The Secrets of 9-Figure Fortunes

In a previous job, I helped manage a few nine-figure fortunes -- which was intimidating at first. I mean, an errant mouse click while making a multimillion-dollar trade and you're fired. But eventually the sweats subsided, and I learned the secrets behind this enormous wealth.

How did the holders of these fortunes do it?

In two easy steps ...
First, they picked the right stocks. But their picks weren't the hot-shot fads of the day. Oh, no. A look at their portfolios revealed almost nothing but blue chips such as H.J. Heinz and 3M (NYSE: MMM  ) .

Second, they let their investments compound over long periods of time. Most of the fortunes got their start with family patriarchs or matriarchs who never lived to see the nine-figure promised land. (They did, however, live to see eight figures, which still isn't shabby.) Now, as a result of their wisdom and foresight, the family has a financial legacy to pass down over subsequent generations. In fact, many of the beneficiaries of these fortunes live quite comfortably off the dividends from their inheritances.

As much fun as watching paint dry
Now, you probably haven't heard much about the returns of Heinz or 3M lately. That's because they aren't burning up the charts the month the way Wynn Resorts (Nasdaq: WYNN  ) has.

Yet many of the nine-figure portfolios had holdings in both companies in excess of $10 million -- with a cost basis of $20,000. That's close to a 50,000% return. Sound impossible with this boring fare? It's not. It just takes time.

For a $20,000 investment to reach $10 million in 50 years, it needs to grow at an annualized rate of 13.2%. According to Wharton professor Jeremy Siegel's most recent book, The Future for Investors, those returns are easier to get when you buy dividend-payers and reinvest their payouts. Fully 86 of the original S&P 500 stocks achieved that 13.2% benchmark from 1957 to 2003. For example:

Company Name (2003)

Accumulation of $20,000 Over 47 Years

Annual Return

Bristol-Myers Squibb (NYSE: BMY  )

$25.2 million

16.4%

Unilever (NYSE: UL  )

$14.3 million

15.0%

DuPont (NYSE: DD  )

$13.1 million

14.8%

Wyeth (NYSE: WYE  )

$9.5 million

14.0%

Not coincidentally, most of the nine-figure fortunes had bought and held some of these very companies for 50 years or more. In some cases, the patriarch instructed his heirs to never sell these positions because they would be the only stocks they'd ever need.

Finding the winners
If you're ready to build your own financial empire, you'll need to start with today's best dividend-payers. If you want some help in that quest, James Early and his Income Investor team can help. They find and recommend companies with quality management, reasonable valuations, and a history of growing dividends -- in other words, stocks worth holding for 50 years.

Give the service a shot with a free 30-day trial. There's no obligation to buy, so what do you have to lose -- besides an empire?

This article was originally published on Aug. 10, 2006. It has been updated.

Fool contributor Todd Wenning does not own shares in any of the companies mentioned. Unilever and H.J. Heinz are Income Investor choices. 3M is an Inside Value selection. The Motley Fool has an ironclad disclosure policy that even the USS Monitor couldn't knock out of the water.


Read/Post Comments (0) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 536062, ~/Articles/ArticleHandler.aspx, 8/31/2014 2:29:23 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement