Here's How Simply Investing in Companies You Love Can Make You Rich
Putting money in the stock market can seem scary and overwhelming, but there's an approach to making money that even the newest investor can understand. It's also a philosophy followed by some of the most wealthy market gurus.
When it comes to choosing individual stocks, top investors including Warren Buffett and Peter Lynch advise people to invest in what they know and like.
The logic behind "invest in what you like" is quite simple. If people like a product or service, they will buy it. Lots of happy customers means more revenue, and thus a growing stock price. (See also: What Makes a Company an Attractive Investment?)
A look at Fortune's' list of most admired companies could also be a list of some of the best stocks to invest in over time. Nearly all of the firms have seen returns outpacing the broader stock market in recent years.
Here's a look at some well-liked companies and their returns for investors.
Coke and Pepsi
Coca-Cola [NYSE: KO] is one of the most iconic American companies, and one of the world's most valuable brands. PepsiCo [NYSE: PEP] isn't too far behind. The companies placed first and second, respectively, in a CoreBrands survey that sought to determine the most respected brands. These are enormous companies with product lines full of things people love, from soft drinks to Doritos to Quaker Oats.
Investors in Pepsi have seen the company's shares rise about 75% in the last decade, while Coke's prices have gone up about 70%. (It should be noted that Buffett's Berkshire Hathaway owns about 9% of Coca-Cola.) Returns from these companies mirror the S&P 500. Long-term investors have done well and should continue to do well over time with these firms.
Yum! Brands [NYSE: YUM]
Pizza Hut? Taco Bell? KFC? You're talking about three of the most popular restaurant chains in the world. If you eat at these places all the time, why not invest in the parent company?
After being spun off from Pepsi back in 1997, Yum! Brands has become a truly international phenomenon, getting nearly 70% of its revenues from overseas. It already operates more than 3,800 restaurants in China, and its latest move has been to bid for Little Sheep Group, a popular hot-pot chain in the world's most populated country. In the last 10 years, Yum! share prices have risen more than 300%, or more than triple the S&P 500.
Apple [NYSE: APPL]
When people camp out for days to get their hands on your new products, you know you're on to something. It's been a little while since Apple blew anyone away with a new device, but anyone who invested in this company early made a killing. Shares since 2004 have risen nearly 2,000%, making it one of the best performing stocks in recent years.
Google [NASDAQ: GOOG]
One of the few companies to rival Apple in the tech space, Google went public in 2004 and has been a gangbuster ever since. The company dominates the search engine space, and its Android mobile platform has spawned numerous viable competitors to Apple's iPhone.
Early investors in Google would have seen shares rise nearly 1,000% over the decade, and there's almost no window of time when Google's share prices haven't greatly outperformed the S&P 500.
Disney [NYSE: DIS]
Who doesn't love Mickey Mouse and Co.? This company is an entertainment behemoth, with properties that include ABC and ESPN, Pixar and Marvel Entertainment, and 11 parks and resorts. In the last decade, Disney investors have seen a 250% return, with much of that gain in the last five years.
Starbucks [NASDAQ: SBUX]
If you can't get through the day without a tall caramel macchiato, you're not alone. Starbucks has leveraged America's coffee addiction and seemingly placed a coffeeshop at every corner. The Seattle-based chain now boasts quarterly sales of nearly $4 billion, and investors have been jumping for joy even without the aide of caffeine. An investor who bought Starbucks stock in 2004 has seen prices rise more than 230%, or nearly double that of the NASDAQ.
Nike [NYSE: NKE]
This company helped bring along the fitness craze more than 40 years ago and hasn't slowed down since. Athletic shoes and apparel is a competitive market, but Nike has consistently managed to shine, as partnerships with top athletes Michael Jordan, LeBron James, and Tiger Woods have proven to be lucrative. In the last decade, shares of Nike have risen more than 300%, or nearly four times that of the S&P 500.
Can you think of any other well-regarded companies that are also great long-term investments? Please share in comments!