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3 stocks I’m buying now to get rich later

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. He looks after his children in the evenings, and on the weekends, enjoys a beer 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.

Related > Free guide — Your 10 Step Guide to Making $1 Million in the Market

Why absolutely anybody can become rich – including you.

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 $62.5 billion, according to Forbes.

And if you thought that Warren Buffett is just a Yank who got lucky, check out this neat fact…

What 43,000 Australian millionaires have in common.

A recent 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 very 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 or Woolies!)

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 Woolworths Limited (ASX: WOW) – 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.

Stock #1: A consumer power play that looks dirt cheap… and boasts a 6.3% dividend yield.

Beverage manufacturing giant Coca-Cola Amatil Ltd (ASX: CCL) (“CCA”) is one of these 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 12 months and, as a result, the shares are trading near a five-year low. In comparison, the broader S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is trading at a 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 heavily populated Indonesia. Perhaps best of all, it offers a bumper 5% yield, franked to 75%. Grossed up, that’s a 6.3% dividend yield!

Stock #2: The ultra-promising ASX small cap you’ve never heard of.

Greencross Limited (ASX: GXL), a rapidly expanding provider of veterinary services, is another stock that needs your attention. While it might not seem like an absolute bargain right now with shares trading on a multiple of about 41 times 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 most promising or well run companies – I just wanted to find a stock that would pop overnight.

So one of the very 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 bare 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.

Here’s the rub, though. 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 far superior results.

In fact, a recent article titled: “The power of compound interest – an investor’s best friend” by Dr Shane Oliver of AMP Limited 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 measly dollar 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 six 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.

The great news is, not only have the shares recently fallen to 43 cents, but the company’s growth is only just beginning. That’s because Nearmap has a highly valuable and unique product.

The company provides ultra-high resolution aerial photographs that are designed to save both time and costs for customers spanning various industries. As an example, construction companies find this technology particularly useful – they can show their clients ultra-clear updates on a screen rather than wasting both time and resources making a field call.

With far higher resolution photos than those provided by Google Inc, Nearmap not only shows enormous promise in Australia, but is also conducting test flights in the United States that could prove to be a huge market in the future.

Even better: Here’s another ASX company with the recipe for tremendous long-term returns

I’ve got one more ASX stock on my watch list. And I’m not the only one excited by this small company’s massive potential.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

Motley Fool contributor Ryan Newman owns shares in Coca-Cola Amatil, Google Inc (A shares) and Nearmap (Greencross could soon make this list).

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