personal Capital. Personal Capital will help you keep track of all your investments in one place and can hook you up with a personal financial adviser as well. 

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, the job became too stressful and Joe retired from his engineering career to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle.

Passive income is the key to early retirement. This year, Joe is increasing his investment in real estate with CrowdStreet. He can invest in projects across the U.S. and diversify his real estate portfolio. There are many interesting projects available so sign up and check them out.

Joe also highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.

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{ 26 comments… add one }
  • Jo May 19, 2014, 5:10 am

    Hi Joe,

    I can see that you bought intel stocks for 25.96 and you currently have 1890 shares based on the article you write in Jan 6. That is the majority of your portfolio. There have been varying fluctuations over the years in the share price of intel. Back in 1997 the peak price was $24. In 2003 the peak price was $34. $28 back in 2012 and now we are at $26. Over the course of seven years, the share price has remained relatively stable. Is this a good thing? The S&P 500 index shows an increase from 2000 till now. VFINX is relatively good. Are you still happy to hold intel stock considering how stable the prices have been?


    • retirebyforty May 19, 2014, 10:09 am

      Actually, that’s the price at the start of 2014. I think my price is actually around $9 due to various grants and such. I’m not happy with them and will probably sell some in a year or so. I don’t think there will be any big change in the future either. They are not doing very well in the mobile space.

  • Jo May 18, 2014, 6:05 am

    Thanks for the advice. I have been investing for the past six years. I used to invest in shares for the short term (maximum one year) due to lack of patience and experience but fotunately I have made some gains. As I am getting older, I am changing my investment strategy to long term quality stocks that provides dividends. I am always looking for opportunities that exist in the market. You say it is difficult to time, and I agree with you but I am reluctant to purchase companies that are expensive at present. If a major crash occurs, it will be years before they will pick up to where it started and the gains you make won’t be as significant if you had purchased it at a lower price. The same mentality applies when I purchase anything. I am relunctant to purchase something unless there is a discount. I should start adding more quality stocks to my portfolio, but it is this fear of the market crashing which is preventing me from buying certain companies.

    • retirebyforty May 19, 2014, 10:02 am

      That’s true, but you’re also losing out on opportunity cost. I’m reluctant to add a big lump sum too, but I don’t mind incremental investments in my 401k and Roth IRA.

  • Jo May 15, 2014, 10:06 pm

    Ahh thanks for that. I am trying to focus on reinvesting my stocks as I think it is better in the long term. Timing in the market is important for me as I do not want to purchase something that is over priced. Looking at the chart Joe has provided us, if history repeats don’t you think the market will crash? Why so keen on investing when the prices are so high at present?

    • retirebyforty May 16, 2014, 8:49 am

      How long have you been investing? If you’re just starting out (5-10 years), then I think it’s much easier to just concentrate on adding to your investment. The saving rate is much more important when you’re starting out and it build good habits. The problem is you don’t really know what the market is going to do. It might keep going up for 2 more years or it could drop tomorrow. It’s hard to time the market.

  • Brian @ Luke1428 May 15, 2014, 5:09 pm

    We never stop investing. Doesn’t matter what the market is doing, just keep putting more and more away little by little. It really is pretty senseless to try and time the market. I know technical analysis can show us some trends but you never really know if you are one week away from the next downturn or the next upswing.

  • John @ Wise Dollar May 15, 2014, 8:12 am

    I could not agree more Joe! It can be hard to stomach at times, especially if you’re listening to the media, but investing consistently is the way to go in order to build your long term wealth. We invest regularly and reinvest those dividends to help out more. I just look at my plan and let that guide what I’m going to do for us as that is one of the big things you actually have control over.

  • Jo May 15, 2014, 7:28 am

    Hi Joe,

    Great website. When you say keep on adding to your investments do you mean dividend reinvestment plan or you purchase more stocks? It seems your dividend portfolio is purely income orientated so how do you reinvest the dividend? If you reinvest the same company from the income you generated from dividends wouldn’t that be a waste of money on purchase fees? Sorry I am confused hope you can clarify.


    • retirebyforty May 15, 2014, 11:40 am

      Both. In my retirement portfolio, I just reinvest the dividend. In my dividend portfolio (taxable), I buy new dividend stocks. I’ll probably transition to reinvesting at some point. It’s just easier to keep track of tax info when you buy new stocks. Although, it’s much easier these days.

  • [email protected] May 14, 2014, 10:45 pm

    I used to be such an emotional investor. I would sell at the bottom and buy at the top. Needless to say, my returns weren’t that great or consistent. Nowadays, I welcome a correction here or there. That’s the perfect time to add additional funds. If you don’t want to follow the moves of the market, I agree that consistent investments in an index fund or dividend stocks is a good strategy.

