Dear Daily Trade Alert,
Our goal is to survive retirement. I have severe health problems, and so does my husband. We do not have a huge amount of money to invest at this time, but I certainly would appreciate some honest information that could help us. We’re both close to 65 years old. Our life has been hard work and very little recreation. We’ve tried to save every penny available.
-Maureen H.
Most people want to have a safe and comfortable retirement, along with a little extra money for the occasional splurges.
But it’s not easy to financially secure one’s life for the long term, as life has a way of putting speed bumps in the way.
Health problems are a good example of that.
That said, it’s amazing what some extra capital, a little time, and high-quality businesses can do for your wealth and passive income.
My experience bears this out.
I was completely broke not too long ago.
In fact, I was worth less than zero dollars as recently as early 2010.
My net worth was negative, meaning my liabilities outstripped my assets.
I was 27 years old.
But I started saving every available penny.
The lifestyle I was living was altered significantly so as to increase my savings as much as possible.
Frugality became a well-known friend. Any extra spending was cut, which also involved moving to a cheaper apartment, selling my car, and changing my diet.
In addition, I worked extra hard at my day job, increasing my income. And I built up a business at home that involved writing articles just like the one I’m writing for you now.
Perhaps most importantly, I educated myself on all things investing, studying a number of investment strategies that successful investors have used to build massive fortunes.
What I learned is that investing in high-quality businesses that pay growing dividends is one of the most surefire paths to increased wealth and passive income.
By taking my savings and investing it this way – investing in high-quality dividend growth stocks at attractive valuations for the long term – I went from below broke at 27 to financially free at 33.
My real-money, real-life portfolio is the end result of all that saving and investing.
This portfolio has a value well into the six figures. And it pumps out five-figure passive dividend income that should grow faster than inflation over the long haul.
A dividend growth investing strategy is incredibly simple, which means there’s almost no learning curve at all.
If you take the time to look through my portfolio, you’ll notice a lot of household names.
Companies like The Coca-Cola Co. (KO), Johnson & Johnson (JNJ), and Microsoft Corporation (MSFT) are on that list.
Blue-chip stocks often pay out increasing dividends. And they amass track records of such behavior for years – or even decades.
Why?
Well, it’s pretty simple.
Great businesses sell more products and/or services year in and year out. That means more revenue and profit. As profit grows, the business can only do so much with all that cash, which means a prudent course of action is to return some of that profit back to shareholders (the collective owners of publicly traded companies).
As that profit increases, so do the dividends.
You see, growing dividends are the “proof in the pudding” when it comes to growing profit.
A company shouldn’t just tell you that it’s growing profit. It should show you.
As Cuba Gooding Jr.’s character in Jerry Maguire likes to say: show me the money!
Meanwhile, it’s not just growing passive income (via those growing dividends) that you can generally count on.
As these companies increase their profit, their stock value (and price) rises over time, too. This increases the value of your investments, growing your net worth in the process.
So it’s essentially getting to have your cake and eat it, too: you get increasing wealth and increasing passive income.
My enthusiasm for this strategy is due to my personal success, as I went from below broke to financially free in a pretty short period of time.
But everyone’s situation is different. As such, you should only be investing money that you don’t need for a while.
While this is sensible advice for anyone, it’s especially true for those more advanced in age, as any potential health issues means liquidity is even more important.
If you’re older, and you don’t yet have a sizable emergency fund that can cover important emergencies (health and otherwise), it’s imperative that you direct excess capital in that direction.
But if you truly have extra capital to invest – money you don’t need anytime soon – dividend growth investing is one of the most straightforward, robust, and powerful investment strategies I know of.
You can see what I did in just a few years’ time. And even if you’re already retired and on a more modest savings schedule, you could definitely positively impact the rest of your retirement, allowing extra wealth and passive income to safeguard your life and provide a little more cushion.
That means if any health issues start to compound in any way, your money is also compounding in the background. This could serve as a great help down the road.
Once you are actually ready to put some of your money to work, I uncover an undervalued high-quality dividend growth stock in every Sunday edition of Daily Trade Alert.
These are valuable and actionable long-term investment ideas. The companies I feature typically offer sound fundamentals, a reasonable level of debt, a strong balance sheet, a rock-solid history of increasing its dividend, and of course, an attractive valuation.
If you’re really ready to walk the path of financial freedom and ensure a comfortable retirement, the key is to get started as soon as possible.
One of the most important ingredients to compounding is time, which means you want it to start working on your behalf right away.
I wish you luck and success.
Jason Fieber
Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.