As a remote worker, I rarely get to spend time with my colleagues in person, so I really appreciated the opportunity to be around them outside of a work setting.

Unfortunately, there’s no poker game on the itinerary for this year’s holiday festivities. So in memory of The Oxford Club’s 1st (and Only) Annual Poker Game, I thought I’d share this article from 2022 about what investors can learn from a man nicknamed the “Poker Brat.”

– James Ogletree, Managing Editor

A couple of years ago, I met a gentleman who told me he had more than 400 open options positions. “That’s too many,” I told him point-blank. “How do you possibly manage 400 positions?”

He brushed aside the question and said he’d taken a beating this year.

I wasn’t surprised. No one can actively manage 400 positions. It’s a completely undisciplined approach that is sure to lose money.

Look, I’m all about diversification. You should have stocks from a wide variety of industries, geographies, and market caps. But if you have hundreds of stocks or options, not only is your portfolio going to be impossible to manage, but I guarantee you’ll have a lot of garbage stocks in there.

In An Economist Walks Into a Brothel – an interesting and very readable book on understanding risk, written by Allison Schrager – there is a chapter on poker champion Phil Hellmuth.

The “Poker Brat,” as he is called, is known for his volatile personality and explosions of rage when he loses a hand that he thinks he shouldn’t have lost.

In the book, Hellmuth discloses that he plays only about 12% of his hands, much less than the 25% to 50% of hands most players play.

His discipline is what makes him a winning player.

Investors could learn a thing or two from the Poker Brat.

Many investors try to make up for lost time and get rich quick. Sometimes it works – sometimes you pick that great stock or option play that goes through the roof, and you make a lot of money. But I guarantee that for every one of those you hit, there will be several losers.

If you’re disciplined and can keep your losers small and your winners big, you can make money.

However, for most investors, discipline comes in the form of picking quality investments and leaving them alone – regardless of what the market is doing, where interest rates are headed, or who is in the White House.

A disciplined player like Hellmuth will mostly play very strong hands, like two aces, two kings, an ace and a king, etc. He’ll also play weaker hands if he is one of the last to bet. (This is known as being in late position, and it’s an advantage because you’ve already seen what the other players have done.) And, of course, every good poker player will bluff occasionally.

Here’s how you can set up your portfolio according to the same principles.

1. Play a Strong Hand

For most of your portfolio, you should do the equivalent of holding two aces: own Perpetual Dividend Raisers. Holding two aces doesn’t guarantee that you’ll win the hand, just like owning a quality dividend growth stock doesn’t guarantee that you’ll make boatloads of money. But it greatly improves the odds.

A company that has a decent dividend yield and grows its dividend by a meaningful amount will generate a solid return each year even without price appreciation… but Perpetual Dividend Raisers also tend to outperform the market over the long term.

RTX (NYSE: RTX), for example, has a 2.2% dividend yield and has raised its dividend every year for over 30 years. Over the past five years, the dividend has grown by an average of more than 6% per year.

Meanwhile, the stock has outperformed the S&P 500 even amid the second straight year of a raging bull market. RTX is up 36% this year, while the S&P 500 is only up 28%.

2. Give Yourself an Edge

Sometimes, a good poker player will play lower-quality hands, like a 9 and an 8 of the same suit, if they’re in late position and believe they have an edge.

That would be the equivalent of buying a stock in an industry that is poised to benefit from current conditions. For example, if energy prices rise this winter because of the unrest in Russia, Ukraine, and the Middle East, most oil stocks will probably do well as the entire sector climbs higher. You don’t necessarily need the top stock in the industry to make money.

3. Know When to Fold ‘Em

Then there’s the bluff, which is when a player has a garbage hand, like a 10 and a 6, but plays it like it’s a great hand. A good player will know whether to bluff and try to make their opponent fold a good hand or simply lay down their cards to avoid losing a lot of money.

In the investing world, that could mean taking a flier on a small stock or option with an upcoming catalyst. If you’re right, you can make some great money. If you’re wrong, you need the discipline to get out quickly so a small loss doesn’t become a big one.

Don’t let a trade become an investment. Have the discipline to fold your cards if it’s not working out so you have enough money to play another day.

