Millionaire-Maker Mutual Funds

Becoming a millionaire isn't out of reach, you know. It really takes just three things:

  • Some money to invest
  • An effective growth rate for your money
  • Time

Let's say that you're a relatively aggressive investor and you can sock away $10,000 per year into the stock market. Here's how long it will take you to become a millionaire, and the average growth rate you'll have to achieve:


Growth rate

10 years


15 years


20 years


25 years


30 years


35 years


40 years


Pretty interesting, eh? If you have enough time, you might almost reach millionairedom via a simple savings account or CD! But most of us don't have 40 years. So, let's look at what we can do in 20 or 25 years. We'll need to earn average returns in the 10% to 14% range. (Remember, saving and investing more means you won't have to earn as high a return -- or that you will end up with more money.)

The stock market, on average, has returned about 10% annually over many decades, though in your particular investing period, it might end up averaging more or less. You can aim to beat that with carefully chosen individual stocks. Below are some examples that popped up when I screened at our CAPS community of investors for large-cap stocks with returns on equity (ROE) of 15% or more, dividend yields of 2% or more, and CAPS star ratings of four or five (out of five). See how some of them have grown over time:


CAPS Stars

Dividend Yield


20-Year Average Return

Johnson & Johnson (NYSE: JNJ  )





McDonald's (NYSE: MCD  )





PepsiCo (NYSE: PEP  )





Caterpillar (NYSE: CAT  )





3M (NYSE: MMM  )





Sources: Motley Fool CAPS, Yahoo! Finance.

Bad -- and good -- news
Of course, while these terrific companies turned in great results, many other terrific companies didn't fare quite as well. The 20-year average return for Alcoa (NYSE: AA  ) , for example, is 3.2%, and for Boeing (NYSE: BA  ) , it's 7.1%. That just goes to remind us that it's important to spend time picking your stocks carefully.

Fortunately, if you don't have the time, interest, or skills for that, you're not out of luck. You can have someone else do your stock-picking for you -- a mutual fund manager! There are many funds with market-beating records that can serve you well. Consider, for example, the FBR Focus (FBRVX) fund, which has outperformed its benchmark index handily over the past decade, averaging 8% annually. (Its recent top holdings: American Tower and Markel.) The Vanguard Health Care (VGHCX) fund has averaged nearly 16% over more than 20 years. So don't think that some great performances aren't possible from funds.

Just as some terrific stocks can make you a millionaire over time (even in today's volatile market), so can some great mutual funds -- with a lot less pressure placed on you.

So, look for funds on your own, avoiding sales loads if you can, and finding managers who have been at the helm for more than a year or two and whose philosophies and approaches you respect. In addition, look for low fees, and ideally, low turnover. Or, let us help you by doing much of the legwork for you.

I invite you to check out our Motley Fool Champion Funds newsletter, which is where I've gotten some good leads myself. Try it for free and see which funds have been recommended -- and why. Together, our picks have been beating the benchmark indexes by some six percentage points. Stock funds, balanced funds, small-cap funds, foreign funds, bond funds, value funds, funds for your 401(k) ... you name it, and we've got some for you, whether you're an aggressive or a conservative investor, or somewhere in between.

Longtime Fool contributor Selena Maranjian owns shares of Johnson & Johnson and 3M. 3M is a Motley Fool Inside Value recommendation. Johnson & Johnson and Pepsico are Motley Fool Income Investor selections. The Motley Fool is Fools writing for Fools.

Read/Post Comments (1) | Recommend This Article (26)

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.

  • Report this Comment On July 10, 2009, at 12:56 AM, choppedlivr wrote:

    What makes you think that because someone "aims" to outperform the indexes, that they will?

    Bill Miller's fund had a great streak of 15-16 years, before performing very poorly over the last 2 years.

    What makes you think that the mutual fund managers you mention are any better than Miller and truly have an edge that can be profitable on a prospective basis?

    Aren't you possibly trying to find an edge for the present and future by looking through a rear-view mirror?

Add your comment.

Compare Brokers

Fool Disclosure

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: 911774, ~/Articles/ArticleHandler.aspx, 10/26/2016 2:15:32 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...

Today's Market

updated 4 hours ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 4:00 PM
AA $27.29 Up +0.43 +1.60%
Alcoa CAPS Rating: ***
BA $139.02 Up +1.57 +1.14%
Boeing CAPS Rating: ****
CAT $84.48 Down -1.51 -1.76%
Caterpillar CAPS Rating: ***
JNJ $113.96 Up +0.35 +0.31%
Johnson and Johnso… CAPS Rating: ****
MCD $112.72 Down -0.85 -0.75%
McDonald's CAPS Rating: ***
MMM $166.23 Down -5.04 -2.94%
3M CAPS Rating: *****
PEP $107.23 Down -0.08 -0.07%
PepsiCo CAPS Rating: ****