One Simple New Year's Resolution Could Generate +278.5% More Income

"The road to hell is paved with good intentions."

It's not exactly a proverb that fills you with holiday cheer, but it is appropriate for this time of year.

If you're like most investors, you've vowed to get your portfolio back in shape by the end of the year. You've sworn that you'll be more disciplined about your investments in the coming year. But if these resolutions are like resolutions past, by February you'll have given up your admirable goals, overwhelmed by the task at hand.

This Year's Task May Be bi171en Bigger
This year may be even less productive for well-intentioned investors. The market's rollercoaster ride over the last 12 months had many investors employing a "duck and cover" approach to managing their portfolios. Brokerage account statements got thrown in the bottom of desk drawers, unopened. Rather than deal with difficult decisions, investors just hoped for the best.

Furthermore, many people's investment needs have been altered by the recession. Some people postponed retirements in the wake of reduced retirement accounts and economic uncertainty. Others had unplanned employment changes and must come to grips with unemployment or reduced pay.

Don't Plan to Do More -- Plan to Do Less
With so much to do, investors may think the cure for their portfolios involves a mammoth reconstruction plan, replete with numerous trades and complicated strategies. But the one thing I've learned in my many years of investing is that a simple investment strategy is better than a complex, high-maintenance, investment strategy.

Why? Because we are much more likely to implement and maintain simple strategies.

Grandiose investment plans almost always fail. It's not because they aren't sound. It's because they tend to overwhelm even the most determined investors.

That's one reason why I like the "old school" approach of dividend reinvestment plans.

Collect Income or Reinvest All Year with One Trade
Just one trade in a sound income investment can deliver solid income, year in and year out. That's pretty simple.

But enrolling your investment's dividends in a reinvestment plan -- which usually involves checking a box in your online brokerage account or a call to your broker -- is even simpler.

With regular dividend reinvestment, you can get all the benefits of a Compounding interest is a tried and true growth engine.

And for those of us who have a few years before investment income is a necessity, dividend reinvestment can set us up for a far richer stream of income.

For instance, if you put $20,000 in an investment with a 7% yield, in ten years that investment will be churning out the same $1400 a year in dividends. If you reinvested those dividends, however, your annual income after ten years would be $2,754 -- or +96.7% more income. And if you were lucky enough to find an investment that boosted its dividend by +5% a year -- something even the blue chip AT&T (NYSE: T) has been able to do over the last five years -- you could be receiving $5,299 in annual income.

You could increase the income potential of your investment by +278.5% -- all with one trade and one dividend reinvestment plan.

Dividend reinvestment isn't a sexy investment strategy. It doesn't involve complex financial derivatives. It doesn't require you to nurse your investments like a day trader. And you don't need a PhD in economics to understand it or profit from it.

Its genius is its simplicity.

But whatever investment strategy you plan for the coming year, make sure it's one that you'll stick with. Keep it simple.

And have a very profitable 2010.
 

P.S. To learn more about Amy's top dividend reinvesting picks and her new newsletter, The Daily Paycheck, click here.