Memorising just four words could turn you into a millionaire

In times of economic uncertainty, the idea that people earning an average wage can becomemillionaires from memorising a few simple words sounds implausible.Think again. Aslong as youre disciplined, building a massive pot of moneyover time is achievable. Heres how.

Receive

To reachyour financial goals, youll need a bit of helpfromdividends. Think of these initially modest biannual or quarterly payouts asthe fertiliser needed to grow your wealthover the long term.

It follows that the first part of this strategy involves buying shares in a group of companies offering dependable but alsorealistic yields. Diversification is hugely important. Purchasingshares in several of the UKs biggest housebuilders, for example, isnt particularly prudent. Adding just one is far more sensibleas other, less cyclical, companies in your portfolio (such as power provider, National Grid,or pharmaceutical behemoth, GlaxoSmithKline)shouldensure that your wealth doesnt suffer too much in the event of a property downturn.

In addition to being diversified, you should alsocheck how safe the yieldsonoffer really are by looking at the number of times a company is capable of paying its dividend from profits. A dividend cover of 2 or more indicates thepayout is secure. Anything approaching1may signal that a business is in trouble.Packagingproducer, Mondi and communications giant, BTare just two examples of businessesthat appear capable of paying dividends for the foreseeable future.

Reinvest

In periods of market volatility, dividends are one of the few things to raiseshareholders spirits.However, to build a solid financial future, that money cant stay in your possession for too long. Ideally, it should go straight back into the stock market, perhapsto the same company or another business that you believe shows promise. While some investors choose to automate this process, others may see this as an opportunity to re-evaluate their holdings, particularly if one or twoshares have performed so well that they now take up a greater proportion of the portfolio than initially desired.

Above all, the point here is to resist the temptation to spend what you earn. Let the power of compound interest really get to work.

Repeat

Throwing money back into the best businesses on the market makes a lot of sense. The only caveat to this is that it needs to be done regularly and with almost religious zeal. Leaving cash to languish in your stocks and shares ISAwill severelyweaken your returns over the long term.

To reach millionaire status, the process of receiving and reinvesting dividend payments must also be repeated over decades. As such, only patient investors need apply.

Relax

Counter-intuitively, the fourth step is possiblythe hardest to master. Once youve started to receive and reinvest dividends on a consistent basis, you need to avoid meddling with your portfolio. Given thebarrage of negative news coverage daily, this is easier said than done.

Asinvesting is one of the few things in life in which doing as little as possible improves performance, youre likely to do far better by only checking your portfolio periodically.By not attempting to time the market or jump from share to share, youll save yourself a lot of unnecessary stress (not to mention brokerfees).