Turn the Odds in Your Favor

Like poker players, investors who are undisciplined can get lucky once in a while, but they will lose over time. The ones who are disciplined almost always make money over the long run.

Yell and scream like Phil Hellmuth when a trade goes bad if you want… but if you make smart decisions like he does, you likely won’t need to.

The post Investing Lessons From an Angry Poker Champ appeared first on Wealthy Retirement.

I said I liked the stock – which was true.

But even though I liked its outlook at the time, I didn’t recommend it to my subscribers in The Oxford Income Letter.

I’ll tell you why in a moment, but first, let me take you behind the scenes of TV land.

I’m Ready for My Close-Up

When a producer calls and asks you to be on a show to give your thoughts on a stock, they want strong opinions. The producer doesn’t want you hedging your position. A wishy-washy answer doesn’t make for good television.

If you don’t give them what they want, they will find someone else. After all, there are lots of people who would love the opportunity to talk to hundreds of thousands of viewers at once.

I won’t go on TV and say something about a stock unless I believe it. I’ve told producers in the past, “I don’t have a strong opinion on this one.” If they’re looking for a bull and I’m a bear, I’ll admit to them, “Sorry, I don’t like it.”

I know that people will act on what I say. No one should buy a stock because they hear someone talking about it for 90 seconds on TV, but people do. I learned that years ago, before I joined The Oxford Club – back when my then-boss refused to take responsibility for any of his market calls.

I was the one reading the emails that people sent him to tell him how much money they lost on his advice.

He didn’t want to hear it or believe it. But I knew these were real people investing real money based on what he said. I’ve never forgotten those emails.

After I appear on TV, I get calls from friends and family asking if they should buy the stock.

So why did I tell CNBC viewers that I liked this telecom stock and then not recommend it to my subscribers?

Increase Your Buying Power

It has to do with my specific strategy for investing in the best dividend stocks. It’s called the 10-11-12 System, and it is designed to achieve 11% yields and/or 12% average annual total returns within 10 years.

The entire goal of the model portfolios in The Oxford Income Letter is to generate solid income today – and even more tomorrow. Typically, the stocks of companies that raise their dividends go higher and outperform the market.

The secret sauce is dividend growth.

The companies that I recommend in The Oxford Income Letter‘s portfolios have long histories of raising their dividends every year – usually by a meaningful amount, such as 10% or more.

Think about what that does for an investor.

If inflation sits at 2.4% per year, what costs $1,000 today will cost $1,126 in five years and $1,268 in 10. If inflation returns to the historical average rate of 3.4% per year, $1,000 worth of goods will cost $1,182 in five years and $1,397 in 10.

That means the 10% dividend raiser easily beats inflation. It actually increases your buying power, improving your quality of life and ability to save.

An investor who receives $1,000 in dividends today and whose dividend payout increases 10% per year receives $1,610 in five years and $2,594 in 10.

The stock that I mentioned on CNBC was and is a great company – a leading telecommunications company with growing margins and earnings.

It had paid a dividend every year for decades and consistently raised it. But it didn’t have impressive dividend growth, so it was not likely to help income investors get where they want to go.

However, a stock that has a similar starting yield to that company’s but grows its dividend by 10% per year will yield 9.9% in 10 years.

A $10,000 investment in even a 4% dividend grower will generate only $597 in income in 10 years, while the same investment in a stock with 10% dividend growth will spin off $990. That’s a big difference.

Best Buy (NYSE: BBY) is a great example of the kind of dividend-growing stock I’m talking about. The company has raised its dividend by an average of 11% per year over the past five years.

While Best Buy’s 4.2% yield today may not knock your socks off, if the company maintains an 11% dividend growth rate, its yield will be much more attractive a few years from now.

Here’s the bottom line: Buy stocks with sizable and safe yields if you’re most focused on short-term income. But if you’re looking for a way to ensure your investments generate a significant amount of income in the future, be sure to stick with dividend growers that raise their dividends by meaningful amounts.

The post Supercharge Your Portfolio With Dividend Growers appeared first on Wealthy Retirement.

My cousin Susan was 8 years old at the time. My uncle’s best friend was recommending an investment that he had already put his own money into. For $15,000, my uncle could join a partnership in an office building on 39th Street and 1st Avenue in Manhattan.

