Published in Investing on 31 March 2010
Through investing, even a tramp can become a millionaire...
Earlier this week, news emerged of a remarkable man who managed to amass a sizeable fortune while living rough.
Curt Degerman, from the Swedish town of Skellefteå, died of a heart attack 18 months ago at the age of 60. Local people knew Degerman as a tramp that scraped together a living by collecting scrap metal and food and drink cans for recycling. For 40 years, he lived a solitary existence, rummaging through bins for recyclables and eating leftovers from fast-food restaurants.
However, after his death, it emerged that "Tin Can Curt" was an avid reader of the financial pages and an astute investor. By reading Dagens Industri -- the Swedish equivalent of theFinancial Times -- in his local library, Degerman invested his collected deposits carefully. On his death, his fortune was estimated at more than £1.1 million.
A predictable family feud
Somewhat inevitably, news of Degerman's secret wealth sparked a family feud among his relatives. Degerman's Will left his estate to a cousin who visited him often. However, another cousin contested the Will on the basis that his father, Degerman's uncle, was the legal heir.
A Swedish judge urged the feuding heirs not to waste their money on legal fees and, instead, reach a private arrangement, which they have now done.
What's in a tramp's portfolio?
Apparently, Degerman was an academic child, but dropped out of education and mainstream society in his late teens following personal problems. So, how had he invested his money -- and what can we learn from him?
Degerman clearly knew that investing in businesses produces the best long-term returns, as the majority of his portfolio was in stock market-listed companies. Also, he knew about tax planning, because his share portfolio (worth £731,000) was held in a Swiss bank account. Degerman also saw gold as a shrewd investment: his safety-deposit box held 124 gold bars worth £250,000.
Despite never spending any money, Degerman also had £4,300 in his current account and a further £275 of spare cash at home. Thus, despite not needing any cash, he kept some liquidity at hand, perhaps to fund his next share purchase?
Other 'wiser misers'
To me, this is a familiar tale of a 'wiser miser' who amasses considerable wealth but has no interest in spending it. Similar stories of eccentric millionaires emerge frequently, often revealed by a generous charitable donation on death.
For example, in the Motley Fool UK Investment Guide, we told the tale of Anne Scheiber, a childless New Yorker who died in 1995 at the age of 101. From working as an auditor in the US Internal Revenue Service, Scheiber noticed that the very wealthy kept a large proportion of their fortune in stocks and shares.
Despite having never earned more than $4,000 a year, this recluse turned her modest income and a $5,000 nest egg into a $22 million portfolio of blue-chip businesses. On her death, Scheiber generously donated her entire estate to New York City's Jewish Yeshiva University to establish scholarships for disadvantaged female students.
Likewise, investment genius Warren Buffett lives a simple life. Despite his personal wealth of $47 billion, placing him third on the Forbes Rich List, the 79-year-old CEO of Berkshire Hathaway cares nothing for possessions.
In her brilliant biography of Buffett, The Snowball, Alice Schroeder describes how Buffett still lives in the modest house he bought in 1957 for $31,500. The Sage of Omaha also drives a 20-year-old car and only replaces appliances when beyond repair.
For Buffett, the important thing is to live by his own 'internal scorecard' -- the set of values and beliefs by which he measures himself and by which he wishes to be measured. Hence, just like Anne Scheiber, his friend Bill Gates of Microsoft and other tycoons, Buffett is a philanthropist. Indeed, he intends to leave his entire estate to charity.
In summary, by cutting your expenses to the bone and investing a large proportion of your take-home pay in big businesses (perhaps via a low-cost index tracker), you too could amass a sizeable fortune. However, I don't recommend taking this to extremes by living as a vagabond!
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