| When choosing among portfolio candidates, you might run across two $20 stocks, one with a $0.50 per share annual dividend and the other paying $0.70, providing yields of 2.5% and 3.5%, respectively. The first impulse is to automatically pick the higher upfront yield. But don't be too hasty. The lower dividend might be growing far more rapidly. At a 10% annual growth rate, a dividend will double in just seven years. So that $0.50 payout might easily grow to become $1.00 or more in the future. Even better, that type of growth is usually accompanied by a rising share price as well. Should investors stay in the markets during downturns? A wise man once observed that you make most of your money in bear markets - you just don't realize it until later. When panic sets in, investors sell indiscriminately, even dumping the shares of unaffected companies that are still posting record profits. We saw that happen recently with the COVID-19 selloff. And when other investors panicked, we went on a shopping spree over at High-Yield Investing. And it's already paying off handsomely. When this happens, it can be a great opportunity to pick up undamaged merchandise at discounts of 20%, 30% or more. Quite often, these undervalued stocks are among the first to bounce when sentiment improves. Until then, you can thank the market for these erratic mood swings. A widespread 20% decline means that stocks that used to yield 4% now pay 5%. On a $200,000 investment, that's an extra $2,000 in your pocket over the next 12 months - and $10,000 over the next five years. Explain why it's crucial to reinvest dividends. Unless you're living off your dividend payments, you need to reinvest them. By reinvesting, you purchase more shares, which throw off more dividends, which then buy more shares, which in turn generate more income… and so on. This is a great way to harness the miraculous power of compound interest to dramatic effect. Let me give you a quick example using one of the world's most iconic companies, Coca-Cola (NYSE: KO). An investor who bought $10,000 worth of KO in 1962 would have received a total of $136,000 in dividend payments over the next 50 years. By that point, through stock splits and appreciation, the original stake of 131 shares would have grown to 6,288 shares worth $503,000 - for a total of $639,000. You could certainly do worse than turning $10,000 into more than half a million. But if all those quarterly dividends were reinvested, the original 131 shares would have grown to 21,858 shares worth a cool $1.75 million. That's an extra $1 million in your pocket - not by investing in better stocks, but simply from putting your dividends back to work and harvesting the power of compound interest. It seems to me that investors should always have an exit plan, especially during tumultuous times such as the coronavirus pandemic. While there are countless articles and other resources that help teach you which stocks, bonds and funds to buy, information regarding when to sell is sparse. Yet, these decisions can be just as important. Many investors sitting on big gains have watched helplessly as those unrealized profits evaporate, until finally the position is underwater. There are few things more frustrating than taking a loss on a stock that had been a big winner just a few weeks or months earlier. But it's a common tale. That's why it often pays to protect gains with stop-loss orders, particularly on overheated stocks that might be due for a pullback. And don't be too quick to cut losses on stocks that drop right after you buy them. If the company is operating the same as before and the shares are simply sliding in a weak market, there is no need to panic. But if the stock is falling because of deteriorating earnings caused by company or industry-specific reasons, it's time to reevaluate. Up or down, successful income investors don't succumb to emotion and base their sell decisions on valuation. Editor's Note: My interview with Nathan Slaughter provided you with invaluable investing advice. But it's only a starting point for successful investing. Want to discover the secrets of generating steady, reliable income? I encourage you to learn more by simply following this link. John Persinos is the editorial director of Investing Daily. You can reach him at: mailbag@investingdaily.com | 
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