A boring investment strategy helped my grandpa retire a millionaire

Christel Deskins

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, but our reporting and recommendations are always independent and objective. My grandpa used a buy-and-hold strategy to build a portfolio balance of over […]

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, but our reporting and recommendations are always independent and objective.

  • 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.
  • Start investing today with SoFi »

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.

walmart stock

Google Finance chart showing Walmart stock over time.

Google Finance

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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