I'd like to share with you the story of a woman I'll call Jean. She was an ordinary investor like you and me, but she went from being a pauper to being a millionaire.
Then we'll talk about how you can do the same.
One woman's story
Jean was born in 1905 on a subsistence farm. Her father died when she was 11, and the family found it couldn't manage the farm, so they moved to the nearest town, ending up among the poorest of its residents.
Yet, by the time she passed away at the age of 95, she had given her 15 heirs four tax-free gifts of $10,000 each and then passed on an estate worth more than $1 million. In other words, she gave away nearly $2 million.
How did she manage this feat? By working hard until the day she died? By pinching pennies so hard that Lincoln yelled in pain? Probably so, but she did more than that.
What Jean did was to invest in solid companies, steadily buying new shares and reinvesting the dividends all of her life.
You're probably expecting me to talk about dividends, but I won't. Rather, I want to point out how Jean's experience proves what Professor Jeremy Siegel of the Wharton School of Business showed in The Future for Investors: Investing in stocks over the long term is the best way to build a fortune.
One example of fortune-building
Jean amassed her fortune by steadily buying shares of solid, long-term companies like ExxonMobil and AT&T. They weren't flashy, even then, but between early 1970 and 2000, an investment in ExxonMobil, including reinvested dividends, grew nearly 114 times.
Not only did Jean invest in great companies, but she kept investing into her 70s, her 80s, and on into her 90s, holding her investments for decades. Buying and holding was an important part of her success and it allowed her to enjoy a comfortable retirement.
The 3 steps behind her success
Her "secrets" are simple:
1. Find companies with a record of good performance -- shown through solid earnings, free cash flow growth, and strong management -- and likely prospects going forward and then hold onto them for years.
2. Once you find one, buy shares consistently over time and reinvest the dividends. Rinse and repeat.
3. Do this for the rest of your life.
Using these steps today, an investment in one or more of the following companies -- and a plan to continue investing in them -- could start you on your road toward becoming a millionaire.
- Disney (NYSE: DIS ) , both for its strong brands and its strengthening movie studios after acquiring both Pixar and Marvel.
- Johnson & Johnson (NYSE: JNJ ) for its strong consumer brands and its careful acquisition of smaller companies that broaden and strengthen its reach.
- Apple (Nasdaq: AAPL ) for its continuing success in designing products that consumers like to buy and use.
- McDonald's (NYSE: MCD ) for its huge brand, strong free cash flow, and repeat business.
- Teva Pharmaceutical (Nasdaq: TEVA ) for its strong line of generic drugs which will only get stronger as more drugs lose patent protection.
- Vale (Nasdaq: VALE ) for its diversified mining production and its exposure to the growth of Brazil.
Putting one or three of those in your portfolio and following her steps to success is almost too easy.
Continuing the tradition
It's so easy, in fact, that not only did Jean do it, but her kids and grandkids have also done it, with similar, amazing results. In fact, one of her grandkids is a subscriber to Motley Fool Stock Advisor, which is where I first ran across her history.
Jean's three steps are familiar to Tom and David Gardner, co-founders of The Motley Fool, because that's how they outperform the market at Stock Advisor. For instance, they've chosen Netflix (Nasdaq: NFLX ) as the only company they both think should be a core company in anybody's portfolio. Its DVD delivery system is still growing and it's poised to dominate the streaming-movie market. Over the seven years it has been a recommendation, a lot of members have made a lot of money, and Tom and David think there's more to come.
To read why they think so, and to read our latest thoughts on all the recommendations in our upcoming super-sized review issue, click here to sign up for a free, 30-day trial today. There's no obligation, and I'll even introduce you to Jean's grandson.
Jim Mueller owns shares of Netflix and Johnson & Johnson, but has no interest in any other company mentioned in this article. Walt Disney is an Inside Value selection. Apple, Netflix, and Disney are Stock Advisor picks. Johnson & Johnson is an Income Investor selection, and Motley Fool Options has recommended a buy calls position on the company's stock. The Fool's disclosure policy, while still young at just 17 years, plans to be around for decades, showing you the way.