    • retirebyforty May 15, 2014, 11:33 am

      Great job. It’s a simple change in the way to look at the stock market. Unfortunately, most investors don’t know how to do it.

  • No Nonsense Landlord May 14, 2014, 8:50 pm

    Sometimes it’s hard to invest at all time highs…

    Everyone is expecting the bull market to continue, that means it’s ready for a fall. or Not.

    I am about to pull the trigger on another RE investment. Probably sometime next week.

    • retirebyforty May 15, 2014, 11:33 am

      Good luck with the next deal. The RE market is pretty high in our area so it’s tough to find anything good now.

  • Dividend Mantra May 14, 2014, 2:08 pm


    Couldn’t agree more. Except for one month, I’ve consistently and monthly purchased dividend growth stocks since March 2010. And I plan on doing so in the future for as long as possible, and as much as possible. Trying to outsmart the market is a sucker’s game, in my opinion. Reinvesting dividends is the only way to go, and better if you can combine those reinvested dividends with fresh capital from your savings.

    Best wishes!

    • retirebyforty May 15, 2014, 11:31 am

      You have come such a long way in 4 years. That’s a really short time and it shows that anyone can do it.

  • Justin @ Root of Good May 14, 2014, 12:56 pm

    Such a simple concept but it seems like many have a hard time following simple advice. I tell folks to set up their investments on auto pilot and have them drafted from their checking account monthly just like it’s another bill.

    Treat “getting wealthy” as just another payment that you have to make each month and it’s a lot easier to end up wealthy as you get older.

    And getting used to investing in good markets and down prepares you psychologically to deal with volatility.

  • My dividends are automatically set up to reinvest, so I never feel like I’m giving something up.

  • kammi May 14, 2014, 9:10 am

    I’m all about Schwab (they’re GREAT and I can walk to their office!) and I’m planning to open a Vanguard account later this year. I LOVE numbers so I love watching the stock market, actually; it’s fun and I try not to bee too overly serious about money in general that I put into it; I think of it as sort of ‘play money’ so I don’t freak out about losing money but I still appreciate when I gain a bit of interest (I hope that’s not too weird). I try not to focus too much on investments (unless it’s in myself; these days I’m still learning new skills which will provide me with more opportunities for income in the near future); if you focus on producing and earning, then you don’t stress out too much about what you already have sitting in accounts. But that’s just my opinion 🙂

    • retirebyforty May 15, 2014, 11:29 am

      That’s a good way to look at it. I have been really busy the last couple of months and I haven’t checked the stock market much. It’s actually pretty good because I won’t stress out about it. The swings don’t impact our daily lives anyway.

  • Bryce @ Save and Conquer May 14, 2014, 8:51 am

    Good topic. The way to make lots of money is to invest often. We contribute the max allowable to our 401(k)s through monthly installments. We also max our Roth IRAs near the beginning of the year. Our mortgage is paid off, so throughout the year, we invest the equivalent of our old accelerated mortgage payment every month. We also put any excess funds at the end of the month into investments, as well.

    • retirebyforty May 15, 2014, 11:27 am

      Great job! We are doing the same with our 401k and Roth IRAs. We still have our mortgage, though. Someday….

  • Lord Protector May 14, 2014, 6:45 am

    Love the bit about how adding more money makes the pile of money bigger. Such tautological insights are truly astounding.

  • Frugal Pediatrician May 14, 2014, 6:20 am

    We just do index funds through Vanguard and Schwab for our pre-tax retirement savings and than another Vanguard index fund post-tax investments. To be honest, I just check to make sure that the cost are low and that we are diversified in international vs domestic and then keep it in the index funds. We’re not as savy as other people. I think the more important thing are the cost are low, stick with Vanguard/Schwab, and we have a very large savings rate. We are about 1/3 investments in actual rental properties and then other in stocks/index funds. We’ve stuck with the plan for 10 years and we seen to be doing well. We also keep on investing no matter what the ups and downs are. I don’t even keep track on the stock market.

    • retirebyforty May 14, 2014, 8:35 am

      That’s the easiest way to do it. I do that for most of our investment too. I have a portion of our investment that I experiment with, but I’m not doing as well as the passive investments. I’ll transfer most of that to Vanguard soon. It’s just so much easier.

      • peter May 14, 2014, 10:17 am

        1. The more you do, the less you have.
        2. Those that get frequent updates on their investments earn lower returns than those that do not.
        These are universal truths.

        So why do people want to be active “investors”? Well, human beings like to think they are in control and doing (trading) makes them feel like they are.

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