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The Boring Investment Strategy That Helped My Grandfather Retire A Millionaire

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Sani Ibrahim
Abubakar Tafawa Balewa,University
Agricultural economics and extension
100Level, Nigeria.
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My grandpa used a buy-and-hold strategy to build a portfolio
balance of over $1 million over the course of his lifetime.
Picking stocks with strong fundamentals and strong long-term
potential is key when investing for long-term goals.
While my grandpa built his portfolio mostly of single stocks,
you can follow a similar investment strategy using ETFs.
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When my grandfather died at 88 years old, he was a stealth
member of the seven-figure club. He wasn't flashy and you
wouldn't have guessed he had so much. I didn't know he was
a millionaire until shortly before he died.
A simple and straightforward investment strategy that he
followed over many decades helped him reach that number.
Here's a look at how my grandpa built stealth wealth in the
stock market.
Buy good companies and hold them for a long time
My grandpa was a marketing professor at the University of
Arkansas. The university's location, in Fayetteville, is just a
short drive from Bentonville, the home of Walmart. Through
his position at the university, my grandpa got to know Sam
Walton, Walmart's founder, and at some point decided to buy
Walmart stock.
If you held onto Walmart as long as my grandpa did, you
probably made a lot of money. That stock grew to become a
huge portion of his portfolio, but he didn't sell his biggest
winner and rebalance. He kept on holding and the stock price
kept going up.
I've had similar results with an investment in Walmart's
biggest competitor: Amazon. While I don't own nearly as much
as my grandpa did of Walmart, I followed a similar strategy of
spotting an up-and-coming stock . I bought Amazon at $258
per share and my few shares are up 1,252%. It's my biggest
winner and biggest overall holding, but I'm not going to sell it
anytime soon.
Picking good companies and sticking with them can pay off
very well in the long run. He didn't follow some get-rich-quick
scheme. He picked solid companies and held on as they grew
in value over time.
Choosing stocks for a buy-and-hold portfolio
I don't have a crystal ball that told me Amazon was going to
do so well. While most of my stocks are up and I have
significant overall gains, some stocks in my portfolio have not
fared as well. The three investments I made in oil companies
are my biggest losers right now, for example, as they've taken
a huge hit since the start of COVID-19.
But again, I'm not focused on short-term gains or losses. I'm
focused on my results more than a decade from now. So I'm
not going to sell those oil stocks. I'm just going to keep adding
more to give my portfolio more diversification and
opportunities for growth.
The main financial factors I look at when choosing stocks are
the company's revenue and profit growth rate, book value,
dividend growth rate, and a healthy balance sheet. I also look
at subjective factors, like competitive advantages (sometimes
called an economic moat), how important the industry is in the
economy, and if the company is being innovative or creating
something new of value.
You can follow a similar strategy with ETFs
If all this talk of stock picking has you thinking this strategy
isn't right for you, you don't have to follow it exactly. You can
just take out certain concepts that work for virtually every
investor and apply them to your life. Even if you don't want to
buy single stocks, you can follow my grandpa's boring strategy
to build wealth over time through exchange-traded funds
(ETFs) .
The S&P 500 , for example, has returned an average of around
10% per year over any long period of time. Buying a low-cost
S&P 500 ETF and investing more steadily over time gives you
investment exposure to 500 of the biggest stocks in the United
States. If history continues to repeat itself, chances are good
you would do well with that type of investment over time.
If you don't want to go all-in on one fund or one type of fund,
you can expand to a portfolio of index funds that track specific
industries, types of companies, or other investment criteria
you believe in.
While I have a growing portfolio of single stocks, I always put
the maximum in my Roth IRA , my wife's Roth IRA, and HSA
every year. Those portfolios are made up primarily of diverse
funds. I don't want the risk of single stocks in my retirement
accounts, so I pick good funds and will hold them for a long
time. So far, it has worked out well.
Slow and steady wins the investment race
In "The Tortoise and the Hare," the rabbit took a risky strategy
using up his energy running ahead of the slower and steadier
tortoise, and that added risk ended up costing the hare the
race. The same is true with investing. While it may be tempting
to throw your money into high-risk , speculative stocks, a slow
and steady push into boring stocks and funds is a steady path
to investment success.
I'm not there yet, but I'm working hard to build my wealth and
join the seven-figure club myself. I still have a ways to go, but,
as my grandpa demonstrated, slow and steady wins the race.

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