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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 40,000 Australian millionaires have in common. It’s a timeless and simple lesson anyone can use to start getting rich.

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 and expensive holidays, amongst 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 second richest person with a net worth of US $74 billion, according to Forbes.

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

What 40,000 Australian millionaires have in common

A report by Boston Consulting Group earlier in the year found that surging equity markets helped create more than 40,000 new millionaire households in Australia during 2013. The study found that Australia is home to around 195,000 millionaires, with rising equity markets named as one of the key drivers.

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 other 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 Telstra!)

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 Telstra Corporation Ltd (ASX:TLS) – 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 supermarket behemoth that looks dirt cheap… and offers a gigantic dividend

While it may seem like a ‘boring’ pick, Woolworths Limited (ASX: WOW) could be one of the best long-term buy-to-hold investments you make in 2015.

Since hitting a fresh all-time high at $38.92 earlier this year, the supermarket giant has plunged more than 20% to be trading at just $30.50 currently. While it is expected to pay $1.45 per share in dividends in FY15, that puts the stock on a fully franked yield of nearly 4.8%. Grossed up, that’s a 6.8% dividend yield!

Right now, it seems as though investors are focused on the company’s titanic struggle against rival Wesfarmers Ltd (ASX: WES); its struggling Masters Home Improvement chain and the threat being posed by Costco and Aldi. While these matters should certainly be monitored, the company has proven its ability time and time again to generate enormous returns and that shouldn’t change anytime soon.

Although most of Woolworths’ growth is now in the past, I expect the company will still deliver fantastic profits over the coming years, and even decades.

Stock #2: The ultra-promising ASX stock you’ve never heard of

Data analytics business Veda Group Ltd (ASX: VED) debuted on the market just over one year ago but has thus far managed to remain under the radar of investors, despite having jumped nearly 30% in that time.

The company enjoys a monopolistic position in Australia’s data analytics field, providing credit information on individuals and businesses across the nation. While credit reporting standards are becoming increasingly strict, there is a huge growth opportunity for Veda which has developed a strong track record for growing revenues and earnings. At $2.25 per share, Veda Group is posing as a very promising long-term stock.

Before I reveal my #3 stock pick 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 have now lost my entire investment. 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, an article by Dr Shane Oliver of AMP Limited earlier in 2014 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 $1000…

(In case you were wondering, $1,000 invested back then at 12% per annum would be worth more than $408 million today. It might seem a bit ridiculous, but it’s true.).

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 993%)

Although I think Woolworths and Veda Group could be great investments for the long-term, I believe Nearmap Ltd (ASX: NEA) could be the big winner for my portfolio over the next 10 years.

For those who haven’t heard of Nearmap, this small-cap superstar has been the shining light for investors who were lucky enough to buy in early. In fact, the stock was trading at just 6 cents at the beginning of 2013 but has since risen to 65.5 cents – a remarkable 993% return in just two years.

The great thing is, this growth story could just be getting started, thanks to Nearmap’s 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. While this has proven incredibly popular in Australia, the company is now excelling in its expansion into the much larger market of the United States.

While this could dint the company’s profits in the near-term, revenues are tipped to jump strongly while the long-term is looking as bright as ever before. While I already own shares in the company, I am strongly considering buying even more.

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 company’s massive potential.

The Motley Fool's top investment advisor, Scott Phillips, has just revealed "The Motley Fool's Top Stock for 2015". This ultra promising stock is a sexy ASX tech company with a stunning track record and plenty of room to run. You can discover Scott's hands-down favorite bet for 2015 by simply clicking here and entering your email address, and we'll send you out his brand-new FREE report.

Note: No credit card required.

Motley Fool contributor Ryan Newman owns shares in Veda Group Ltd and Nearmap Ltd. You can follow Ryan on Twitter @ASXvalueinvest.

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