Pop quiz: What's the first image that comes to your mind when you picture a millionaire?
Do you picture (A) a flashy Internet entrepreneur zipping around in a black BMW…
Or (B) some all-powerful chief executive luxuriating in a padded leather chair in a high-rise office overlooking Sydney Harbour?
What comes to my mind is starkly different.
In fact, what I imagine is an everyday Aussie living in a middle-class neighbourhood. He (or she) goes to work five days a week and shops at the same supermarkets that you do. She looks after her children in the evenings, and on the weekends, enjoys a drink and barbeque with friends.
Now here's the surprising truth: That's exactly what most Australian millionaires look like.
But you don't have to take my word for it. Below, we'll look at the #1 trait that all 43,000 Australian millionaires have in common. It's a timeless and simple lesson anyone can use to start getting rich.
Unfortunately, most investors are convinced they'll never become wealthy
Other things in life just always seem to get in the way. Mortgage payments, expensive holidays and other hefty outlays…
The fact is, most millionaires are actually self-made. They didn't necessarily come from wealthy upbringings or inherit strong family businesses. Instead, many actually made their fortunes by investing in publicly traded shares – the same ASX stocks we all have access to.
Just look at Warren Buffett, the world's greatest investor. When he graduated from college, he had less than $10,000 to his name. Now, he's the world's third richest person with a net worth of US $66.1 billion, according to Forbes.
And if you thought that Warren Buffett is just an American who got lucky, check out this neat fact…
A report by Boston Consulting Group found that surging equity markets helped create 43,000 new millionaire households in Australia during 2013. So you can see I'm not kidding when I say that the stock market can be a gold mine for people like you and me.
And regardless of whether or not you're willing to join me, I have a plan that I believe is going to make me rich, just like those 43,000 smart Aussies.
Before I share my plan, let me show you three of the stocks that I believe are going to help me build serious wealth in the years to come.
My three top stocks for long-term wealth (hint: not the banks!)
When I buy stocks, I don't want to buy speculative companies that could hit the jackpot in the future. Or ones that could quadruple in price just because an 'expert' says they will…
Instead, I simply look for companies that are trading at reasonable prices and offer significant growth potential.
Put simply, if you're looking for a get-rich-quick scheme, you're not going to find it here. What you will find however, are three companies that should be bought and held for a very long time.
Right now, I'm not even talking about the usual suspects like Commonwealth Bank of Australia (ASX: CBA) or Westpac Banking Corp (ASX: WBC) – both of which I consider to be overvalued.
The companies I'm talking about are the ones I think will, from their current valuations, deliver market-smashing returns in the long run. Better yet, they're looking all the more attractive thanks to the market's recent dive…
Stock #1: A consumer power play that looks dirt cheap… and boasts a 7% dividend yield
Beverage manufacturing giant Coca-Cola Amatil Ltd (ASX: CCL) ("CCA") is one of those companies. With the rest of the market seemingly bearish on its future potential, I firmly believe that right now is the best time to buy the stock.
CCA has faced strong macroeconomic headwinds over the last 24 months and, as a result, the shares are trading at a five-year low. In comparison, the broader S&P/ASX 200 (Index: ^AXJO) (INDEXASX: XJO) is still within a few percentage points of its six-year high…
While CCA's near-term prospects remain cloudy, the company boasts one of the strongest brand portfolios in the world and has excellent growth potential in the heavily populated Indonesia. Perhaps best of all, it offers a forecast 5.3% yield, franked to 75%. Grossed up, that's a 7% dividend yield!
Stock #2: The ultra-promising ASX stock you've never heard of
Greencross Limited (ASX: GXL) is a rapidly expanding provider of veterinary services that needs your attention. While it might not seem like an absolute bargain right now with shares trading on a multiple of about 33x expected earnings, the company's growth potential is nothing short of fantastic.
Dogs and other household pets are increasingly moving from the kennel to the couch and becoming 'part of the family', meaning owners are growing increasingly willing to pay for premium care. And considering the company also has a rapidly expanding retail division, Greencross looks set to be much, much bigger in years to come.
But before we go on – and I share stock pick #3 with you – I'll let you in on the worst investing mistake I ever made. Because it could be vital that you avoid this common danger too.
How I lost 30%… but gained a 'wealth' of knowledge
Like a lot of people, when I first started investing, I was gung-ho on making a quick buck. I wasn't interested in finding the promising or well run companies – I just wanted to get a stock that would pop overnight.
So one of the first companies I ever bought came from a friend's tip, rather than any solid research on my part. All I was going on was my mate's word that a certain stock had 'enormous momentum.'
Unable to stand the anticipation any longer, I bought my parcel of shares. Within a week, I'd lost 30%+ of my initial investment.
Losing 30% is bad, but it could have been worse. Had I held onto those shares I would now be down more than 90%. Ouch.
Ever since then, I've been much wiser with my investment decisions. Now, I employ a much longer-term approach which could see my wealth grow exponentially over the years.
Patience and calm composure are the keys for me, and they should be for you too. While it would be nice to make a sweet fortune overnight, history has proven that long-term buy-and-hold investing delivers superior results.
In fact, a recent article by Dr Shane Oliver of AMP Limited, titled, "The power of compound interest – an investor's best friend," highlighted that the stock market has grown at an average annual rate of 12% per annum since 1900.
To highlight how incredible that is, consider this simple example:
Say you'd invested just $1 in shares in 1900. And since then, you'd reinvested all your dividends and achieved the market's average returns.
Believe it or not, that $1 would now be worth more than $400,000. Imagine how much you'd be worth if you'd invested $100 back then, or even $1,000…
In case you were wondering, $1,000 invested back then at 12% per annum would be worth more than $408 million today.
So that's my plan. By buying high quality companies trading at reasonable prices, I'm going to hold them over the coming years and let compounding work its magic.
It might not sound that exciting, but I expect the results could be truly incredible.
Stock #3: My favourite ASX pick for the next decade (already up 800%)
Despite how bullish I am on Coca-Cola Amatil and Greencross, I believe Nearmap Limited (ASX: NEA) could be the big winner for my portfolio over the next 10 years.
In case you missed the headlines, Nearmap was the ASX's breakout stock in 2013. Having begun the year trading at just 6 cents, it ended the year with a 54 cent price tag. Yes, you read that correctly: that means the shares packed on 800% in just 12 months.
While the stock went on to climb as high as 68 cents earlier this year, it has since trended back to that 54 cent mark, offering investors another prime opportunity to stock up. And it might be a good idea to do so now, because I think the company's growth is only just beginning….
Nearmap offers a highly valuable and unique product. It provides ultra-high resolution aerial photographs that are designed to save both time and costs for customers spanning various industries. While it has already made a solid name for itself in the Australian market, it recently confirmed that it was expanding into the U.S. market which it expects to generate between $30 – $50 million in sales by 2017.
To put that in perspective, it reported revenue of just $17.8 million in FY14, indicating significant upside potential from this expansion…
Even better: The BEST stock money can buy
I've got one more ASX stock on my watch list. And I'm not the only one excited by this Aussie company's massive potential.
