Many investors believe that if you want to achieve big returns, you have to take big risks. They believe that safe, boring companies yield nothing but boring results. These investors are wrong. And it has cost them a fortune.  It might sound counterintuitive, but if you want to achieve big gains (I’m talking about 1,000% to 5,000% or more), your best bet is to play it safe.

There is one way to consistently and reliably make a fortune in the stock market.

It has nothing to do with buying options or shorting stocks. You don’t have to time the market. And it doesn’t involve finding the “next big thing” or the latest technology. Without a doubt, history shows that the biggest and most reliable returns in the market come from the safest and most mature companies.

Specifically, the key is to buy the highest quality companies you can find – companies that pay dividends and have a history of raising those dividends over time. Buy these shares when they are cheap and reinvest the dividends. That’s it. The combination of rising dividend payments and reinvesting those dividends invokes the magic of compounding.

Let me show you what I mean. Market research firm, Ibbotson Associates, has calculated U.S. stock market returns going back more than a century. Their study shows that if you invested $1 in large U.S. companies in 1925, you would have had $98 in 2005. Had you reinvested the dividends, your $1 would have become $2,658.

The same $1 invested in 1824 would have become $374 in 2005… or more than $3,000,000 with dividends reinvested.

But by no means do you have to invest for a century or even a quarter of a century to capture the power of compounding reinvested, rising dividends.

Had you invested $10,000 in Johnson & Johnson in 1989, you would have purchased 126 shares. After splits and by reinvesting your rising dividends into more shares, you would have 2,868 shares today, worth $150,862. That is a return of 1,408%. And your initial investment would now provide you with more than $5,621 a year in dividends… the equivalent of a 56% annual yield on your initial investment!

This is how Warren Buffett’s original shares in Coca-Cola (purchased in 1988) now provide a yield of 32% on his original investment… the equivalent of several hundred million dollars per year.

Opportunity is Knocking…

With many of the best dividend-raising companies trading at a significant discount to their true value, there has rarely been a better time than NOW to build a portfolio of these stocks.

Companies that have a long history of raising their dividends are the strongest and most stable companies in the market. That means they not only provide the safest shelter in the storm, many of them actually benefit from a recession.

Companies can respond to a severe economic downturn in one of three ways. They can:

1. Die. Many companies have already declared bankruptcy and many more will before this downturn is over.
2. Survive. These are the companies that downsize, cut expenses, lower prices, close factories and stores, sell assets and cut dividends.
3. Grow. These companies may cut expenses and become leaner, but they also increase their market share by swallowing the minnows and beating up the weaklings. They fill in the competitive gaps that retreating companies have left behind.

Surviving is better than dying. But you want to invest in companies that can continue to grow and increase their competitive advantage.

While other companies play defense, protecting a diminishing pile of cash and by getting smaller and slashing assets. Other companies become bigger by buying assets (heavily discounted assets, at that). Recessions and downturns actually make these companies stronger.

As an investor, you shouldn’t fear a bad economy and a bear market. You should embrace them. If your retirement is more than a few years away, the crash in asset prices is not a crippling blow. It is a gift that comes along rarely. It takes bad times to push the price of great stocks down far enough to make huge returns over time.

And great stocks have rarely been as cheap as they are today.

If you have a time frame of 5 to 20 years and you’re looking for investments that can provide you with 1,000% to 10,000% gains, consider investing in companies like Wal-Mart, Proctor & Gamble, Verizon Communications and Emerson Electric.

Average into your positions over time, continue to invest, and then reinvest the dividends back into more shares. There is no more reliable way to become wealthy in the stock market.

Source: The Stock Market’s Greatest Secret