How Anne Scheiber Amassed $22 Million From Her Apartment
By Joshua Kennon
Investing for Beginners
In the mid 1940’s, Anne Scheiber retired from the IRS where she worked as an auditor. Using a $5,000 lump sum she had saved, and a pension of roughly $3,150, over the next 50+ years, she built a fortune from her tiny New York apartment that exceeded $22,000,000 upon her death in 1995 when she left the funds to Yeshiva University for a scholarship designed to help support deserving women. Here are some of the lessons we can learn from this ordinary woman that achieved extraordinary wealth.
1. Do your own research
Sheiber was burnt by brokers during the 1930’s so she resolved to never rely on anyone for her own financial future. Using her experience with the Internal Revenue Service, she analyzed stocks, bonds, and other assets. The result: She owned only companies with which she was comfortable. When markets collapse, one of the best ways to stay the course and maintain your investment program is to know why you own a stock, how much you think it is worth, and if the market is undervaluing it in your opinion.
2. Buy shares of excellent companies
When you’re really in this for the long-haul, you want to own excellent businesses that have durable competitive advantages, generate lots of cash, high returns on capital, have owner-oriented management, and strong balance sheets. Think about everything that has changed in the past one hundred years! We went from horse and buggies to cars to space travel, the Internet, nuclear knowledge, and a whole lot more. Yet, people still drink Coca-Cola. They still shave with Gillette razors. They still chew Wrigley gum. They still buy Johnson & Johnson products.
3. Reinvest your dividends
One of the biggest flaws with both professional and amateur investors is that they focus on changes in market capitalization or share price only. With most mature, stable companies, a substantial part of the profits are returned to shareholders in the form of cash dividends . That means you cannot measure the ultimate wealth created for investors by looking at increases in the stock price.
Famed finance professor Jeremy Siegel called reinvested dividends the “bear market protector” and “return accelerator” as they allow you to buy more shares of the company when markets crash. Over time, this drastically increases the equity you own in the company and the dividends you receive as those shares pay dividends; it’s a virtuous cycle. In most cases, the fees or costs for reinvesting dividends are either free or a nominal few dollars. This means that more of your return goes to compounding and less to frictional expenses.
4. Don’t be afraid of asset allocation
According to some sources, Anne Scheiber died with 60% of her money invested in stocks, 30% in bonds, and 10% in cash. For those of you who are unfamiliar with the concept of asset allocation , the basic idea is that it is wise for non-professional investors to keep their money divided between different types of securities such as stocks, bonds, mutual funds, international, cash, and real estate. The premise is that changes in one market won’t ripple through your entire net worth.
5. Add to your investments regularly
Regular saving and investing is important because it allows you to pick up additional stocks that fit your criteria. In addition to the first investment Scheiber made, she regularly contributed to her portfolio from the small pension she received.
6. Let your money compound uninterrupted for a very long time
Probably the biggest reason Anne Scheiber was able to amass such as substantial fortune was that she allowed the money to compound for of half a century. No, that doesn’t mean you have to live the life of a monk or deny yourself the things you want. What it means is that you learn to let your money work for you instead of constantly striving to scrape by, barely meeting expenses and maintaining your standard of living.
To learn about the power of compounding, read Pay for Retirement with a Cup of Coffee and an Egg McMuffin. With only small amounts, time can turn even the smallest sums into princely treasures.
http://beginnersinvest.about.com/od/investorsmoneymanagers/a/Anne_Scheiber.htm
Perhaps the only clue that Ronald Read, a Vermont gas station attendant and janitor who died last year at age 92, had been quietly amassing an US$8 million (S$10 million) fortune was his habit of reading the Wall Street Journal, his friends and family say.
It was not until last week that the residents of Brattleboro would discover Read's little secret. That's when the local library and hospital received the bulk of his estate, built up over the years with savvy stock picks.
"Investing and cutting wood, he was good at both of them," his lawyer Laurie Rowell said on Wednesday, noting that he read the Journal every day.
Most of those who knew Read, described as a frugal and extremely private person, were aware that he could handle an axe. But next to no one knew how well he was handling his financial portfolio.
Read, the first person in his family to graduate from high school, dressed in worn flannel shirts and spent his free time scavenging for fallen branches for his home wood stove. He drove a second-hand Toyota Yaris.
"You'd never know the man was a millionaire," Rowell said. "The last time he came here, he parked far away in a spot where there were no meters so he could save the coins."
Read graduated from Brattleboro High School in 1940 and during World War II served in North Africa, Italy and the Pacific theatre. Returning home, he worked at Haviland's service station and then as a janitor at a JCPenney store, marrying a woman with two children.
Before his death on June 2, 2014, Read's only indulgence was eating breakfast at the local coffee shop, where he once tried to pay his bill only to find that someone had already covered it under the assumption he did not have the means, Rowell said.
Last week, Brooks Memorial Library and Brattleboro Memorial Hospital each received their largest bequests ever. Read left US$1.2 million to the library, founded in 1886, and US$4.8 million to the hospital, founded in 1904.
"It was a thunderbolt from the sky," said the library's executive director, Jerry Carbone. While a surprise, he said the gift made sense once he learned more about the quiet, shy library patron appropriately named Read.
"Being a self-made man with his investments, he recognised the transformative nature of a library, what it can do for people," Carbone said.
Read's stepchildren survive him but were not immediately available for comment. - Asiaone