Wednesday, December 21, 2016

Compound Interest

Many financial bloggers talk about compound interest. 

Many dividend investors talk about compound interest. 

Here's why - 

I will be starting the 2017 year with ~$2,200 in my Robinhood Portfolio. Throughout the year, I will receive dividends, let's assume ~3.5%.

Below is a chart of my projected portfolio amount if I don't add any more money out of my pocket, and I buy stocks only with the dividends I receive.

YearStarting Portfolio AmountDiv Yield %Dividends
2017$2,2003.50%$77
2018$2,2773.50%$80
2019$2,3573.50%$82
2020$2,4393.50%$85
2021$2,5253.50%$88
2022$2,6133.50%$91

Now, if I add $26/week every week (like I've been doing), here's an updated table. 

YearStarting Portfolio AmountDiv Yield %Dividends
2017$2,2003.50%$77
2018$3,6293.50%$127
2019$5,1083.50%$179
2020$6,6393.50%$232
2021$8,2233.50%$288
2022$9,8633.50%$345
Obviously these tables make a lot of assumptions. I assume it will be a constant 3.5% dividend yield. I assume my portfolio value won't go up or down with the market. BUT, I think the tables make their point. If I keep adding money from my own pocket to buy dividend stocks, along with dividend money, the compound interest will benefit my portfolio! 

Signed,

Mitch

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Thanks for your thoughts!