As long-time readers may know, back in December 2009 I began an ambitious experiment.

My mission: take $200,000 of StreetAuthority’s money and invest it in a stable, growing portfolio of dividend-paying securities. I would take the dividends I earn from these investments, reinvest them, and then build my portfolio into a robust income-generating machine.

We built an entire newsletter advisory around this experiment. And during this time, I’m happy to report that I’ve been able to grow my portfolio value to more than $320,000. And depending on the needs of my Daily Paycheck subscribers, they can “flip the switch” from dividend reinvestment and live off of their income stream at any time.

But let’s face it, not everyone gets $200,000 thrown in their laps.

Take Matthew Michaels, for example.

#-ad_banner-#Matt is a young father who works at StreetAuthority. He doesn’t have thousands of dollars to invest at the moment. But even so, he and his wife recently began using the Daily Paycheck strategy to build a portfolio for their two young daughters’ future.

That’s the beauty of my strategy: anyone can take steps to secure their financial future whether they have a few hundred bucks or thousands of dollars.

When you are just starting to build your retirement account — or an account for your children’s future, you may be working with substantially less than $200,000. But trust me, the laws of compound interest through dividend reinvestment work whether you have one dollar or a million dollars.

Below is a chart my long time subscribers have seen before. It shows how much income you can generate — with and without dividend reinvestment — if you invest $20,000 in a security yielding 6%. With dividend reinvestment your portfolio can generate 274% more income in 20 years time.

But the same math applies whether you have $20,000 or $300 — which is what Matt’s daughters’ account started with. The $300 Matt’s grandparents gave to his two young daughters for Christmas last year can generate 274% more income in 20 years time, just so long as its dividends are reinvested.

Of course the income from his daughters’ account is likely to grow even faster as money from future birthdays and holidays gets added to the principal.

Granted, setting up a small income portfolio can be challenging. But with a little creativity — and with the help of funds — small portfolios enjoy the same advantages as much larger portfolios.

Let me explain.

Funds Are A Beginner’s Best Friend
Today I own more than 50 securities in my Daily Paycheck portfolio. But you don’t need to own everything I own to get the kind of results I do. For one thing, depending on your income requirements and risk tolerance, not every security is going to be appropriate for your individual needs.

And if you’re just starting out with a smaller account, then it would be impractical to own everything I have in my portfolio. But that doesn’t mean you can’t achieve similar results.

If I were starting all over again with a smaller bankroll, I would start with funds. Funds offer a diversity that would be hard to accomplish with individual holdings. And in the past few years, I’ve recommended dozens of high-quality dividend-paying funds that would be assets to any Daily Paycheck portfolio.

For instance, large income portfolios can own dozens of reliable, dividend-paying stocks like utilities and telecoms. But you could get access to some of the most stable utility and telecom stocks in the world — global companies with dependable cash flows and near-monopoly power — by simply owning the Reaves Utility Income Fund (NYSE: UTG).

Since launching in 2004, Reaves has paid more than 120 straight monthly dividends. In that time, the fund never missed a dividend payment — even through the worst of the financial crisis. At current prices, the fund sports roughly a 6%yield. That’s a pretty nice yield, especially compared to historically-low savings account rates and Treasury yields.

Steady income payers like UTG help minimize the overall risk of a Daily Paycheck portfolio. Overall, my portfolio is about 30% less volatile than the overall market. Since I purchased UTG in late 2009, I’ve collected $2,368.98 in dividends, and my initial investment has returned more than 90%.

Of course, your own dividends might be more or less than mine depending on how much you invest. For instance, if you’re starting out with just a few hundred dollars, like Matt, you can’t expect thousand-dollar paychecks right away. But it is possible to turn even a small amount into a fast-growing income stream, provided you stick to a few key principles.

But let me be clear: the most important principle is that you reinvest your dividends.

That’s what Matt plans to do. It’s a simple habit that will set him up to invest thousands more for his daughters in the coming years.

In fact, Matt recently documented, on camera, his first ever high-yield trade. He hopes that by putting his money to work, and by sharing the experience, he can prove that anyone can start a successful low-risk investment plan… no matter how much money you begin with.

In the video, you will see his computer screen and watch precisely how he opened his brokerage account and invests $300 into the fund I told you about today. So if you’re curious to learn exactly how my strategy works and want to know more about his story, you can watch him take the first steps right here.