I know the secret to becoming a billionaire investor.
It isn't to buy stocks at the bottom, though that helps. It isn't to avoid massive value traps, though avoiding losses is important. And it isn't buying the best companies available, though that, too, is an excellent strategy.
So what is the surest path to extraordinary wealth? Entrepreneurship.
Oh to be an owner
Of the top 10 members of Forbes' latest list of the nation's 400 richest, four started firms that earned billions: Bill Gates' Microsoft is first, Warren Buffett's Berkshire Hathaway is second, and Larry Ellison's Oracle third.
Four heirs to Sam Walton's Wal-Mart fortune come next, followed by New York Mayor Michael Bloomberg, founder of his namesake financial services company, and Charles and David Koch, who inherited their father's private oil refining business and transformed it into America's largest private company, Forbes reports.
And there are many more business owners among the remaining 390. Google's (Nasdaq: GOOG ) Sergey Brin and Larry Page are each worth more than $15 billion and ranked 13th and 14th, respectively. Amazon's (Nasdaq: AMZN ) Jeff Bezos is 33rd with an $8.7 billion fortune. DISH Network's (Nasdaq: DISH ) Charlie Ergen ranks 35th with $8.1 billion. And broadcasting magnate Ted Turner, though no longer on the board of Time Warner (NYSE: TWX ) , is 190th with $2.3 billion.
Invest with owners
Feeling envious? I don't blame you. Wouldn't it be great if we were all billionaires, unencumbered by the need for money? Of course it would be. But that's not how the world works.
Still, I find it reassuring that, as rich as Gates is, the bulk of his wealth comes from staying invested in the company that brought him to the billionaires' ball. Why? Because anyone with a brokerage account could have enjoyed similar percentage gains.
In fact, many did. So great is the story of Microsoft's ability to generate wealth that it has a name -- the uprising of the so-called "Microsoft millionaires." At least hundreds of them must still exist. Think about it: A $1,000 investment in Mr. Softy at the dawn of 1990, four years after his debut on the Nasdaq, would be worth more than $37,000 today.
Searching for the next Microsoft
That's why Motley Fool Hidden Gems co-advisors Seth Jayson and Bill Mann focus on the stocks of up-and-coming firms in which the managers own a stake. Some of the service's best ever picks have featured meaningful insider ownership.
Consider Genesee & Wyoming (NYSE: GWR ) , a freight railroader here and abroad. Bill recommended the stock to subscribers in the June 2007 issue and it's been a rare outperformer since.
Coal is filling many of its freight cars -- and the freight cars of competitors CSX (NYSE: CSX ) , which just reported big earnings gains, and Norfolk Southern (NYSE: NSC ) , too. So long as coal continues to produce dirty, sexy, money, it's a good bet that Genesee & Wyoming investors will profit. Insiders, especially -- they still own more than 13% of the business.
So, don't envy the billionaire owners. Invest alongside them. They're the ones who really have the best chance to create the next Microsoft, and make you millions in the process. Want help identifying promising prospects? Take a 30-day free trial to Hidden Gems. There's no obligation to subscribe.
This article was originally published on Oct. 12, 2006. It has been updated.
Fool contributor Tim Beyers had stock and options positions in Google and stock positions in Berkshire Hathaway and Oracle at the time of publication. Berkshire Hathaway is a recommendation of both the Motley Fool Stock Advisor and Inside Value services. Microsoft and Wal-Mart are active picks for Inside Value. Amazon is a Stock Advisor selection. Google is a Rule Breakers recommendation. Genesee & Wyoming is a Hidden Gems pick. The Motley Fool owns shares of Berkshire. Its disclosure policy always takes ownership.