Lake Forest College administrators knew their school would receive most of Grace Groner's estate when she passed on, but they probably didn't expect much. Groner, who died in January at the age of 100, lived in a small one-bedroom house. She'd been a secretary once, but retired long ago.

So the college must have been surprised to receive a whopping $7 million from Groner's estate. How did this modest woman amass such wealth?

1. Buy stocks
Groner's wealth began with $180, which she invested in three shares of her then-employer, Abbott Labs (NYSE: ABT).

Stocks are tied to brick-and-mortar-and-flesh companies -- real businesses that can grow robustly for years to come. That's why companies such as IBM (NYSE: IBM) and Hewlett-Packard (NYSE: HPQ) outperformed the market for so long. When companies increase their profit margins, revenue, and market share over time, their stock prices will likely rise as well.

Over the long haul, stocks have outperformed other investments by leaps and bounds. Check out what just $1 invested in various ways between 1802 and 2006 would have grown to:


Real Return, in 204 Years











Data: Jeremy Siegel, Stocks for the Long Run.

2. Respect your circle of competence
It's not just enough to buy stocks, of course -- you've got to buy the right stocks. Every year, public companies go bankrupt, and the money invested in them vanishes.

Restricting yourself to companies you understand will go a long way toward protecting your investments. Ms. Groner may or may not have understood pharmaceutical science, but she knew the company she worked for.

That applies to hobbies as well as professions. If you're an inveterate shopper, you'll have a sense of whether Wal-Mart (NYSE: WMT) and Best Buy (NYSE: BBY) are doing well, and you'll likely be able to learn their business models. If you read computer magazines for fun, you probably have a decent handle on the prospects of computer-related companies.

That said, familiarity alone doesn't make a company a good buy. If it isn't turning a profit, can't pay down its debt, or simply demands too lofty a price for its shares, you're better off looking elsewhere.

3. Be patient
Groner bought her three shares of Abbott Labs in 1935. That gave her 75 years of compounded growth!

The power of compounding is critical to developing wealth. If you average just 8% returns annually for 75 years, that's enough to turn $5,000 into $1.6 million.

Odds are you don't have 75 years left in you -- but even shorter periods are still quite powerful. For most of us, 30 years is a more realistic time frame. Combining three decades of compounded growth with strong, flourishing companies can make quite a difference indeed.


Time Span

Avg. Annual Growth

Would Turn $10,000 Into...


30 years


$1.1 million

ExxonMobil (NYSE: XOM)

30 years




30 years



Data: Yahoo! Finance. Average annual growth includes splits and dividends.

Of course, we're never guaranteed long-term growth from one company, but a nest egg diversified across a bunch of solid and growing companies will tend to do well over long periods.

Just remember that letting a winner keep winning for decades means resisting the urge to sell just because the market swoons. Sell if the company no longer seems promising; otherwise, hold on.

4. Don't be afraid to start small
Groner's gift also demonstrates the power of modest amounts of money. Remember, she began with an investment of just $180 in 1935. Adjusted for inflation, that's the equivalent of less than $3,000 in today's dollars -- still not a king's ransom.

In other words, every little bit helps. Small sums invested regularly can go a long way to making us wealthy.

5. Reinvest those dividends
Instead of taking the payouts from her Abbott shares, Groner used them to buy additional shares of stock, which then grew on their own, paying out their own dividends. Over 75 years -- or even 20 or 30 -- those ever-accumulating payouts can become quite powerful.

My colleague Rich Greifner has pointed out that between January 1926 and December 2006, 41% of the S&P 500's total return came from dividends, not price appreciation. Over that time span (just a little longer than Groner had), an investment of $10,000 would have grown to $1 million without dividends. But with dividends reinvested, it would have totaled $24 million. Yowza.

Be like Grace
The five lessons listed above helped an amateur investor turn $180 into $7 million. Who knows where they might lead you?

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Best Buy, 3M, and Wal-Mart are Motley Fool Inside Value recommendations. Best Buy is a Stock Advisorselection. PepsiCo is an Income Investor choice. Motley Fool Options has recommended a diagonal call position on PepsiCo. The Fool owns shares of Best Buy.

Longtime Fool contributor Selena Maranjian owns shares of PepsiCo, 3M, and Wal-Mart. The Motley Fool is Fools writing for Fools.