Do you want to learn how to build wealth? Of course you do. Everyone loves the idea of being wealthy as much as they love a fairytale ending. The two characters destined to end up together walk off hand in hand into the sunset after vanquishing some villain or overcoming some harrowing difficulty. It’s a moving story of perseverance, effort, and patience.
To reach this ending, usually the hero has some unique attribute, possesses an edge others simply lack, or faces circumstances which provide the opportunity to seize the day. But what if someone who has none of these advantages could also rise above? Or better yet, what if this person found a way to walk this path while ignoring the stress suffered by the stereotypical hero?
Let’s explore how an ordinary person can be the hero of his or her own financial future by building wealth through the incredible compounding machine known as the stock market.
Compounding Returns – Your Secret Super Power to Building Wealth
Examining the success of a traditional hero in the stock market, one could presume he or she has some combination of superior intelligence, access to non-public influential information, or an incredible sense of timing. These heroes do exist, but make no mistake that an ordinary investor does not need to possess any of these in great supply to be successful when learning how to start investing money and realizing his or her own financial success.
The most reliable method to growing wealth is utilizing the last real edge in investing: time spent in quality investments. Albert Einstein is widely credited with claiming compounding interest to be the most powerful force in the universe. To see proof, look no further than Warren Buffett, the investing paragon widely recognized as the best investor in modern history.
He relies on compounding for building wealth year after year. Ideally, his investment horizon is forever. That takes conviction to stick with an investment that long. While he is not always accurate with his stock selections, he wisely couples the force of compounding with three major investing criteria:
- Finding an exceptional business that can compete over time;
- Paying only a fair (or discounted) price for the investment; and
- Employing only quality managers who deliver sustainable, industry-leading returns.
Buffett succinctly states of investing, “All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.”
Sure, it sounds simple, but if it’s so easy, why doesn’t everyone do it? Many try to replicate Buffett by using his value investing approach and only invest in durable businesses run by competent managers. Usually where folks go wrong is that second criterion, or not having patience for an investment to perform over time. Staying in an investment requires true conviction, especially when the going gets rough.
However, if our aspiring hero held stock in a company which meets all three of Buffett’s investing requirements and he or she did not need the money, why should there be a sale? In truth, if there isn’t a need for the money and the three requirements are still met, holding the investment is a much wiser decision. This is a hard but important step in learning how to build your wealth.
But Why Pick One Stock When Saving for Retirement?
That’s all well and good, but what if a person feels unsure of selecting the companies which might meet those criteria? When it comes to building wealth in a diversified manner, Buffett has an answer for that as well: investing in index funds. He suggests purchasing a low-cost S&P 500 exchange-traded fund (ETF) (or something similar like VTI, the Vanguard Total Market Index Fund) and reinvesting the dividends across time.
In this scenario, the compounding interest super power still applies. To illustrate, let’s take a peek at how the the S&P 500 has performed over the last 10 years:
- 2025: 17.88%
- 2024: 25.02%
- 2023: 26.29%
- 2022: -18.11%
- 2021: 28.71%
- 2020: 18.40%
- 2019: 31.49%
- 2018: -4.38%
- 2017: 21.83%
- 2016: 11.96%
It’s important to note that past performance is not necessarily indicative of future results. But, it’s needless to say, a person who just stuck with a simple S&P 500 index fund over the last decade would have done very little and been handsomely rewarded. This person’s wealth would have grown tremendously by doing nothing.
Notice that not every year has been positive. However, over a sufficient amount of time, stock market returns have always been positive—a great sign for your wealth building.
This should give people comfort knowing that time and discipline really pay off and why you should always save money in retirement accounts and other investment accounts. If you continue investing, over enough time, your returns will inevitably turn positive. This, along with advancing in your career to make money quicker, taking up side hustles, setting aside money in a savings account for an emergency fund, avoiding credit card debt and student loans (or paying them off as quickly as possible), will allow you to reach your financial goals.
If you want to diversify your investments further and have no need for liquidity, also consider alternative investments which do not correlate with the stock market but have produced positive returns over long periods of time.
How to Build Wealth at Any Age: Invest in ETFs, Dabble in Growth Stocks
If you are interested in beginning your investing journey and have some money set aside to invest, I’d recommend using a service like Betterment and pursuing a long-term financial goal of wealth creation. This service provides access to low-cost index funds like those from Vanguard, Fidelity and Charles Schwab. All of these fund families have managed to reduce fees to negligible levels, thereby offering more opportunity to mimic the performance of the market.
Alternatively, adding a zero-commission stock trading app like E*Trade to buy and sell individual stocks can add more importance to your investing decisions, potentially leading to better performance over time. That is, of course, not a certainty and where subscribing to top stock research apps and investment research websites come in handy for identifying long-term buy and hold opportunities in growth stocks.
While I strongly support index funds for holding the majority of your assets, holding a portion in growth stocks can add a few additional percentage points to your return, adding substantially to your wealth over time. I’d suggest using a research service like Motley Fool’s Epic to find high-potential growth stocks. The service’s Rule Breakers arm has shown consistent outperformance over time, and I’ve used the service myself to find mega-growth stocks.
Personally, my wife and I use these services for various investing objectives. With our retirement savings, we primarily have individual retirement accounts (IRAs) which invest in a diversified portfolio of the best mutual funds, ETFs, and stocks.
In the past, we subscribed to products from the Motley Fool, which gave us strong growth stock recommendations. The stock picking service continues to outperform and add a bit more to our portfolio each year.
This more scaled up approach to invest both in ETFs with a robo-advisor like Betterment and individual stocks with an investment app like E*Trade takes a lot of the financial worry out of the process of wealth building.
I’d suggest considering use of a robo-advisor to make a higher allocation toward index funds over individual stocks. While the latter has a place in your portfolio, index funds provide a low-cost way to diversify your portfolio. In fact, robo-advisors use scientific research to optimize which index funds you hold and automatically rebalance your holdings across time as you make contributions and withdrawals and assets perform differently.
- The Betterment app gives you the tools, inspiration, and support you need to become a better investor.
- Start with as little as $10 and use the top-rated mobile app to set up automatic investing into diversified ETF portfolios. You can also purchase individual stocks or ETFs, and the platform also supports fractional shares.
- You can also invest in diversified preset cryptocurrency portfolios.
- Customize your risk tolerance and investment goals with guidance available at any time.
- By upgrading to Premium, you can unlock unlimited financial guidance from a Certified Financial Planner™.
- Betterment customers with at least $100,000 in assets may be eligible for an interest-rate discount on select mortgages, as well as hundreds of dollars in closing-cost credits.
- Hands-off investment management
- Diversified portfolio that automatically rebalances
- Low-cost investment selection
- Fractional shares
- Limited investment selections
- Limited crypto diversification in cryptocurrency portfolios
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How to Build Wealth By Going from Zero to Hero
Armed with this information, hopefully you will see investing does not need to be as scary as some might think. Held long enough, investments in broad-based stock market index funds produce not only positive returns, but history has shown them to be sizeable.
Starting out at a young age with an initial investment in an S&P 500 ETF (or other preferred market index mutual fund like VTSAX or VFIAX) is a great first step for going from zero to hero when it comes to learning how to build wealth from nothing.
