The Apple Tree Loophole: A Great Way to Make Money in Stocks

Written By
Paul Tracy
Updated January 16, 2021

No, it's not a get-rich-quick scheme nor is it a confusing trick. 

I call it the "apple tree" loophole and it's one of the best ways I know to make money in the market, especially if you don't want to fuss over your investments every day.

And when it's used properly, the "apple tree" loophole can greatly reduce the risk of losing money in any type of market.

But before we continue, know that there are a few caveats to how you use it. 

First, you have to follow this simple strategy exactly as outlined below. 

Second, it only works with high-yield, dividend-paying stocks and funds.

It all started with a simple saying I heard years ago…

"The best time to plant a tree was 20 years ago. The second-best time is today."

It's a saying that has stuck with me for years. And if you hadn't noticed, it's talking about a lot more than planting a couple of apple trees in your backyard and enjoying the fruit later.

The Real Lesson From This Simple Saying

It's the moves we make today that deliver the greatest payoff down the road.

And that's the perfect analogy for investing in consistent, high-quality dividend payers. I firmly believe the high-yield stocks we buy today -- those with steady and increasing dividend payments -- are the ones that will end up paying us the most in the long run.

Just imagine if you had bought no more than a handful of the market's top dividend payers just 10 years ago.

  • Altria (NYSE: MO) pays 5.9%, has increased the dividend 41% in the past three years, and has returned 331% in the last 10 years thanks to all the dividends paid.
  • Realty Income (NYSE: O) brags of being the "Monthly Dividend Company" and returned 347% in ten years, thanks in part to its 5.5% yield.
  • Magellan Midstream Partners (NYSE: MMP) has returned 504%, thanks in part to its 5%-plus yield and the fact that it has increased payments 437% since 2001.

As you can see, thanks to their dividend payouts each of these investments easily returned triple digits in the past decade. Compare that with the paltry 28% return by the S&P 500 in the same period, and the power of dividends becomes apparent.

But the benefits don't stop there. If you were to hold those stocks for a longer period, then the difference would be even more pronounced.

And that's the premise for the loophole. Every time you're paid a dividend, the risk of losing money on that position gets smaller. And over time, those steady -- and increasing -- dividends can add up to unlikely returns, even from "boring" companies. 

If you hold your stocks for long enough, eventually you'll start collecting pure profit with each dividend payment.

Of course, because it takes a while to make any progress if you're only being paid between 2-3% a year, this strategy works best with high-yield stocks that pay 5% or more.

Investing is never a surefire thing; I can't guarantee success with the "apple tree" strategy, or any other investing strategy. 

But one thing I can tell you is this: Every dividend you receive makes it that much more likely that you will see a winning position in the long run. 

The Investing Answer: In a market that's keeping investors up at night, I can't think of a better way to make money without having to worry over your investments every day.

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