It seems like only yesterday when I launched The Daily Paycheck. But on Dec. 15, 2009, I made my first Daily Paycheck portfolio purchases.

I built my portfolio slowly. After six months, roughly 60% of my funds were invested in income-generating securities, and my monthly income was just under $750.

By November 2011, my monthly dividend checks totaled $1,668.49 — 47% more than I received in November 2010. In just two years’ time, I’ve collected 595 dividend checks for a total of $25,075.55.

If you’re not familiar with The Daily Paycheck strategy, then let me fill you in…

Most newsletters have a hypothetical portfolio. Not The Daily Paycheck. I actually buy and sell each month’s investment in a real brokerage account, which my company funded with $200,000 in December 2009. My goal is to find what I think are the best dividend stocks and funds on the market, and then watch my paychecks grow through dividend reinvestment and compounding. Eventually, I’ll be able to collect a dividend check for every single day of the year.

Wall Street is packed with so-called analysts who tell you all day which investments to buy, but not many have the courage to put their money where their mouths are. By contrast, I invest right alongside you. And you’ll not only mirror my performance, but you might well beat it. I’ll always give you advance notice before I buy anything for this portfolio, and I’ll always tell you exactly when to sell.

Of course, I didn’t do this all on my own. Reinvested dividends did the lion’s share of the work. For example, below is a chart of one of my holdings, a closed-end bond fund that holds corporate and government debt issued focused on the Asian-Pacific region.

 It has paid a steady monthly dividend of $0.035 since I bought it on Dec. 15, 2009. Since then, my monthly income from this fund has grown from $19.25 to $21.66 — a 12.5% increase.   

The rate of income growth is even faster if you can find a security that increases its dividend. Below is one of my favorite holdings, a master limited partnership (MLP) that has raised its dividend every quarter since I bought my initial shares back on Dec. 15, 2009. By reinvesting those fast-growing dividends, my quarterly income has jumped from $63.00 to $77.88. That’s a 23.6% increase in just two years’ time.

But perhaps the most pleasant surprise in the two years I’ve managed the Daily Paycheck portfolio is its overall performance. Even though it is made up of many conservative income securities, the portfolio has outperformed the S&P 500 Index. The portfolio is less volatile and produces more than four times the income generated by the S&P 500 Index.

 
I know a lot of traders who sit in front of their terminals all day long trying to beat the major averages. When I tell them about my Daily Paycheck strategy, they don’t believe me. They assume strategies that beat the market have to be complex and time consuming.
 
I also have a lot of friends who are in their late 50s and 60s. They are worried they won’t be able to build up a portfolio that can produce the kind of income they’ll need in retirement. When I tell them about the Daily Paycheck strategy, they don’t believe me. They’ve been told that it takes decades to build a strong income-generating portfolio.

Well, in November 2011, my portfolio generated 41% more income than the average monthly Social Security check. Reinvested, that income is going to produce even more growth and income this time next year.
 
Action to Take –> Looking ahead, I’ve already begun rebalancing a few of my positions in The Daily Paycheck. I have a few securities that have made substantial price gains and are now carrying low yields as a result. I’d like to put some of those gains to work in higher-yielding securities. I also have a few positions that have been underperforming the market. I want to put them under the microscope to be sure they have what it takes to get me where I want to be this time next year.

This has been a valuable two years for me. I have confirmed that building an income-producing portfolio doesn’t have to be complicated. Once you find a solid dividend-paying security, the rest is simple. You don’t have to babysit every position every minute of the day. You don’t even have to remind yourself to reinvest your dividends — that happens automatically through your broker. And I’ve learned that even within the short investment time frame of two years, you can significantly grow your income.