The dream of many people is have enough money to meet your expectations and meet your daily needs. However, achieving that stability requires vision and strategy. Therefore, a specialist shares some of his most valuable secrets to achieve this goal and learn how to do true “magic” with money. How to achieve it?
According to CNBC, One of the most effective strategies to generate passive income is to invest in stocks that pay dividends, since they allow money to work constantly without the need for additional effort.
“Mad Money” host Jim Cramer explained to CNBC Make It that dividends can be a “magic” tool for building wealth. It ensures that by reinvesting them, investors end up with many more shares than they imagined, boosting their profits over time.
Cramer exemplifies that if $100 is invested in stocks that rise to $110 and also generate a 2% dividend, reinvesting it will achieve a total return of 12%. This compounding effect, repeated over the years, drives financial growth significantly.
Data from Hartford Funds supports this view: between 1960 and 2024, a $10,000 investment in the S&P 500 would have grown to $982,000 from price appreciation alone, but with reinvested dividends it would have reached $6.42 million.
For this reason, Cramer insists that the secret is not to withdraw dividends, but to let them work to multiply wealth.
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Colombian money
Source: Canva
What other way is there to make “magic” money?
There are other ways, but you just need to be encouraged to investigate them and be able to venture into the world of finance. Some ideas are:
1. Low-cost index funds or ETFs:
According to Invest, these allow you to replicate the performance of indices such as the S&P 500 with minimal commissions, taking advantage of long-term compound interest. They are ideal for building wealth in a stable and passive way.
2. Smart real estate investment (BRRRR method):
It consists of buying, rehabilitating, renting, refinancing and repeating. This method allows you to recycle capital and gradually increase assets through income and capital gains.
3. Diversification of assets:
Sound Investing indicates that combining different stock classes (large, mid and small caps) improves risk-adjusted returns. Balanced portfolios have historically outperformed concentrated ones.
4. Tax and cost optimization:
Minimizing taxes and fees can enhance the benefits of compound interest. Index funds, for example, reduce tax events thanks to their low asset turnover.
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Other important points to take care of money
Taking care of money is as important as making it grow. The first step to achieve this is to build a solid financial foundation: have an emergency fund that covers between three and six months of expenses, avoid high-interest debts and maintain a clear budget that allows you to identify how each peso is spent. According to CNBC, this initial planning is essential to avoid imbalances and protect capital against unforeseen events.
Another fundamental aspect is to invest intelligently. Morningstar recommends diversifying your assets, as spreading your money across different options—such as stocks, bonds, or real estate—reduces risk and improves long-term stability. Additionally, CNBC Make It highlights the importance of staying consistent and not getting carried away by market fluctuations.
Finally, reinvesting profits or dividends can make a big difference in wealth growth. Business Insider reminds us that compound interest has a “magical” cumulative effect when left to act patiently.. Complementing these practices with the advice of a certified professional, as suggested by CNBC, helps make strategic decisions and maximize the potential of each investment.
