I Just Shared the Most Powerful Income Tactic With My Sister

Screen Shot 2015-12-23 at 4.33.34 PMI had a long conversation this past weekend with my sister, Katherine Schuber.

The conversation was all about Katherine’s income and how she could grow it. I’ll show you why I’m telling this story, and the advice I shared with Katherine, in just a moment. So stick with me for a second here. The payoff’s coming — I promise…

Katherine is an amazing portrait artist, and she’s been very successful in building income from her business. Below is one of her paintings of my daughter Emma:

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While Katherine is an expert at her art business, she’s relatively inexperienced when it comes to investing.

This weekend, we spent some time talking about income investing and the best way for her to steadily grow the income she gets from her investment money. As we talked about dividend stocks, the conversation turned to ways that investors can grow the amount of income they receive each month.

Today, I want to discuss three different ways that investors can grow the income they receive from their investment accounts. Hopefully, the ideas I talked about with Katherine will help you grow your own investment-based income over the next few months…

Income Growth Strategy #1: Leverage

The first way to grow your investment income is a strategy that I consider to be very risky. In fact, I would recommend you avoid this method, because it could really hurt you over the long run. Still, I think it is important to discuss because many income investors fall into this trap, and I don’t want you to be hurt.

Investors who use “leverage” to grow their income typically borrow money to invest more. Most brokerage accounts will allow you to borrow from them (while paying your brokerage interest) and use that money to buy more shares of stock.

In a bull market, this strategy can work out fine. If you have an account with $50,000 in capital and you borrow another $50,000 to buy shares of dividend stocks, you’ll actually own $100,000 in stock.

You’ll collect all of the dividends from these shares and make money if the stocks that you own trade higher. In fact, you’ll make a lot more money because you own twice as much stock.

This type of investing is often called “margin investing.” And while it can help you collect twice as many dividend checks and grow your money quickly, it can also really hurt you in a bad market.

Suppose you have a $50,000 account and borrow another $50,000 from your broker to buy shares. Once again, you will now own $100,000 in stock.

Now, if the market drops by 25%, your $100,000 in stock will likely lose 25% of its value and you’ll be left with $75,000 in stock positions. But keep in mind you still owe $50,000 to your broker. After repaying the loan, you’re left with just $25,000 — or half of your original amount.

As you can see, this strategy can give you more income. But it also leaves you with a lot more risk.

So if your broker (or a friend or neighbor) tries to convince you to “trade on margin,” please know that this way of increasing your income is very risky — and is usually a very bad idea.

Income Growth Strategy #2: Dividend Reinvestment (DRIPs)…

A second way to grow your investment income is by using your dividend checks to buy new shares of stock. When you use your dividend payments to buy additional shares, you’ll receive larger dividend checks each quarter. This is because you’ll own more shares (leading to bigger dividend payments) as time goes on.

The method for increasing your investment income is often called a dividend reinvestment plan (or DRIP), and it can really make a big difference in your account over time. In fact, over time, this method could double the total return on your investment account:

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And all of this just by using your dividend payments to buy more shares of stock!

If you’re interested in safely growing your income over time, I highly recommend you read my special report on “juicing.” From there, you should go ahead and enroll in the DRIP programs that are offered by many of our dividend investments.

Income Growth Strategy #3: The Instant Income Loophole…

If you want to increase the income that you receive from your investments right now (as in immediately), then you might want to consider a special income strategy.

This method for increasing your income puts instant payments in your brokerage account simply by taking advantage of a little-known loophole in the market. These payments can come from stocks we don’t even own, provided you know how to take advantage of this opportunity.

Also, this loophole can allow you to collect extra income payments from stocks that you already own and put the income into your account right away. You can use this income to cover a bill that you received in the mail today — or to take a friend out to dinner this evening.

To learn how to start generating as much as $1,000 in extra income per month using this loophole, I’ve prepared a full website around the idea.

This year, I’ve shown readers how to collect large amounts of income using this method. Last October, we collected $4,386 in instant income payments. And I’ve already shown investors how to use this strategy to collect $730 so far in November. Altogether this year, investors have been able to capture $31,254 in instant income with this method.

My preferred strategy takes a little more work (usually about 10-15 minutes each week), but the payments are immediate and can add up very quickly.

Also, this income strategy is very safe. While every investment strategy involves some risk of losing money, this loophole actually has less risk of loss than our dividend reinvestment strategy. That’s what makes this loophole so great!

A Quick Overview of Three Income Growth Strategies…

Just to review, I told my sister Katherine about three different ways that she could grow her investment income.

1) Add Leverage: This method of borrowing to buy more stocks is risky, but it can help you grow your income in a bull market. Because of the risk, I rarely suggest this to most income investors.

2) Dividend Reinvestment: You can use your dividend payments to buy more shares (with a DRIP). This is an excellent way to grow your income over time. But it takes years for the growth to really kick in.

3) Instant Income Loophole: This method allows you to collect instant income payments from the market. The payments are immediately deposited into your account, and you can spend them right away. This loophole is actually safer than buying shares of dividend stocks.

If you’re not yet taking advantage of this loophole, you should definitely check it out. The 10-15 minutes spent each week to collect your income payments could wind up being the most prosperous minutes of your week!

Here’s to growing your income!

Zach Scheidt
for The Daily Reckoning