If you've ever been tempted by one of those "can't miss!" emails about some company you've likely never heard of, listen up: The road to wealth is not paved with get-rich schemes or "guaranteed" shortcuts. Instead, it is usually a years-long process of careful thought and steady investment.
In fact, the proven way to wealth through the stock market often reminds me of one of Aesop's fables. It's the one with the tortoise and the hare, where slow and steady wins the race.
Not more buy-and-hold .
I can hear the cries now: "We want excitement! We want to get rich!" Sorry, but those are two different things. If you want excitement, go watch Disney's (NYSE:DIS) Pirates of the Caribbean. If you want to get rich, invest in companies like Disney and hold on for years. Since the beginning of 1986, the House of Mouse has grown more than 1,100%, or 13% per year.
See, hare-like investing that has folks trading in and out of quick rises -- and even quicker falls -- is not the path to wealth. Folks who trade in and out of high-volume, volatile stocks such as Cisco Systems (NASDAQ:CSCO), Intel (NASDAQ:INTC), or Pfizer (NYSE:PFE) may do well for a little while, but taxes, trading costs, and general unpredictability will eventually catch up to their returns.
What's worse is that folks who tried to catch the Cisco rocket in 2000 in hopes of a quick gain actually caught it as it came crashing down. I was one of those folks.
But have no fear. You see, I'm a tortoise-like investor; I take a long view with investing, and thus do well even in volatile companies like Cisco. Folks who saw Cisco's wide market opportunity early on -- let's say the beginning of 1991 -- and bought and held through the crash have still seen incredible 35.4% annualized returns.
Similar results have been seen at Dell (NASDAQ:DELL), with 32.3% annualized returns since the beginning of 1996; Sysco (NYSE:SYY), with 14.5% annualized over the past 20 years; and even Whole Foods Market (NASDAQ:WFMI), which has provided 21.2% annually returns since the year after its IPO.
As the tortoise goes
But tortoise-like investing isn't easy. It's only for long-term investors -- remember, slow and steady wins the race -- who have the patience to stick it out during inevitable market downturns. Those downturns, however, are easier to stomach when you have faith in your company's fundamentals. And while buying to hold may be boring and unglamorous, it will help you achieve your financial goals.
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Fool contributor Jim Mueller owns shares in Disney, Dell, Intel, and Sysco. Disney, Dell, and Whole Foods are current selections in Stock Advisor. Pfizer, Dell, and Intel are current picks of Inside Value. Sysco is an Income Investor recommendation. The Fool lets you know these things.
