Becoming a millionaire by investing is less about hitting the jackpot and more about playing the long game with patience, persistence, and a few wealth-building safeguards.
How to build wealth over time
First off, you have to be patient . The market will zig and zag and maybe even zog, but you must stay cool and not panic during downturns. It may be tempting to sell when things look dark, but that may be the worst possible time to take action -- you're just converting temporary paper losses to real cash destruction.
A long-term horizon lets you harness the magic of compounding returns , where your investment winnings start generating their own gains. The longer you stay invested, the bigger the difference you'll see from this snowballing effect.
You should also diversify your portfolio . Spread your investments across different industries, geographies, and company sizes to minimize risk. Going beyond stocks, you should also consider assets such as real estate, bonds, and maybe some cryptocurrencies. This way, a bad day in one sector won't ruin your whole plan. Going all-in on a single stock may work for a while, but even long-lived titans of industry can fall.
Investing discipline is also helpful. Regularly invest, rebalance your portfolio now and then, and don't let emotions drive your decisions. Stick to your long-term plan, but don't hesitate to update your strategy as you become a better investor or as market conditions change.
This patient buy-and-hold strategy is championed by investing legends like Warren Buffett and Benjamin Graham . It's about picking quality stocks and holding on to them, letting time do its work.
By following these steps, you can steadily build wealth and achieve your millionaire dreams. Investing is a marathon, not a sprint, so keep your eye on the long-term prize.
So, I honestly can't say that any one stock will make you a millionaire. It takes a diversified portfolio to get there, and it will take time. But if I had to choose a single stock that just might deliver steady growth for several decades, it would be an experienced industry leader with a strong track record, consistent earnings, and a durable competitive advantage. And it needs to be ready for abrupt change if new technology, economic trends, and other unexpected changes turn the marketplace inside out.
That's a very short list, and I really don't recommend putting all your eggs in one basket. Still, my best bet for truly long-term durability and robust wealth creation has to be Amazon (NASDAQ: AMZN) .
Why Amazon, of all stocks?
Don't get me wrong -- several stocks look ready to stay on their feet for years and years. Alphabet is always searching for the next big technology to replace its dominant search and advertising business. Apple may be polishing the device to pick up the iPhone's fallen crown someday. IBM has been adapting to market changes for more than a century and might be around in 2124, too.
But none of them can match Amazon's cross-sector muscle and constant hunger for greater business gains.
Amazon's e-commerce empire
Starting as a simple online bookstore with minimal inventory overhead, Amazon has become the defining example of an e-commerce retailer. With a staggering market share of about 40% of total e-commerce in the U.S., the vast majority of Amazon's online retail sales come from North America. But it's a big world out there, and the American market accounts for just 19% of the global opportunity. Amazon has a lot of international growth left to do, even if it outduels chief rival Walmart on American soil.
That's Amazon's financial foundation, accounting for $434 billion of global sales in 2023. Besides providing a stable fiscal platform, the e-commerce business also helps Amazon establish new operations, such as shipping services, payment processing, and cloud computing. Remember, the soaring Amazon Web Services (AWS) business started as an experiment in getting more use out of Amazon's network of order-processing data centers.
Reaching into new markets
That's a story worth telling, too. AWS accounted for 16% of Amazon's total revenues last year but generated two-thirds of the company's operating profits. This fast-growing and wildly profitable business has its finger on the artificial intelligence (AI) boom these days, and I'm sure you'll see Amazon pull new tricks from its AWS sleeves after that.
AWS is a great example of Amazon finding brand-new business ideas and taking the lead in the resulting market. I can't wait to see what else the company will do over the next 10, 20, or 30 years. Beyond that, I'm probably more worried about my own lifespan than Amazon's. The company was built to last.
Again, I don't recommend betting your entire nest egg on Amazon or any other single stock. But this stock could certainly help you build wealth in the long haul, and maybe you should hold a larger stake in Amazon stock than in other ideas. Given enough time and a large enough starting position -- not to mention consistent long-term buying -- Amazon could very well push you over the millionaire goal line someday.
With earnings before interest, taxes, depreciation, and amortization (EBITDA) soaring to a record high of $98.7 billion in the last four quarters, Amazon's stock is changing hands at a measly enterprise value to EBITDA valuation ratio of 19. That's well below the five-year average of 25. In other words, Amazon's stock is on fire sale. If you haven't started a position in this uniquely robust stock yet, this would be a great time to take that first step .
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anders Bylund has positions in Alphabet, Amazon, and International Business Machines. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, and Walmart. The Motley Fool recommends International Business Machines. The Motley Fool has a disclosure policy .
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