The following promises may sound droolworthy, but trust me -- you'll want to keep your salivary glands in check:

  • "Strategic Resources is $1 now and new results are set to push it over $35."
  • "Ready for 400% Returns... buy as much Gold Mountain Explorations as you can below $0.75 because I think it's about to jump above $3."
  • "Buy CalciTech, now below $1 -- and the world economic powers may soon drive it above $20."

What's the catch? These statements all come from junk mail I've received touting various hype-filled newsletters. The recommended stocks don't have Oracle's massive customer base, or UnitedHealth Group's (NYSE:UNH) pricing power. Nor did they double or quadruple, respectively, as those two powerhouses did over the past decade. That $1 stock? It's trading around $0.10 per share now, not above $35. The 400% returns stock? It goes for $0.02. The one headed to $20? It's around $0.09.

That's because those newsletters aren't promoting promising investing -- they're promoting speculation in risky stocks. And they prey on our dreams of suddenly, instantly striking it rich.

A better alternative
Imagine that you have $80,000 at your disposal. If that sum grew at the market's historic average annual return of 10% for 25 years, it would top $850,000. If you think that's impressive, hold on to your hat -- it only gets better.

According to what I've learned from our Rule Your Retirement newsletter service, in order to make your retirement nest egg last, you should plan to conservatively withdraw about 4% of it per year in retirement. A 4% slice of $850,000 is $34,000, or roughly $2,800 a month -- not a bad chunk of change. Better still, you'll likely have saved and invested more than that lump-sum $80,000 in the years leading up to retirement. So if you enter your golden years with, say, $1.5 million, that 4% will amount to $60,000 in your first year of the good life.

Take the safer road to riches
So why try to have it all right now, by putting your hard-earned money at risk in volatile ventures that could destroy your retirement, when instead, you could set yourself up for decades of relaxation?

With the right stocks -- companies with fat profit margins, and/or a history of strong and growing dividend payouts -- you might even earn more than 10% per year. Dividend-paying companies can make excellent long-term holdings, because a stable payout helps to built wealth even in shaky markets. And companies with high levels of profitability often have strong competitive positions, making them great picks for the long haul.

If you'd like some ideas for further research along those lines, here are a few stocks that earned the maximum five-star rating from our 130,000-member strong Motley Fool CAPS community. I found them while screening for companies that paid dividend yields of at least 3%, and boasted returns on equity of 15% or more.


Recent Dividend Yield

Return on Equity

Philip Morris International (NYSE:PM)



Johnson & Johnson (NYSE:JNJ)



Novartis (NYSE:NVS)



PepsiCo (NYSE:PEP)



Norfolk Southern (NYSE:NSC)



Procter & Gamble (NYSE:PG)



Data: Motley Fool CAPS and Capital IQ, a division of Standard & Poor's.

If you're looking for additional guidance, feel free to browse Robert Brokamp's Rule Your Retirement service free for 30 days. Doing so will give you access to all past issues, which feature stock and mutual fund ideas, asset allocation recommendations, and a host of "Success Stories" from early retirees eager to share their strategies.

Click here to learn more.

Longtime Fool contributor Selena Maranjian owns shares of Johnson & Johnson, which, along with PepsiCo and Procter & Gamble, is an Income Investor recommendation. UnitedHealth Group is both an Inside Value and Stock Advisor pick. Novartis and Philip Morris are Global Gains selections. The Fool owns shares of Procter & Gamble and UnitedHealth Group. The Motley Fool is Fools writing for Fools.