Reinvesting Dividends Can Help You Earn Money in Your Sleep: Here's Why

There's a timeless investment strategy that's older than most publicly listed companies today. The strategy involves only a little time and effort, and it can accelerate compounding in your portfolio to a great degree. There are no fees. Plus, you can set the strategy to automatic in your brokerage account for consistency. It sounds almost too good to be true.

The strategy is called dividend reinvestment, deployed by beginner investors and some of Wall Street's most seasoned professionals, such as Warren Buffett. Dividends are rewards (usually cash) that a company or fund gives to its shareholders on a per-share basis. Companies with good profits and excess earnings can reinvest the cash in operations, pay down debt, or pay a dividend to reward shareholders.

Image source: Getty Images

Source Fool.com