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Three Things to Ensure You Grow Wealthy
It seems to me that three things well-applied, can make all the difference in someone's life financially: time, a good idea, and a bad memory.If you’re still here, and I haven’t prevailed to get you to do anything else with some of your money—please do just this one thing.
Put your money in a good company--even if it's just $100--then forget about it.
Some people have the impression that making any real money investing, or growing rich with the stock market requires you to become some sort of super-trader market guru who buys and sells stocks and options all day at her computer.That’s nonsense—although, I know from experience it can be fun. But let me show you why the super-trader notion is nonsense.
My parents never had a lot of money growing up. I don’t think they made any kind of investment at all, including a retirement account, until I was almost graduating from high school—by that time, my father was 50!
Time was not completely on their side, but there was still plenty of it left.
Let’s imagine a different scenario had played out. Imagine my parents had been given $100 as a wedding gift in 1977, and they had invested it in a single stock—Walmart (WMT)—then forgotten about it. What would the original investment be worth today?
Walmart traded for $13.75 in 1977 on their wedding date. If I reverse out the stock splits (I won’t get too technical here, I can explain about stock splits in another article), my parent's share purchases at $13.75 would have risen to a price of $1484.42 today.
Their $100 investment would be worth $148,442 today. The numbers are simply Unbelievable.
Remember the three things? Time, a good idea, and a bad memory...
But this small sum isn’t all they would have made. I’m talking about just the growth in share value. I haven’t even accounted for dividends, or share buybacks, or special dividends, for that matter, which is beyond the scope of this article. Let’s stick to growth and dividends and see how much money they would have made.
There are a few ways to have money work for you when you just buy and hold a stock. The main ones are growth, which we have talked about, which is the increase of the share price. The second is dividends.
Accounting for dividends, here is the breakdown on returns:
Price adjusted for dividends and splits on April 1, 1977: $.04
Current Price: $79.72
If only my parents had known. Their measly $100 would have been worth over $193,000.
It's easy to play Monday night quarterback, and use hindsight to judge peoples' decisions. But if my parents had known the reality of what a paltry $500 investment could have become today, they would have sold their car, and every gift they received that wedding day, in order to buy one good idea--Wal-Mart stock. They would be millionaires today without a care in the world.
Why did I say earlier that you need to invest and forget? Because it’s easy to do. It’s a hundred bucks. It really makes no difference to you in the long run, and you won't miss the money.
But, imagine you were extremely poor and close to retirement, and you remember some obscure investment you made decades ago, so you call up your broker. And you find that all of a sudden, you have and extra $250,000 to help you get through retirement in addition to social security and other savings. Would it make a big difference to you then? What if the amount was $1 million instead? or $3 million?
If you don't do anything else, invest and walk away
Of course it would make a difference. If you are young, and can’t stand getting bogged down in all this finance and investing stuff, make just one decision—to invest and walk away. Even if you are older, there is still time to make this happen.
Check out my research section for a short introduction to a few good stocks to invest in for the long-term. If you want, hit up the list I've made in this article about the best stocks to buy to help you start learning.
Live long and invest,
Jeremiah
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