If you want to be a great stock investor, there are plenty of bits of advice you might follow, such as:
Research investments so you know what you’re buying.
Have realistic expectations. (For example, the stock market’s long-term average annual gain is close to 10%.)
Diversify, so that you don’t have too many eggs in one basket.
If you’re investing in individual stocks, learn to read financial statements.
Aim to buy stocks when they’re undervalued.
There’s one particular bit of advice I think is most important, though — because I credit it with having made me a millionaire.
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My background
I went to business school, but I learned very little there that was useful to me as a stock investor. I did learn a great deal about investing a few years later, though — from The Motley Fool, which was then a new company, operating solely on AOL.
I started putting money in stocks when I was in my early 30s. (I wish I’d started in my early 20s, because then my money would have grown much more.) I made lots of common beginner blunders, such as:
Chasing high-flying stocks
Not being patient and giving my investments time to perform
Being overconfident about my abilities
Trading too frequently
Not always understanding the companies I was investing in very well
Ignoring fees (in those early days, it often cost $20 or more per trade; today, lots of good brokerages charge nothing)
I also prematurely sold my stakes in lots of great companies that would go on to soar. I left a lot of profits on the table.
Despite all that, my little portfolio grew. After all, not every investment turned out to be a regrettable one. And even when I sold good stocks too soon, I had often netted a profit already.
What I did that made me a millionaire
So what did I do that was so effective in making me a millionaire? Well, this: I stayed invested. I stuck with it. I may have moved in and out of stocks too frequently, but I never just sold them all and walked away. This persistence is what I credit with my success.
At the Motley Fool, we often advise people to be long-term investors. I believe in that — because I’ve seen what it can do.
When I see new investors, I don’t worry so much about them making the kinds of mistakes I did; I worry that they’ll give up and walk away.
Here’s how it all worked for me:
I began investing modest sums.
I often checked my portfolio multiple times a day (another mistake, or at least an unhelpful habit).
In the early years, my portfolio slowly grew from a total value of around $10,000 to $50,000, then to $100,000.
The dot-com bubble burst and stocks crashed around 1999 and 2000. I hung in there, even with my portfolio shrinking in value.
I kept investing. I sold some stocks I no longer had a lot of confidence in, and bought stocks that seemed much more promising.
I was disappointed by some of my investments, because they lost me a lot of money.
In the meantime, others grew.
In 2008, there was another major stock-market crash — with the S&P 500 index plunging 37%. My portfolio shrank again.
As more years went by, my portfolio grew larger and larger.
After a decade or so, it was worth $300,000; then $400,000; then $500,000.
I kept at it.
I left a lot of stocks in my portfolio to just sit and grow.
My best investment was in Netflix. I invested only $1,000, but over a decade or two, my stake grew to be worth more than $100,000.
More years passed, and more sticking with it.
The market swooned again in 2020 with the onset of the COVID-19 pandemic. I held on.
And here I am now, with my portfolio worth more than $1 million.
Note that I wasn’t always adding money to my portfolio; there have been many years where I added nothing. But thanks to dividend income and to having started relatively early, I have done quite well.
Could I have done even better?
I surely could have done better — had I made some different choices, committed fewer blunders, and learned even more about investing from great investors and others.
If I’d invested even more money, especially earlier, that would have boosted my results as well.
And, honestly, I haven’t been the most brilliant stock-picker. If I’d swallowed my pride, and my greed, I would probably have achieved similar results by just sticking with a simple index fund such as the Vanguard S&P 500 ETF (NYSEMKT: VOO). That would have saved me a lot of time.
Over the past 30 years, since 1995, the S&P 500 has averaged annual gains of 10.4% with dividends reinvested. That’s enough to turn a single $1,000 investment in 1996 into $19,450 in 2026. And if an investor had put in many more dollars along the way, well, they also could become a millionaire.
You can do it, too
You too can invest in the stock market in earnest, for the long term. You could simply opt for one or more good index funds, and then relax. Just be sure to not sell in a panic when the market swoons. And don’t invest any money in stocks that you’ll need within five (or 10, to be conservative) years.
It can be hard to stick with it, especially if you experience early losses. But over decades, your wealth can grow like gangbusters. (If you don’t have decades in which to invest, maybe you can share this article with a young person you care about.)
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Selena Maranjian has positions in Netflix. The Motley Fool has positions in and recommends Netflix and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
