Make Your Kids Rich

On my first birthday, my parents gave me a present that has lasted a lifetime. It wasn't a new set of water wings for the pool, and it wasn't one of those ridiculous sailor suits that mothers love to dress their sons in. They got me shares of stock in three companies. All in all, it really didn't matter to me what my parents bought for me when I was that young. But boy, am I grateful today.

Letting time sink in
When I had just turned 1, neither of my parents were big traders. They didn't have the time, and quite frankly, they didn't have the interest. Being financially educated people, however, they definitely had a tremendous respect for the power of compounding interest. As such, they made it a point to develop and contribute to the type of dependable investing strategies that last a lifetime.

As I grew up, I also began to learn the power behind a reliable investment in a worthwhile company. That respect grew into a love for and curiosity in the market, which is why I'm here today.

It doesn't take an expert
The best gift you can give your kids -- or yourself, for that matter -- is time. Time to play, time to learn, and for the purposes of this article, time to let your interest compound. Knowing that, you might be wondering how to select the right investment for you and yours. You might also be thinking you simply don't have the time to research and stumble across that lucky investment.

Coincidentally, my parents didn't either. So, what did they ask for in an investment?

  1. A company that was reliable and dependably well-balanced.
  2. A company that had a respectable track record.
  3. A company with a solid financial foundation.
  4. A company that they knew would be around for a long, long time.

And what did they buy? Good ole American favorites General Electric (NYSE: GE  ) , Coca-Cola, and Wal-Mart. Were they the hottest investments back then? Probably not. Did they make me the most money they possibly could? I'd venture to say that's a no, too. But looking at the 2,394%, 2,536%, and 4,322% that each one has respectively returned since then, I'd say they were good choices just the same.

Turning money into wealth
Let me put those numbers into a little perspective for you. If you had invested $10,000 into each one, you'd have a present-day total of just more than $925,000, on an initial investment of $30,000. And unlike with funds, you'd have no costs eating into your margins along the way.

Looking at the next great ones
Choosing these types of investments for your children or yourself doesn't require a huge amount of time or expertise. It simply requires you to identify some of the market's best companies that stand a solid chance of being profitable in the future. Need some ideas? Allow me to suggest some:

Company

Five-Year Return*

Expected Five-Year Growth Rate

UPS (NYSE:UPS)

29%

12.0%

ConocoPhillips (NYSE:COP)

150%

7.0%

Target (NYSE:TGT)

47%

15.0%

MetLife (NYSE:MET)

107%

11.3%

Yahoo! (NASDAQ:YHOO)

243%

25.0%

*Includes splits and dividend payments.

I'm not talking about the next hot growth, tech, bio, or renegade stock. And I'm not talking about investing in a small offshoring plant in a politically unstable nation. I'm talking about the type of company that you can envision being around when your kids are ready to pay for college or a house.

Make it a commitment
If you like what you've heard and need a few ideas to get started, I encourage you to pursue the Motley Fool Stock Advisor service, which sets its sights on superior companies. You can take a look at all of our stock recommendations with a free 30-day trial.

As you go about the process of building wealth for your kids, be certain to focus on only the finest of companies for a long-haul investment. I can promise you that they'll appreciate it.

Fool analyst Nick Kapur owns shares of General Electric, Coca-Cola, and Wal-Mart, but none of the additional companies mentioned in this article. Coca-Cola and Wal-Mart are Inside Value recommendations. UPS is an Income Investor pick. Yahoo! is a Stock Advisor recommendation. The Fool has a disclosure policy.


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