This conversation took place more than 60 years ago, so $15,000 was a large sum (even for a worthy cause like investing in your children’s future).

My uncle was not in the habit of throwing money around without a lot of thought. He came from a poor family and had worked too hard for too long to be frivolous with his cash.

The friend, however, was a successful businessman. My uncle trusted him and followed him into the partnership.

The friend ended up being right. That investment has been very good for Susan. Today, Susan earns $48,000 a year in income from that partnership – more than a 300% annual yield on my uncle’s original investment.

A 60-Year Horizon

Susan is retired now. A former teacher, she has a decent pension with solid benefits. But does that extra $48,000 still come in handy? You bet it does. In 2019, she and her husband went on a monthlong cruise to Europe. Their house is paid for, and they can easily handle the cost of long-term care insurance so as not to burden their children should they get sick.

They live well, thanks in part to my uncle’s $15,000 investment all those years ago.

The money didn’t always belong to Susan. My aunt and uncle collected the income from the partnership annually for more than 50 years. But they never sold it, because they knew it would eventually be “good for Susan.”

Very few of us have a parent or role model who looked so far into the future. As a result, we do not have an investment horizon of 60 years.

But we all have a few Susans in our own lives – loved ones who could benefit from our investment skill after we’re finished with the investments ourselves.

It might be six decades too late for you to get in on that Manhattan office building, but there are plenty of investments out there that will pay you a rising income annually while generating a ton of cash for you down the road.

How to Do It

My favorite way to set up this scenario is with Perpetual Dividend Raisers – stocks that raise their dividends every year.

That’s because by lifting their dividends every year, their management teams have set the bar very high.

Imagine what would happen if, after six decades of annual dividend increases, American States Water (NYSE: AWR) did not hike its dividend. As Ricky Ricardo from I Love Lucy might say, the CEO would have “some ‘splainin’ to do.”

A CEO who breaks a long streak of dividend raises should probably get their resume together. Investors in such companies have come to expect annual dividend increases, and management teams work very hard to be able to provide them. If the dividend boosts were to suddenly come to a halt after 20 or 30 years, that would suggest a drastic change in the company’s business or prospects.

Let’s assume you’re generating $10,000 per year in dividend income and your stocks grow their dividends by an average of 8% per year. Next year, you’ll receive $10,800. At the historical average U.S. inflation rate of 3.2%, you’d need only $10,320 to keep up. That means you now have an extra $480 to save, invest, or spend.

Lastly, if you’re reinvesting your dividends, owning Perpetual Dividend Raisers helps you step on the gas of the compounding machine.

Let’s say you have a $100,000 portfolio of dividend stocks that matches the historical average gain of the S&P 500. The portfolio has an average dividend yield of 4%, and you reinvest your dividends.

After 10 years, your $100,000 will be worth $278,544, and you’ll receive about $5,300 per year in dividends.

After 20 years, your nest egg will be worth $668,103, and the portfolio will spin off $6,100 per year in dividends.

Not bad, right?

But that’s not all…

If instead of earning a flat 4%, your portfolio starts off yielding 4% but then averages an 8% dividend boost every year, the numbers increase significantly.

In 10 years, you’ll have $310,764… $32,000 more than in the first scenario. More importantly, you’ll then be generating $11,780 in dividends, more than double what you would have made if the company did not boost the payout.

In 20 years, the portfolio will be worth $978,406 – a whopping 46% more than in the earlier case. And if at that point you’re ready to stop reinvesting the dividend and take it as income, you’ll receive $38,290 annually. That’s a far cry from the $6,100 you’d get without the dividend increases.

That will be very good for your “Susan.”

Perpetual Dividend Raisers are a great way to get some income today and an even larger “paycheck” for your heirs later.

The post Perpetual Dividend Raisers: The Secret to Long-Term Wealth Creation appeared first on Wealthy Retirement.

On top of that, every single day, one of our leaders in Washington does or says something so stupid you wonder how they’re able to dress themself in the morning, much less hold a position of power.

It feels like things are spinning out of control.

And when that happens, you can count on the annuity industry to ramp up its marketing and try to convince you that it’ll make everything alright.

I’ve written extensively about annuities and what terrible investments most of them are. In fact, in my book You Don’t Have to Drive an Uber in Retirement, Chapter 16 is titled “The Worst Investment You Can Make.” It’s about annuities.

