Most people think you can’t time the market. That’s nonsense. Not only is it possible, it’s easy.
That’s a bold claim, I know.
Today I’m going to show you how to do it with far less risk than the average investor would face. The best part? We don’t have to wait for the next panic to put our plan to work. We can start now.
This strategy not only helps shield us in a panic—it leverages market chaos for bigger gains (and a fatter income stream) down the road. That’s in large part because of this plan’s “secret weapon”: dividends. Or more specifically dividend growth.
Our strategy starts with a decidedly unsexy approach—dollar-cost averaging, or DCA. But it builds from there, giving us a shot at stronger gains using one of the most reliable patterns I’ve seen in investing.
Step 1: Build Your Portfolio (and Income Stream) Automatically
Most investors shrug off DCA, but they shouldn’t, because it gives us an edge over the “buy-and-hope” crowd.
Under DCA, we invest a fixed amount of money in a stock or fund on a fixed date, say the end of the month. By sticking to that routine, we never overbuy when stocks are pricey (because our fixed amount buys fewer shares at those times). Plus we naturally buy more shares when they’re cheap.
Successfully “timing” the market? Check!
You probably know that pretty well all brokerages let us automatically do this with our dividends through a dividend reinvestment plan, or DRIP. I think of DRIPs as our favorite dividend payers hitting the gym and doing reps—building their value, and our income stream, over time.
But it doesn’t matter whether you follow this approach with reinvested dividends or use fixed amounts of new money. The effect is the same.
Most people stop here. Not us. Because now we’re going to go further and “magnetize” (hint!) our dividends with another proven pattern few people appreciate.
Step 2: Power Up the Dividend Magnet
The key to really making our market-timing play work is to run DCA in the background but keep cash “on the side” to deploy when markets really fall out of bed.
Truth is, that’s easier said than done. While we all think of ourselves as canny contrarians, pulling the trigger on a buy when a stock is in freefall takes a lot of nerve. This is where the second part of our plan comes in, because it essentially throws a “tractor beam” on a stock, slowing its slide and pulling it back up when the dust settles.
If you’ve read my columns, you’ve likely heard me talk about the Dividend Magnet. It’s the tendency for a company’s dividend growth to pull its share price higher over time. It’s one of the most reliable (and least talked about!) patterns in investing.
It hands us the strongest gains when three things are present:
- A dividend that’s not only growing but accelerating.
- A stock that’s fallen behind the payout’s growth. This is when we want to deploy our extra cash, confident that the rising payout will pull the share price back up.
- A buyback plan, which cuts the number of shares outstanding, pushing up earnings per share, thereby putting more upward pressure on share prices.
The best way to explain this is to show it to you in action. Let’s do that, with two picks from my Hidden Yields dividend-growth service.
Visa’s Dividend “Dog Walks” Its Share Price
Visa (V) is the poster child for our “DCA+” plan, ticking all three of the above boxes.
First up, management has boosted the payout 378% in the last decade, and that growth has been accelerating (last year’s hike came in at a gaudy 13.6%) as the company targets new areas like stablecoins, which make settling cross-border transactions faster and cheaper.
Buyback plan? Check. Nineteen percent of Visa’s shares have been bought back and canceled in the last decade. The result is a Dividend Magnet set to “high”—and a precise roadmap for our DCA+ play:
We’re Buying Visa All Year Long (Especially on Dips)
You can see how our strategy works with a stock like this. Using DCA, you’d naturally buy fewer shares when they’re expensive and more when they’re cheap. That’s built in.
Now imagine deploying extra cash on every dip (circled above). That would boost our profits even more. And we could be confident in those buys, knowing Visa’s Dividend Magnet is there to throw a floor under the shares—and pull them back up.
And if you look at the right side of that chart, you can see that now is the perfect time for us to get started, with the stock again lagging well behind the payout.
Our next pick is also a great DCA+ candidate because its stock is just a bit more volatile, in relation to its dividend, than Visa’s is.
Amgen’s Whipsawing Share Price Always Swings Back to Its Payout
Over the last five years, Amgen (AMGN) has seen its share price track its payout higher, but with more ups and downs than Visa. That’s fine! It gives us more opportunities to add to our regular DCA buys. Check it out:
Amgen Is Another Prime DCA+ Play
This one is a classic. If you’d simply dollar-cost-averaged into Amgen, you’d have done just fine.
If you saved some dry powder for dips? Even better! Because like Visa, Amgen’s fast-growing payout keeps its share price from wandering too far south. Management’s buybacks also help, as the company has taken 5% of the float off the market in that time.
I expect those payout hikes to keep coming as pharma benefits from “AI-accelerated” drug research, which will slice years off of development time. That’s likely to add billions of new sales as Amgen and its competitors get to sell their drugs for years longer before generics kick in.
So while Amgen’s share price is about even with its payout now, it’s still a good time to start in on this one, while keeping cash on the side for the next dip.
That’s the best part of this strategy: We don’t have to wait for that dip. We can start now, build wealth over time, and deploy more cash when the share price falls behind the payout, reassured that our Dividend Magnet will be there to reel it back in.
5 Prime Dividend Magnet Plays to Kickstart Your “DCA+” Plan
Our “DCA+” wealth-building system is proven—and I want to make sure you get started on the right foot with my next 5 “Dividend Magnet” picks.
All 5 boast soaring payouts that keep pulling their stocks higher. And thanks to their “lagging” share prices, you can start dollar-cost averaging into them now or make a larger buy (or both!).
It’s entirely up to you.