Which Strategy Will Make You Richer… Starting Tomorrow? 

I had been a publisher of investment advice – in book form, magazine form, and newsletter form – for a long time when, in 2010, PS, a former protégé turned publisher himself, proposed to create a financial newsletter around me.

I thought at first that he was kidding. Or sentimentally supporting me. But he understood our business as well as anyone I’d ever worked with. He knew that I wasn’t remotely qualified to be a financial newsletter “guru.” I knew how to make and sell information. I knew marketing. I knew copywriting. I knew how to create new products. But my knowledge of financial assets was that of a reader, not a writer, and my experience in buying and selling financial assets – the skill we had been selling in our publications for 30 years – was nil.

I didn’t think I needed to remind him of this, but I did. And his response intrigued me. He said, “I don’t need you to start another stock-picking service. But I’ve had this idea in the back of my mind ever since I became a publisher.”

His idea was this: to create a new product that was more than an investment advisory. It would have two gurus – one of our very best analysts and me (“an older guy who started out with nothing and got wealthy and was not afraid to write about all the things he did to get rich besides investing”).

“I don’t know,” I said. “There are plenty of books written by guys like me. Some of them have been bestsellers. But among the people who buy financial newsletters, they aren’t attractive. We’ve tried selling those sorts of money-making products in newsletter form before, and they haven’t worked.”

He reminded me that I would have a partner to take care of the stock advice. “But with you as the old man,” he said, “we can offer our subscribers two things they can’t get from anyone right now.”

“First,” he said, “you would be writing about your personal rags-to-riches history. That always makes for good reading. But you are also someone who has 101 theories about why what you did worked.”

“You got me there,” I said. “What’s in door number two?”

“You are the only person I know who, since the day 30 years ago when you decided you wanted to get rich, has actually gotten richer non-stop – every single year, without once taking a hit.”

Those were the two reasons PS gave me, and it worked. I still wonder if he somehow knew what I discovered years later: that “affirmation” is my “love language.” Those two reasons felt like affirmation to me.

We Mapped Out My 30 Years of Getting Richer – and Investing Ranked Third 

PS’s idea was basically correct. We’d had a very successful franchise for 10 years, with me giving out the sort of wealth-building advice I gave – which was basically about working harder than everyone else, growing your main business while creating additional income streams on the side, diversifying, implementing stop-loss mechanisms in every money-making effort – and trusting true stock market experts to create investment strategies for our readers that would endeavor to beat the averages every year while keeping safety as a primary concern.

I had thought, going in, that getting richer year after year would be mostly a story about investing. But when we sat down to map out what we were calling the “Creating Wealth” protocol – the actual sequence of moves that had made me richer every single year since 1981 – investing turned out to be the third thing on the list.

Not the first thing. Not the second thing. The third.

A Reliable Definition of Wealth 

As a younger man, I thought of wealth the way most people do who start out poor. I thought of it as income. Because of that, I was always trying to increase my income by starting new side businesses, joint ventures, and so on.

I didn’t trust banking my future entirely on stock value appreciation. I knew that stock portfolios can go up and go down, and that if you try to do better than the market averages by picking your own stocks, you will do considerably worse.

So income was deep in my psyche – held in my reptilian brain. It’s an instinct I’ve never gotten rid of, which is good, because it forced me to become a wealth builder rather than just a hopeful investor.

I had always paid attention to how much I was earning, and to whether the amount could be made larger. This sounds obvious. It is not. The standard advice in the investment-newsletter business is to focus on your portfolio. Pick the right stocks. Time the market. Allocate cleverly. Rebalance.

But the math of building wealth is unforgiving on one point: You cannot invest your way out of an insufficient income.

If you make $50,000 a year and you save 10% of it, you are saving $5,000 a year. At a reasonable 8% return, it takes you nearly 40 years to reach a million dollars. By then, inflation has eaten half of it.

The man earning $300,000 a year and saving 20% of it is putting away $60,000 a year. At the same 8% return, he hits a million in 11 years. He doesn’t have to be a great investor. He just has to be a great earner.

