UPDATE 8.1.2022: The key to keeping your money alive and well—to survive and thrive—is to consider how much it can grow. Imagine showing a grandchild how to grow a plant in a Styrofoam cup like they learn in school. It doesn’t take too long to see that seed turn into something remarkable. How does it happen? The key ingredient is a little TLC. That’s how Ronald Read made his fortune.
Originally posted August 10, 2020.
You may be familiar with Ronald Read’s story. It’s a story worth telling over and over and over again to anyone you know. My father in law Dick Young wrote in May 2015:
Hard to even comprehend, but this great story, courtesy the WSJ‘s Anna Prior, recounts how Ronald Read accumulated an estate valued at almost $8 million. Mr. Read, who passed away at the age of 92, made a modest living pumping gas for many years at a Gulf gas station in Brattleboro, Vermont.
A Five-Inch Stack of Stock Certificates
How did Ronald Read manage to become a multi-millionaire? Mr. Read invested in dividend-paying blue-chip stocks. As Ms. Prior writes, Mr. Read took delivery of the actual stock certificates and “left behind a five-inch-thick stack of stock certificates in a safe-deposit box.” At his passing, Mr. Read owned over 90 stocks and had held his positions often for decades. The companies he owned paid longtime dividends. And when his dividend checks came in the mail, Ronald Read reinvested in additional shares. Apparently Mr. Read was the master of the theory of compound interest. Not surprising, his list of stock holdings included such dividend payers as Johnson & Johnson (NYSE: JNJ), Procter & Gamble (NYSE: PG), J.M. Smucker (NYSE: SJM), and CVS Health (NYSE: CVS), all names I write about for you regularly. No high flyers for Ronald Read, and certainly no technology names.
Protect, Preserve, Patience, Perspective
Obviously Ronald Read had been a staunch practitioner of my PPPP theme, featuring the basics—Protect, Preserve, Patience, Perspective. Focus on those traits for success.
Now in August of 2020, in The Wall Street Journal, Jason Zweig writes the following on the book, The Psychology of Money by Morgan Housel.
It isn’t often that I receive a new book I feel I have to read, but I couldn’t wait to dig into “The Psychology of Money.”
To be published next month, this 242-page, easy-to-read book by Morgan Housel isn’t about investing. It’s about how to think about investing, and it’s one of the best and most original finance books in years.
Mr. Housel, 36 years old, is a blogger and venture capitalist who writes beautifully and wisely about a central truth: Money isn’t primarily a store of value. Money is a conduit of emotion and ego, carrying hopes and fears, dreams and heartbreak, confidence and surprise, envy and regret.
Mr. Housel begins with a shocking anecdote he witnessed himself: A technology multimillionaire handed a hotel valet thousands of dollars in cash to go buy fistfuls of gold coins at a nearby jewelry store. The executive then flung the coins, worth about $1,000 apiece, into the Pacific Ocean one at a time, skipping them across the water like flat rocks, “just for fun.”
To that man, money was a plaything. (He later went broke, Mr. Housel writes.) To Ronald Read, however, money was possibility. Mr. Read spent decades pumping gas and working as a janitor in Brattleboro, Vt. After he died in 2014 at the age of 92, his estate was able to give more than $6 million to local charities—because he had scrimped and put every spare penny into stocks that he held for decades.
How, asks Mr. Housel, did a janitor “with no college degree, no training, no background, no formal experience and no connections massively outperform” many professional investors?
Investing isn’t an IQ test; it’s a test of character. Unlike the man who chucked coins into the sea, Mr. Read could defer gratification and had no need to spend big so other people wouldn’t think he was small. From such old-fashioned virtues great fortunes can be built.
Analyzing two of the biggest stock-market winners of the past few decades, Mr. Housel says Netflix Inc. returned more than 35,000% between 2002 and 2018. Monster Beverage Corp. gained more than 300,000% from 1995 through 2018.
Yet, along the way, many investors quit; each stock spent at least 94% of the time trading below its previous all-time highs.
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E.J. Smith - Your Survival Guy
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