Why reinvesting stock dividends is an easy way to super-charge your returns

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We will only consider more general questions the investment cess or stocks in the portfolio or related industries

This week's question: I have been a member of the and Cramer's guidance for many years, greatly benefiting from his help

My question is: Should a dividend reinvestment strategy be considered as a possible compounding part of a portfolio? — Thank you, John from Illinois

We always recommend that investors take part in dividend reinvestment plans, or DRIPs for short, as they are arguably the easiest way to realize the incredible benefit of compound interest. (We do not reinvest dividends in the CNBC portfolio because dividends and net gain are given to charity.) DRIPs are an option that investors can choose on their brokerage platform to have the stock dividends that they receive automatically reinvested into the stock from which those funds came

DRIPs can be paid out as fractional s

Setting up a dividend reinvestment plan would not apply to investors who rely on dividends for passive income needed to cover regular expenses

Indeed, those who need cash near-term should also refrain from that cash in an asset as volatile as equities

However, for most everyone else, it's a great way to passively ensure that compound interest is working to their advantage

More active investors may prefer to get cash — not incorrectly arguing that they can take that cash and invest it whenever and wherever they see opportunity

We prefer, however, to see the dividends reinvested because it's passive and ensures that your money is going to work in something you already — otherwise, why be invested in that stock in the first place — as opposed to having a slowly growing pile of cash that you can forget

Defaulting to a DRIP, in our view, stands to vide more benefit for a greater number of investors

Going the more passive route is especially beneficial for longer-term investors who may not open their accounts all that often

After all, constant checking on your account can be detrimental, especially if you're the type of person who feels that you always need to be making a move

To quote the late great Charlie Munger, the steady right-hand man for Warren Buffett for decades, "The big money is not in the buying or selling, but in the waiting." With that in mind, let's run some numbers and look at the benefits of re dividends

That's a big difference. (See here for a full list of the stocks INJim Cramer's Charitable Trust.) As a r to the CNBC with Jim Cramer, you will receive a trade alert before Jim makes a trade

Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio

If Jim has talked a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade

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