The Best Investment Hack Every Investor Should Know

An investment hack doesn’t have to be risky, tricky, or any of those scary ideas. In fact, it can be as simple as consistency.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published November 13, 2024 7:00 pm EST

When it comes to investing, everyone loves a good hack — something simple, reliable, and effective that can make navigating the stock market easier. While many hacks may sound complicated or risky, some are surprisingly straightforward and built to minimize risk. These gems of the investment world offer consistent rewards without demanding constant monitoring or precise timing. One of the best, time-tested hacks is dollar-cost averaging (DCA) — a strategy that’s accessible to every type of investor and designed to make investing both manageable and rewarding over the long run.

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Dollar-cost averaging

DCA is a simple yet powerful approach where you invest a fixed amount of money at regular intervals, regardless of the asset’s price. This might seem too straightforward, but it’s this simplicity that makes it so effective. You don’t need to worry about buying at the perfect time or checking your portfolio daily. Instead, DCA takes the guesswork out of investing by helping you benefit from fluctuations over time. As a result, you can steadily build wealth without stressing over market highs and lows.

One reason DCA is so effective is that it naturally helps you avoid the trap of trying to “time the market.” When prices drop, you end up buying more shares for the same amount, and when prices rise, you buy fewer. This effect is often called “smoothing out” your cost basis, as it lowers the average price you pay over time. For investors who want steady growth without making big moves in the market, DCA offers a clear advantage.

A stock to consider

Power Corporation of Canada (TSX: POW) is an excellent candidate for a DCA strategy. POW’s recent earnings have been impressive, with quarterly earnings growth of 44.6% year over year and revenue growth of 11.5% for the most recent quarter. For investors using DCA, POW’s stability and growth outlook make it a strong foundation in a portfolio.

POW also pays a reliable dividend, making it appealing to investors who value income as part of their strategy. With a forward annual dividend yield of 4.84%, POW provides a steady stream of income. This is excellent for reinvesting back into the stock using DCA. The reinvestment can further compound your returns, especially in a stock with a manageable payout ratio of around 49.53%, indicating that the dividend is sustainable.

Keep it stable

For DCA investors, stability is key, and POW’s low beta of 1.09 points to lower volatility compared to the broader market. This reduces the likelihood of sharp fluctuations in value, allowing you to invest confidently over time without major surprises. POW is a company with a diversified portfolio across sectors like insurance, retirement, wealth management, and sustainable investing. Therefore, POW has a stable foundation that aligns well with the objectives of long-term DCA investors.

Additionally, POW’s management effectiveness metrics, such as a return on equity (ROE) of 11.29%, reflect strong leadership that maximizes shareholder value. This efficiency is a solid plus for DCA investors, as it suggests that the company is consistently working to deliver returns on your investment.

Bottom line

DCA is a simple yet powerful investment strategy that every investor should consider. By spreading your investments out over time, you can avoid the pitfalls of market timing and enjoy a smoother path to building wealth. With its stable financial performance, solid dividend yield, and forward-thinking approach to sustainable investments, POW offers an excellent foundation for a DCA strategy. Whether you’re new to investing or a seasoned pro, consistently investing in POW can help you build a portfolio with both stability and growth potential.