Whenever I write a scathing review of annuities, the annuities salespeople put me on blast. But the numbers simply don’t add up.

An annuity provides an income stream that is based on how much the customer invests and other factors. Fixed annuities, which pay a set amount, are the best (though that’s not saying much), as they are usually the cheapest. Variable annuities, whose returns are tied to the stock market or another variable, are usually very expensive. They are pitched to investors as a way to participate in market upside with limited or no downside.

Sounds great, right? Not so fast.

First of all, your upside is usually capped. For example, you may be guaranteed not to lose money if the market goes down, but your gains might be capped at 8% if the market goes up. So even if it’s a strong year and the market goes up 20%, you’ll make 8%.

There’s no such thing as a free lunch on Wall Street. You’re not going to get unlimited upside with little to no downside, especially at a low cost.

The annual fees for annuities typically run between 1% and 3% of your initial investment. So if you own an annuity for 20 years and your fee is at the midpoint of that range, you’ll pay 40% of your capital in fees.

Annuities also often come with steep commissions. Depending on the annuity, you’ll pay anywhere from 1% to 8% in commission fees. So if your fee is at the midpoint of that range and you have $100,000 in capital, only $95,500 of it will actually be invested, because $4,500 will go to the agent who sold you the product.

But really, here’s all you need to know about annuities…

In 2016, the Department of Labor passed a rule that designated all financial advisors as fiduciaries, which meant they were required by law to do whatever was in the best interest of their clients. After that rule was passed, annuity sales fell 8% in 2016, including 16% in the fourth quarter. Sales of variable annuities, the worst of the worst, dropped 22%.

In other words, once advisors realized they could get in trouble for selling this garbage, they stopped trying.

But then, in 2018, the Trump administration killed the rule – and annuity sales soared 40% in the fourth quarter.

Once the government removed the consequences for selling products that were not in clients’ best interests, advisors hit the phones hard.

According to Bloomberg, investors in an S&P 500-linked annuity would have missed out on $54,000 in profits per $100,000 invested over a 10-year period. That is a significant amount of money.

Lastly, most annuities have strict rules about cashing out early. You’ll pay dearly if you want your money before the contract is up.

So what’s an investor to do in these uncertain times?

The best thing you can do when the market is down is buy stocks.

It’s not easy to do. It’s scary. And when the market keeps going lower, it can be stressful.

But we know that markets go up over the long term and that anyone who has bought during a bear market has made money. They may not have been in the green the following day, month or even year. But they most definitely were within a few years.

So here’s what I recommend: Instead of buying an annuity, take a meaningful amount of capital and buy Treasurys or investment-grade corporate bonds. They are extremely safe and will generate income for you.

Take another chunk of capital and invest it in Perpetual Dividend Raisers, stocks that raise their dividends every year. That will help you generate even more income each year. And as interest rates fall and your high-yielding bonds are replaced by lower-yielding ones, Perpetual Dividend Raisers will help you make up that ground.

Perpetual Dividend Raisers also tend to be safer than other stocks because they generate a meaningful amount of cash flow that usually grows each year. That should help the stock portion of your portfolio increase in value as time goes on.

Annuity salespeople will seize on the chaotic state of the market and the country. They’ll offer to provide stability and reliable income. But they’ll neglect to mention that you’ll pay a fortune and won’t have access to your capital should you need it.

Stay away.

The post Why Annuities Are a Garbage Investment appeared first on Wealthy Retirement.

Has that changed in the 14 months since we last looked at the company?

In case you’re unfamiliar with it, Enterprise Products Partners is a 55-year-old oil and gas pipeline company.

Its CAD dipped slightly in 2020, but in 2021, it rebounded to 2019 levels. It then exploded higher in 2022, but this year it’s expected to dip from $7.75 billion to $7.55 billion.

Last year, Enterprise Products Partners paid $4.1 billion in distributions. (Since it is a master limited partnership, it pays a distribution, not a dividend. Distributions are similar to dividends but have different tax ramifications.)

The $4.1 billion distribution was 53% of the company’s CAD. This year, that figure is expected to rise to 57%. That means for every dollar Enterprise Products Partners has in cash flow, it is projected to pay out $0.57 in distributions. That’s a low number, and it means the company can easily afford its distribution.

