You don't need a ton of money to increase your return on investment in today's volatile market. You just need the right strategy.
In fact, the best way to squeeze the most return on investment from an unstable market is through discipline, not wealth. That's according to Money Morning Chief Investment Strategist Keith Fitz-Gerald, a seasoned market analyst with over 30 years of investing experience.
"I know that there are specific tactics that can help me profit from markets that are moving higher or lower," said Fitz-Gerald. "Like a chef, I'll simply adjust the ingredients in my recipe for higher profits."
Fitz-Gerald has one trading strategy that's built to endure market turbulence best. It will help you boost your stake in a company, without investing any extra money.
But before we discuss this strategy, let's look at what's been happening to stocks recently.
The markets have been extremely volatile in 2016. The VIX Index (INDEXCBOE: VIX), which is a measure of volatility and fear in the stock market, is up 35% year over year.
Despite investor fear, the Dow Jones Industrial Average had a big 343-point rally Tuesday. That was an encouraging upswing after a five-day drop in early February of 700 points.
And those were the most recent swings in a year that has been full of unpredictable market rallies and dips.
On Jan. 29, the Dow had a huge rally of nearly 400 points. That was after it sustained its worst 10-day calendar start in history.
Currently, the Dow is down 7% from its May 2015 highs.
But despite the volatility, Fitz-Gerald still urges investors looking to grow their wealth to stay in the game.
"...the markets remain the single most powerful wealth-creation tool at your disposal," he said. "And that means you can't ignore them in any mission to protect and grow your retirement."
Fitz-Gerald developed an investing strategy that capitalizes on entry points created by this same market volatility we're seeing right now. It uses a special tool that requires no extra money from investors, other than their initial investment.
Here's exactly how the strategy works...
One Easy Strategy to Increase Return on Investment Now
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Searching for steady returns, investors have been flocking to dividend stocks this year.
One of these dividend stocks is Altria Group Inc. (NYSE: MO). Altria is a multinational corporation that sells alcohol and tobacco products. The company's stock has one of the most attractive and reliable dividend policies out of any consumer good stock. It's raised its quarterly dividend 49 times over the last 47 years.
But simply investing in a dividend stock like Altria isn't the best way to get the most return on your money.
Fitz-Gerald recommends a dividend reinvestment plan (DRIP).
With a DRIP, instead of receiving a full cash dividend payout from a company, a portion of your dividend is used to buy additional shares in that company. Most plans are entirely automated. So with a company like Altria, you can use its high dividend payout to buy even more shares of its stock.
Over time, DRIPs add up considerably. For example, if you invested $2,000 in Altria in 1980, it would be worth more than $126 million today, according to Fitz-Gerald. That's nearly $4.3 million in dividends.
When choosing a stock to use DRIP with, make sure it has longevity and stability, Fitz-Gerald says. That means companies with must-have products or services, like Altria. Also, make sure you look for companies that have increased their dividends consistently over time.
Most brokers make signing up for DRIPs simple, and do it through third parties.
"Many DRIPs are free or available at a nominal fee," Fitz-Gerald said, "which means you'll keep more of the money you're investing instead of handing it over to the Armani Army via high commissions."
The Bottom Line: Dividend reinvestment plans are a smart way to weather market volatility. They're easy to use and can be highly profitable in the long term. The best stocks for DRIPs are blue-chip stocks with high dividend yields and must-have products or services.
Stay informed on what's going on in the markets by following us on Twitter @moneymorning or liking us on Facebook.
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