Building Substantial Wealth

"Anyone can build substantial wealth by following a few commonsense rules," insists Mark Hulbert, editor of the Hulbert Financial Digest. All you need is a long-term approach to invest.

Here are three principles of wealth accumulation that can make the difference between dreaming about financial independence and actually achieving it:

Money Makes Money. Brothers Ralph and Brown Ketner decided to raise the capital they needed to open a grocery store in their hometown of Salisbury, N.C., by selling stock. They contacted everybody they knew, and over 100 people each bought up to 100 shares at $10 a share.

That was in 1957. Over the next ten years, from that single grocery store grew Food Lion, a chain of more than 1 000 stores throughout the Southeast. During the period 1968-1988, Food Lion stockholders were rewarded with annual returns averaging 14 percent. Today a share that sold for $10 is worth $109 350. And of those first investors, 87 became millionaires. "I was never tempted to sell," says original shareholder Paul Ritchie. "I knew if I held on and let my interest compound, the stock would be worth a lot."

Once asked, "What is the most powerful force on earth?" Albert Einstein replied without hesitation, "Compound interest." As Peter Lynch, a successful investor and founder of the Fidelity Magellan mutual fund, puts it, "On average you'll double your money every seven or eight years if you leave it in stocks. Outside of a house, stocks are likely to be the best investment you'll ever make."

Short Answer Questions

1. What did brothers Ralph and Brown Ketner decide to do?
2. What can bring you the biggest reward in your investment?
3. How many annual returns were Food Lion stockholders rewarded?
4. If someone holds on his stocks and lets his interest compound, ____
5. What's this passage about?

(Keys.)