The other thing Enterprise Products Partners has going for it is its distribution payment history.

It has raised its distribution in each of the past 25 years and just raised the payout to $0.50 per share in August. The stock yields a juicy 7.2%.

The strong cash flow and quarter-century-long track record of annual distribution raises tell me the distribution is safe. The only mark against the company is the expectation that CAD will decline this year. However, even if cash flow does come in slightly lower than where it was last year, it will still be more than enough to cover the distribution – and a raise in the near future.

Dividend Safety Rating: B

In fact, I like the stock so much that I recommended it in 2020 in The Oxford Income Letter. We’re sitting on a 143% gain as I write, and readers who bought it when I first recommended it are enjoying a gigantic (and safe) 13.4% yield.

If you have a stock whose dividend safety you’d like me to analyze, leave the ticker in the comments section. You can also take a look to see if I’ve written about your favorite stock recently. Just click on the word “Search” at the top right part of the Wealthy Retirement homepage, type in the company name and hit “Enter.”

The post Enterprise Products Partners: Is Its 7.2% Yield Still Safe? appeared first on Wealthy Retirement.

Ireland’s natural beauty is legendary and lived up to its billing. The cities were lively and fun, and the Irish were generous with their spirit.

One of my favorite parts of the trip was getting to know the Oxford Club Members and hearing their stories.

They were inspiring tales of success…

• The 90-something-year-old who was a top salesperson for The New York Times in the 1950s but wasn’t promoted because she was a woman. She eventually left and ran her own advertising agency.
• The former top engineer from Chrysler, who regularly met with Lee Iacocca. His eyes lit up when he talked about cars, especially when the hotel we stayed at had one of the very first cars ever produced.
• The entrepreneur who opened up a pizza place that became a chain, which he sold. A few years later, that chain became Godfather’s Pizza. He still runs multiple restaurants today.

All of the people I met were self-made. More impressively, though they had big successes in life, they also worked hard in their careers and invested their money the right way, affording them the lifestyles they have now.

Many of them told me they follow my 10-11-12 System of investing in Perpetual Dividend Raisers (companies that raise their dividends every year). They weren’t banking on catching the next hot stock.

You may be lucky and discover the next Tesla (Nasdaq: TSLA) or Amazon (Nasdaq: AMZN). But more likely, you’ll wind up in the next Lucid (Nasdaq: LCID).

That’s not a jab at your investing ability. It’s just that there is often a lot of hype about stocks that don’t work out, so those big winners are rare.

Here’s how I run my stock portfolio…

I do take a few small shots at stocks that could be big winners. But if they flame out, it won’t hurt me badly because I keep my position sizes small and use 25% trailing stops.

The rest of my portfolio is invested in Perpetual Dividend Raisers. I want to own stocks that generally yield 3.5% or more, grow their dividend by a meaningful amount every year, and generate plenty of cash flow to be able to afford and raise the dividend.

Because I have a number of years until retirement, I reinvest the dividends, which compounds my wealth. This was the secret that many of the Members on the trip utilized.

For those of you who are unfamiliar with the concept, it goes like this: When a company pays dividends, you can collect the dividends in cash or automatically buy more shares of stock.

For example, Ally Financial (NYSE: ALLY) pays a $0.30 per share quarterly dividend for a yield of 4.3%. If you bought 200 shares at $27.77 (the price as I write this), this quarter, you’d get paid $60 in dividends ($0.30 dividend x 200 shares = $60). If you reinvested the dividend, you’d automatically buy 2.16 more shares based on the same price ($60 dividends / $27.77 share price = 2.16). Of course, the price could be higher or lower. If it was lower, you’d buy more shares, which would generate more dividends.

The next quarter, if the dividend was the same, you’d get paid $60.64, which automatically would be used to buy more shares. That additional $0.64 seems like nothing, but if Ally raised the dividend at just half the pace it’s been raised at over the last seven years, your original $5,554 investment would nearly double to $10,102 in five years. That’s if the stock simply kept pace with the historical average of the S&P 500. In other words, it wasn’t a world-beater. Just an average stock with a strong yield and terrific dividend growth.

Here’s what that original investment would be worth over various periods of time.

