Good morning! Stock futures today (Friday, March 27) forecasted a 10-point retreat from yesterday's close. On Thursday, The DJIA managed to bounce back from early triple-digit losses but still closed down 39 points, notching its fourth consecutive drop.
This morning, it's all about fourth-quarter GDP. The U.S. Commerce Department will release its final estimate on GDP for the last quarter of 2014. Economists expect the final level to tick up to 2.4% growth over the quarter.
After today, investors must turn their focus to first-quarter growth. With earnings season approaching, corporate revenue growth faces four distinct challenges: bad weather, the now-settled labor dispute at western U.S. ports, a strong U.S. dollar, and weakening global demand.
And speaking of global demand...
Japan will release a very important report on February Consumer Price Index (CPI) data today. The Bank of Japan has eased monetary policy to combat weak internal demand. The benchmark Nikkei 225 fell 1.4% yesterday, but the Japanese stock market has climbed more than 11% so far this year. Yesterday, we outlined the best way to play the Japanese markets for the year ahead.
Here's what else you should know about the stock market today - including your "Money Morning Tip of the Day" - to make it a profitable Friday:
Full U.S. Economic Calendar March 27, 2015 (NYSE: all times EST)
Today's tip comes from Money Morning Chief Investment Strategist Keith Fitz-Gerald:
Reinvesting dividends is the practice of buying additional shares of a stock using the dividends themselves to pay for your purchase. It results in long-term compounding, and that's key to building a fortune.
Let's use Altria Group Inc. (NYSE: MO), a high-yield dividend stock, as an example. Last September, Altria boosted its dividend for the 48th time in the last 45 years. Shares yield 4.11%.
While that's fabulous for any investor, some have made out like bandits. Depending on when they originally purchased shares, they've had the chance to receive more in dividends than they originally paid for the stock itself. Which means, practically speaking, they own the stock for "free."
Over time, the difference between simple appreciation and the effects of continual dividend reinvestment is jaw-dropping.
Had you invested in MO stock on Jan. 2, 1970, and left that money alone until the close of trading on Sept. 2, 2014, your return would be 431,800%, adjusted for dividends and stock splits.
Many companies even offer dividend reinvestment plans (DRIPs) as a means for investors to purchase shares over time. Investors can start with a small number of shares and, instead of receiving dividends as cash, reinvest continually in the company's stock.
This achieves two things. 1) It puts the plan on autopilot, and 2) it helps you maximize the effectiveness of dollar-cost averaging over time. You spread your purchases out and never have to lift a finger to do so.
The DRIP strategy isn't a get-rich-quick tactic. But for investors with an eye toward the long term, its power is unrivaled in transforming modest investments into mega-returns down the road.
For more investing tips and stock picks from Fitz-Gerald, go here...
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.