You've seen it touted all over the web: “Warren Buffett Tells You How to Turn $40 into $10 Million.” If you've been enticed to click on the link, you are sent to a come-on for the Motley Fool's investment offerings. They want to help you make big money by telling you which stocks to buy or sell. You might stumble upon a stock that could be very lucrative in the future -- if you're lucky enough to find the next Coca-Cola. Why Coke? Well, if you had invested $40 USD in Coca-Cola stock in 1919, you would now be sitting on about $10.8 million – the 2015 market value, including stock splits and dividends.
It's possible that one of the stocks in your portfolio could be extremely valuable in 90 years or so. But the real lesson is that investing in solid companies that pay dividends can be an effective long-term strategy – especially when you reinvest the dividends, thanks to the beauty of compounding.
Getting in on the ground floor with Coca-Cola:
Of course $40 is worth $572 today, which is about all the average worker made in a year in 1919.