We all need money, Right? And, with the latest economic downturn we are more worried about it. Stocks are down. Bonds are not there yet, etc. So, it is natural we are always on the look out for investment opportunities. That it is when you need to be aware of investment teasers that seem to good to be true.
The other day I received this “investment advice.” It is called the “1-share-millionaire” or “One Share millionaire” strategy. I THOUGHT I SHARE IT WITH YOU, not because I want to recommended it but to tell you to BE AWARE of this kind of strategies that already are known by the investment analysts and personal finance specialists.
This investment teaser start telling you that there’s a “US. Postal secret” that will let you become a “1 share millionaire.” These are, according to the ad pitch, known as “compound shares” that you can buy only through the US Postal System.
Briefly, the ad says that you can buy this special “compound share” through the “Postal service”, and that by doing that you can literally become a millionaire. This is what they tell us: “In short – it’s a little-known way to buy ONE special and very powerful share of stock delivered through the U.S. Postal Service… no matter where you live. The power in these special shares lies in the fact that they multiply in number and in value, without you doing a single thing.”
Well, this it is too good to be true. But the truth is that there is something that fits very well this kind of strategy. And it is NOT a secret. It is known as Dividend Reinvestment Plans (DRIP). Basically, a DRIP is a strategy of build up your wealth in a single stock over a period of time. DRIP shares are bought directly through the company or its transfer agent. The so called “US Postal Secret” is that usually these transactions are executed by mail. Dividends paid by these “special compound shares” (actual shares) are reinvested in new shares so, that is where the compound effect of the share comes from. It is the same that compound interest and reinvesting.
Of course, this is a good strategy if you can wait a long period of time. You buy a share and wait, and DO NOTHING as the ad says. The market will do it by itself. History has shown that no matter what happens in the market, in the long run (30 + years) you will come off great with stock market. You just need to wait.
I hardly believe that you will become a millionaire with 1 share of these special “compound stocks.” But, if you want to build a portfolio the “DRIP way” it would be good idea to have at least 10 or more (better 30) or so companies that are all financially OK and that cover a broad range of industries. This way if one sector goes bad (remember the dot.com bubble?) the others will help you out.
So now you know what is all this 1-share-millionaire system that will bring you all the money you need to retire and live happily for ever.