You can see that after just 10 years, your investment would be up 3 1/2 times. It would double again in another five years to give you nearly seven times your original investment.

Each additional five years would nearly double the nest egg again. After 30 years, you would’ve made more than 53 times your money – not by chasing the next home run but instead by owning a “boring” dividend stock.

Many of the Members on our trip invested according to this strategy. And it helped them afford a stay at Adare Manor, our last stop in Ireland (photo below). It was rated Condé Nast’s top resort in the world.

There is nothing boring about that.

The post How to Invest Safely to Earn the Lifestyle You Want appeared first on Wealthy Retirement.

I believe so strongly in the power of investing in Perpetual Dividend Raisers that I spent two years writing Get Rich with Dividends to show investors why they must include this wealth- and income-building machine in their portfolios.

I write about dividend-growth stocks here and in various other places every week. I invest in these types of stocks for myself and for my kids.

So it may surprise you to know that I also own some bonds.

I have a mix of bonds, including corporate, Treasury and municipal bonds.

My Treasurys have extremely short maturities – less than a year. I basically treat them as a place to park my cash but earn a little extra income.

My corporates and municipals also have short maturities but not as short as those of the Treasurys. I’ll typically buy bonds with three-year or shorter maturities. Since we’re in a rising rate environment, I don’t want to be locked in at a lower interest rate for too long.

Most of the time when I buy bonds, I plan on owning them until maturity. I’m not interested in trading them.

Sure, if I get a spike in the price above par (the price at which the bond will be redeemed at maturity), I may consider selling early. But generally, I’m buying the bond to collect a consistent stream of income with the guarantee (in a Treasury) or near guarantee (in a municipal or investment-grade corporate) of getting my money back.

The important thing to remember when owning bonds is that you get the par value of the bond back at maturity… no matter what the bond, bond market or economy is doing.

For example, let’s say you buy a bond at par value ($1,000) yielding 4% that matures in two years. That means you’ll collect 4% interest each year and receive your $1,000 back at maturity.

If next year the bond declines in value to $900, that doesn’t matter. Because at maturity, you’ll get your $1,000 back. And you’ll still collect 4% interest. The interest rate you’ll receive does not fluctuate with the price of the bond.

I like that kind of stability for a small portion of my portfolio.

I keep my bond holdings fairly small because I’m still building wealth. I have years to go until retirement. Investors who have a lower tolerance for stock market risk might want to have a larger percentage of their portfolio invested in bonds than I do.

If you’re interested in bonds, I do NOT recommend bond funds or exchange-traded funds (ETFs). These investments will lose value as interest rates rise. Individual bonds may also lose value, but at maturity, investors will get their money back. There is no maturity on a bond fund or ETF, so you will very likely lose money in a rising rate environment.

It’s important to note that your bond positions aren’t likely to grow your wealth much, unless you buy bonds that are undervalued. You’re not going to get rich buying bonds. But you may stay rich.

Bonds are a useful way to generate some good income while preserving your capital. Just keep your maturities short while rates are still rising and buy bonds that are high quality.

Take it from the dividend guy.

The post Why This “Dividend Guy” Relies on Bonds appeared first on Wealthy Retirement.

Now I need to do something with it.

The problem is, I like having cash. I remember when I didn’t have any, and it gives me comfort knowing it’s there. At the same time, I know that having cash sitting in a checking account earning a few decimals of a percentage point isn’t helpful.

If you have cash lying around that is earning nothing, you should put it to work. Keep in mind, I’m not talking about the six months of emergency reserves that everyone should have and be able to tap into if needed. I’m talking about the cash that is in excess of six months’ worth of expenses.

Here are several ideas on where your money can earn some income or generate wealth.

Short Term

If you don’t want to lock up your money for long, short-term U.S. Treasurys are a good place to put your cash for a few months.

A three-month U.S. Treasury bill currently yields 4.6%. A six-month bill yields 4.8%, though a one-year bill yields 4.7%. I have several short-term Treasurys in my account and will be buying more next week.

I recommend sticking with Treasurys over certificates of deposit (CDs). The top six-month CD rate is 4.5%. You may as well earn a higher rate from Treasurys.