This was the part most of my colleagues in the investment business never quite talked about. They were in the business of selling people better returns. They were not in the business of telling people their income was the problem.

But it almost always was.

The First Move: Grow Your Income Before You Buy a Single Stock 

So the first move in our Creating Wealth protocol was simple. Increase the flow of money in. Get the raise. Take on the side project. Start the small business. Master the financially valuable skill.

But there is something more important here than the size of the inflow.

Every way to generate income or asset value has its own historical average ROI. The average ROI for the stock market over the last hundred years, for example, is 10%. But some of the things I did had higher average ROIs than stocks, and with no less safety. On the contrary, many of them were actually safer.

What About When Stocks Take a Dive? 

Looking at the S&P 500 since World War II, the market has experienced roughly 30 corrections of 10% or more in about 80 years – about one every 2.5 years, though corrections tend to cluster. Notable 10%+ declines since 1980: 1987 (-34%), 2000–02 (-49%), 2007–09 (-57%), 2020’s COVID crash (-34%), and 2022’s inflation/Fed tightening (-25%), among others.

Over a 30-year horizon, you should expect about 12 to 15 corrections of 10%+, about five to seven bear markets of 20%+, and perhaps one or two truly frightening declines of 40% or more. This is why long-term stock returns are so high. If stocks never fell 10%, nobody would demand an 8%–10% long-run return from them.

The statistic that surprises people most: Despite the S&P 500’s long-term return of roughly 10% a year, in the average calendar year the market suffers an intra-year decline of about 14% – even when the year ends with a gain. A 10% correction isn’t an unusual event. It’s almost part of the normal operating behavior of the stock market.

Step Two: The Secret of the Golden Buckets
(and the quiet “leakage” that keeps six-figure earners broke for life)

The second thing in the Creating Wealth protocol was what I call my bucket system.

This is something I have written about for years, so I will not repeat it in full here. The short version is this: When the money comes in, you divide it into three accounts – one for spending, one for saving, one for investing. You set the percentage for each bucket, and you’re done. No further decisions necessary.

The wealthy people I know – and I have known many – almost all use some version of this system. And their wealth accumulates whether they are paying attention to it or not.

The opposite is true of most wannabe wealth builders. They pay close attention to the markets. They follow their stocks on a daily basis. They worry about retirement. And the reason they worry is that their underlying system has nothing automatic about it. Every dollar they put into saving and investing requires a fresh decision against the pull of the spending they would rather do.

That is the single biggest reason most high earners never become wealthy. Not their investments. Not their returns. It’s the leakage every time they lose the fight.

Step Three: Deploy Your Savings – but Only After the First Two Steps Are Locked In 
(and why the perfect stock tip does nothing until you fix the two layers below it)

Once you have a strong inflow of income and a disciplined system for saving and spending, the investing bucket fills up faster than you can deploy it. The question shifts from How do I save more? to What do I do with what I have saved?

This is the part I never trusted to myself. TD was my first pick to manage the stock side, and he was a superb one. He could analyze management. He could read a balance sheet faster than most CFOs. What he gave the protocol was the tactical engine – the actual deployment moves that turned the bucket of saved capital into a growing pile of assets.

Over the years, that role passed to others. DP took it on and refined the approach. And the portfolio I publish for my readers today is managed by SM. I make a point of crediting all three, because they were and are all exceptional analysts. Just as important, all three understood and followed my very conservative approach to managing money. Every one of them has helped me build my wealth.

What they gave the protocol was the tactics. What I gave it was the strategy. When to deploy. How much to deploy. What asset classes to cover. How to think about risk across a 40-year horizon.

The analyst was the surgeon. I was the doctor who decided whether surgery was needed.

Both were essential. But neither was sufficient on his own. And here is the part most investment advisories never get right: The strategy comes before the tactics.

