The Dividend Snowball: How Dividends Multiply Your Money

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The dividend snowball is one of the most fundamental principles you have to be aware of if you’re a dividend investor, or if you’re considering becoming a dividend investor. Understanding how your money can multiply exponentially as time goes on is the key to becoming a successful dividend investor, and thus, significantly wealthy. Because one reason why it’s important to clearly understand how the snowball effect works is because when you’re just starting out as a dividend or income investor, it can often be discouraging. The dividend snowball is the process of compounding your returns primarily through the reinvesting of your dividends. The whole reason it’s called the dividend snowball is because it’s very much like rolling an actual snowball. When you first form a ball of snow in your hands and begin rolling it, it starts off small. But the longer you roll it the larger it becomes, until the ball becomes large enough to build a snowman with. With dividend investing, the key to following the snowball method is by taking all of the dividends a stock or fund pays, and reinvesting them back into buying more shares of the same stock.