Medium Term

If you have at least a one-year time horizon, take a look at Series I savings bonds, also known as I bonds. These are bonds whose rate changes every May and November based on inflation. When inflation is high – as it is today – these bonds pay a high rate of interest. When inflation is low, so is the I bond rate.

Today, you’ll earn an annualized rate of 6.89% until May, when the rate will change again. This is an incredible rate for what is the safest fixed income product on earth, considering it is backed by the full faith and credit of the U.S. government.

A few important things to understand about I bonds… You do not receive cash interest payments. Rather, the interest is added to your principal. You cannot take your money out until one year has passed. If you withdraw your funds before five years, you’ll lose three months’ worth of interest. Lastly, you can invest any amount but only up to $10,000 per year per person.

For those who can take on a little more risk, investment-grade corporate bonds are a good deal right now. You can earn over 5% on A rated corporate bonds maturing in one to two years. An A rated bond is extremely unlikely to default.

Long Term

If you don’t need the cash for a number of years, I strongly recommend investing in Perpetual Dividend Raisers – companies that raise their dividend every year.

Life is expensive. And that’s more evident than ever. You need your money to grow over the long term to be able to keep up with rising costs.

Owning conservative, quality companies that generate gobs of cash flow and raise their dividend every year by a meaningful amount means that not only are you growing your income every year but, considering that stocks go up over the long term, you’re ensuring that your portfolio will grow, likely substantially.

Going back to 1937, including dividends, the S&P 500 (or a proxy for it before it was created) grew an average of 132% over rolling 10-year periods. But let’s compare that with the S&P 500 Dividend Aristocrats Index, an index of Perpetual Dividend Raisers that are members of the S&P 500 and have hiked their dividend every year for at least 25 straight years.

Since inception in 1990, the S&P 500 Dividend Aristocrats Index has never had a losing 10-year period. Its average 10-year return is 201%, which would triple your money with a one-time investment. That figure includes dividends.

Even if you exclude dividends, the index has still never had a losing 10-year period, even during the dot-com bust and the global financial crisis. At the end of 2008, near the bottom of the crisis, the Aristocrats were still up 9% – in price only – meaning these stocks held up a lot better than nearly all others.

Last week, I added more money to my dividend holdings. I’m not particularly concerned with where the market is going tomorrow or a few months from now. But I am extremely confident that 10 years from now, those funds will have grown substantially.

Having excess cash is certainly a nice problem to have, but it is a problem in that you need to do something with it. Consider the above ideas so that your extra cash isn’t sitting around like your neighbor’s kid doing nothing.

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A few hours later, another friend texted me, asking how he can “get rich with dividends.”

For people who have never invested, the markets can seem like a mysterious and intimidating force – one that can gobble up their money at any moment. But the fact is, investing doesn’t have to be complicated.

The secret to making money in the long term is extraordinarily simple…

Compounding.

When you invest and let your dividends and gains compound, the returns can be outstanding. To make it even simpler and easily digestible, I’ve created a strategy for selecting stocks in order to achieve excellent long-term results. It’s called the 10-11-12 System.

The goal with the 10-11-12 System is to generate 11% yields within 10 years. If you’re reinvesting the dividends, we’re aiming for a 12% average annual total return over 10 years.

Twelve percent may not sound like much, but it more than triples your money in 10 years. And it grows your wealth by 10 times over 20 years.

A 12% average annual return beats the pants off the market and the overwhelming majority of professional money managers.

The 10-11-12 System focuses on investing in what I call Perpetual Dividend Raisers – companies that raise their dividend every year.

The strategy has three important components: dividend yield, dividend growth and time. To earn 11% yields and 12% average annual total returns, you need to invest in stocks with decent starting yields (usually 4% or higher) and strong dividend growth, and you need to stay invested for years.

The higher the starting yield, the lower the dividend growth can be and vice versa.

I caution investors not to go for the highest yields they can find. Companies with high yields can be very risky. We’re aiming for quality companies that have long histories of raising their dividends every year and will very likely continue to do so.

For investors collecting dividends in cash, they’ll receive a raise every year. And if the companies boost their dividend by a meaningful amount, that increase should keep up with or beat inflation.