Most investment advice – including most of what I was selling for 30 years – was tactical surgery for patients who did not yet need it. Buy this stock. Sell that bond. Rebalance into commodities. The advice was not wrong, exactly. It was just being applied to the wrong layer of the problem.

The reader needed to fix his income. He needed to plug the hole in his spending bucket. He needed to automate his saving. Until those layers were in place, the brilliance of the tactical advice did nothing for him.

Investing Is a Tactic. Building Wealth Is the Whole Game. 

Building wealth is a continuous process. It is not a game that resets itself every year. The investor who lives quarter to quarter and year to year is forever starting over, judging himself against a scoreboard that wipes clean each January. The wealth builder is doing something different. Because he is engaged in one long, unbroken process, he is able to make better, wiser decisions – decisions that compound not only his money but his judgment.

You can be a brilliant investor and stay poor. I have watched it happen. You can also be a mediocre investor and become wealthy. I have watched that, too. The man who increases his income year after year, saves a disciplined percentage of it, and lets compound interest do its slow, patient work ends up with more than the brilliant stock-picker every time.

The deciding factor is what you do with the income before it reaches your investment account.

If you let it leak out through the spending bucket, no amount of investment cleverness will save you. But if you channel it into the saving and investing buckets first, even modest investment skill will compound it into real wealth.

My Core Secret: Bet Biggest Where You Have Inside Knowledge and Control 

The reliable ROI of any wealth-building activity is correlated to two things: how much you know about it, and how much control you have over it.

My genius insight, if I’m allowed to call it that, was this: For all the wealth-building activities I do, I will always favor those with which I have a high degree of inside knowledge (usually earned by spending years in the industry) and also some control (by owning it or running it).

In other words, I want the majority of the income I get every year to come from investments that are active – running my own business or a side business, investing in and managing rental real estate, and the like. And I want a lower percentage of my assets tied up in ways of building wealth where I have little to no inside knowledge and can’t control the outcome – like investing in stocks.

Most of the rich men I know spend little or no time investing. When they do invest, it’s more like a hobby. Phil, for example, is a true expert in municipal bonds. But that’s not how he became wealthy, and it’s not how he intends to become even wealthier down the line. He spends an hour or two every week managing his municipal bond portfolio – which I imagine to be well in excess of $10 million. But most of his working hours are devoted to increasing his income through his business. And Phil is no exception. Every rich person I know understands that they cannot build their wealth by investing alone.

What We Created Was a New Kind of Investment Approach –One with True Diversity for Safety and Higher ROIs for Gains 

In the end, the Creating Wealth newsletter was unlike any investment newsletter we had ever published. We did write about stocks. We did pick individual investments. But we framed each issue around the three-part strategy. Every issue had a section on increasing income. Every issue had a section on the bucket system or on a specific spending or saving tactic. And every issue had the expert analyst’s investment recommendations, presented as the deployment of capital that had already been saved.

It was a different kind of newsletter. Some of our readers loved it. But some of them got frustrated because they wanted the hot stock tips without the rest of the discipline, and we lost them. 

Put Simply: Fix the Income, Plug the Leak, Then Invest.
Do all three and you’ll get richer every year, no matter what the market does.

If you have been told that investing is the key to getting rich, you have been told a partial truth.

Investing is essential. Once you have the income and the discipline, it is the lever that turns a saved pile into true wealth. But without the income, and without the discipline, investing is just noise – the hot tips, the portfolios you study, the asset classes you rotate through, all getting your attention at the wrong layer of the problem.

Fix the income. Plug the leak. Then invest. Do all three and you will get richer year after year, almost regardless of what the market does, almost regardless of which stocks you pick.

I know this because I have done it for 40 years. The market has gone up and gone down. It has had two major crashes and several minor ones. Through all of it, I have been a steady earner, a disciplined saver, and a patient deployer of capital. And I have watched my net worth grow to in excess of $50 million without knowing the first thing about any of the sophisticated market instruments.

That is the protocol. That is the difference between investing and building wealth – and, in my experience, the difference between the people who get rich and the people who spend their lives wishing they had.