The stock market has been a disappointing place to invest your money over the past decade. There's absolutely no question about that. Even so, if you've been routinely investing new money throughout this decade-long mess, there's a good chance your net worth has still improved -- via new contributions and dollar-cost averaging -- in spite of the market's decade-long doldrums.

Over the long haul, the act of investing, if done right, matters almost as much as the returns on your investments in determining how wealthy you wind up when all is said and done. If you harness the true power available to you from your investments, the chances are you'll do just fine over time, no matter how the market performs. As this mess drags on and it seems tougher to continue investing for your future, keeping that fact in mind ought to help you persevere.

How to invest correctly
If you want any legitimate chance of investing successfully, you've first got to come up with cold, hard cash. Not just any cash, mind you, but a very special kind of cash – unencumbered cash. That's money you don't need to pay the bills, put food on your table, or spend on some luxury experience that you'll soon forget.

There will always be more opportunities to spend your money than cash in your pocket. Structuring the rest of your life so that you have the money to invest -- and not just once, but month after month -- will go a long way toward helping you build your nest egg. Not only that, but the discipline enforced by saving regularly will help you focus the rest of your spending on those things that are most important to you.

As a result, not only will you be building your nest egg, but you may even find that your overall happiness in life improves because you save.

Compound it
Once you've passed that first, most critical step of coming up with the cash to invest, you've got to figure out where to put it. Whether you're looking to buy individual stocks or invest in an index, chances are you'll come across companies that pay dividends. After all, just look at some of the yields in these companies that are a significant part of the S&P 500 index:


Proportion of S&P 500

Dividend Yield




General Electric (NYSE:GE)



Coca-Cola (NYSE:KO)



Philip Morris International (NYSE:PM)



Abbott Laboratories (NYSE:ABT)



McDonald's (NYSE:MCD)



Kraft Foods (NYSE:KFT)



Those dividends are important for two key reasons. First, the cash you receive from holding those shares is a return on your investment that'll take place regardless of whether the stock gains a penny in price. Second, you can reinvest your dividends either in the companies that paid them or in others that you're buying with your continuing contributions.

When you reinvest your dividends, they compound – turning from mere cash into a tool that increases your investment income stream. That's money that, while you're actively investing, can help you amass your nest egg faster, and once you're ready to retire, that same cash flow will help supplement your income.

What if the market comes back?
In addition to those dividends and the compounding they represent, the market can still rise. As tough as that may be to believe after the horrendous year we had in 2008, capital gains are possible -- and certainly probable over the long term. The thing is, though, to receive those gains, you have to be invested before they happen.

During these days of incredible volatility, that's easier said than done. But if you're using only unencumbered cash to invest and you're seeing the benefits of that long-term dividend compounding, seeking out those gains becomes possible, even today.

If you’re investing to fund your retirement, your time frame is probably measured in decades. Over that span of time, the act of investing itself -- combined with the growth and dividend compounding you receive along the way -- will help assure you have a well-stocked nest egg.

Build the plan that gets you there
At Motley Fool Rule Your Retirement, our goal is to help you get to -- and through -- your retirement, no matter what the market may do along the way. If you're serious about rebuilding your nest egg in the wake of recent losses, join us today to start designing the long-term plan that will get you there.

If you'd like to see what we have to offer before joining, click here to start your 30-day free trial.

At the time of publication, Fool contributor Chuck Saletta owned shares of General Electric. Coca-Cola is a Motley Fool Inside Value recommendation and a Motley Fool Income Investor pick. Philip Morris International is a Motley Fool Global Gains recommendation. The Fool has a disclosure policy.