Investors who don’t need the cash right away should reinvest their dividends so that their investment compounds. The dividends will buy more shares, which will generate more dividends, which will buy more shares and so on…

At some point in the future, if the investor then needs to collect the dividends instead of reinvesting, all of those additional shares that were purchased will result in a higher cash payout.

Additionally, a company that is raising its dividend every year most likely has strong cash flows and growing earnings, which will result in not only higher payouts to shareholders but an increasing stock price.

The numbers can get quite large.

Ten years ago, I launched The Oxford Income Letter. I recommended Texas Instruments (Nasdaq: TXN). The stock has returned 564%. A month later, I recommended Raytheon Technologies (NYSE: RTX). It has returned 451%. That’s the power of investing in Perpetual Dividend Raisers.

It all comes down to this…

If you want to make good money in the market, own quality stocks of companies that raise their dividend every year. It doesn’t get much simpler than that.

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In fact, being rich may make you smart. Or more likely, being poor dumbs you down.

At a conference I attended, neuroscientist Dr. Emily Heath showed how people under financial stress experience a decline of 14 IQ points.

That is worse than if you took an IQ test after not having slept for 24 hours.

And we know that driving with no sleep can be even more dangerous than driving drunk.

The difference is that usually after going on a bender, you sleep it off, feel cruddy for a few hours and are then back to normal. People under financial stress can’t just drink a few glasses of Gatorade, pop a few ibuprofen and get relief.

Stress also takes a physical toll, cutting lives short, causing pain and reducing sex drive. Let’s face it: If you spend your day hiding from bill collectors, you’re probably not feeling like your best self and are less apt to get your freak on.

The same goes for your spouse. Money issues are one of the leading causes of divorce.

There are many ways to give yourself some financial breathing room and start reducing your stress. Let’s take a look at some simple ones.

Forced Savings

If you’re working and your company offers a 401(k), take it.

I know, I know – you can’t afford to give up 5% to 10% of your paycheck when you have bills to pay right now.

But it’s worth the effort. First of all, contributing to a 401(k) will immediately save you money in taxes.

Let’s say that you’re single and your taxable income is $50,000 per year. You’re in the 22% tax bracket, so you’ll pay $11,000 in taxes.

If you contribute 6% of your salary to a 401(k), you’ll reduce your taxable income by $3,000, saving $660 in taxes. Furthermore, many companies offer a 50% match up to 6%, so you could receive an additional $1,500 contribution from your employer.

And most people are still able to make ends meet with fewer take-home dollars.

Acorns offers another way to force yourself to save. Once you sign up and spend money using the Acorns card, the amount is rounded up and the spare change is saved in an investment account.

So if you buy lunch for $6.25, the purchase is rounded up to $7 and the $0.75 is put into your account. That can add up quickly. You can then invest the funds in various portfolios made up of exchange-traded funds (ETFs).

Keep Track of What You Spend

People love quantifying their lives. They have apps to find out how many steps they took during the day. Some even get data on their sleep. But when it comes to money and spending, it’s anyone’s guess.

I’m not the guy who is going to tell you to skip the latte that you enjoy – but if you’re under financial stress, I will tell you to at least track what you’re spending so that you’re armed with the information.

Whether you choose to cut back on lattes is up to you. But you’ll at least be making an informed decision.

There are apps like Mint that track what you’re spending your money on and how much you have remaining. Mint will alert you if your bank balance runs low so you don’t bounce a check and incur overdraft fees, and it’ll also notify you when your bills are due so you can avoid late fees.

Another way to avoid fees is automatic bill payment. Most utility, credit card and other monthly bills can be set up to be paid automatically, which will prevent late fees.

Of course, you need to make sure you have enough money in your bank account to cover the bills. But if you do, automatic bill payment is a nice way to stop worrying about whether you’ve paid the bills every month.

Invest

Lastly, make sure you’re investing, even if just a little bit and whether it’s through Acorns or a brokerage account. My preferred investment is Perpetual Dividend Raisers. These are stocks whose dividends increase every year.

Investing in Perpetual Dividend Raisers serves two purposes…

First, you’ll receive more income each year, which will hopefully lessen financial stress over time.

Second, investing will keep your brain active. Investing involves processing information, decision making and some basic math.

Financial stress takes its toll on our relationships and our physical and mental health. Relieving that stress should be a priority – and we could all use an extra 14 IQ points.

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