Brattleboro, Vermont, will be even nicer than it already is, thanks to Ronald Read. Photo: Ken Gallager
The name Ronald Read might not mean too much to you -- yet -- but it certainly does to Vermont's Brooks Memorial Library and Brattleboro Memorial Hospital, which received gifts totaling $6 million. They came not from a titan of industry or big-name philanthropist, but from the estate of Ronald Read, who worked as a janitor and gas station attendant. Read died last year at the age of 92, with an estate valued near $8 million.
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Stories like this are actually not unheard of -- I've written of them many times before. For those who pay attention, they offer a hugely valuable lesson -- that we can probably amass far more money than we would ever expect.
Many thought Read's only hobby was chopping wood. (Photo: Merzperson, via Wikimedia Commons)
How he did itOf course, there's more to amassing $8 million, or any other large sum, than merely wishing for it and socking away extra dollars now and then. Let's review how Read did it, and what lessons we can learn from him:
He took a long time. Wealth like that generally doesn't happen quickly. We, too, need to be patient once we set our goals and set in motion a plan to reach them. You might play around with a calculator to see how you could reach your goal. If you wanted to get to Read's $8 million, you might, for example, invest $6,300 per year for 50 years. If you earned the stock market's long-term average annual gain of about 10%, you'd hit $8 million.
He lived frugally. There's frugal, taking advantage of sale prices for your vacation tickets or buying a new car with the mid-level trim package, and then there's really frugal. Read reportedly would park in inconvenient spots in order to avoid parking meters. He drove a second-hand Toyota Yaris. He also searched for and cut his own firewood. It's worth noting that he didn't take his frugality to the most extreme level, as he treated himself to coffee-shop breakfasts instead of preparing his own eggs and coffee. Being disciplined about pursuing a goal is great, but we should enjoy life, too.
Mr. Read was very frugal, but treated himself to diner breakfasts. (Photo: Jim G., Silicon Valley, California, via Wikimedia Commons)
He kept learning. Read, true to his name, regularly read The Wall Street Journal, where he could learn about companies far and wide and keep up with happenings in the business world. Note, too, that he graduated from high school -- the first in his family to do so -- but didn't graduate from college, which reinforces that we don't need fancy degrees in order to invest well. Indeed, we can invest in a low-cost broad market index fund, such as one based on the S&P 500, and will likely outperform most Wall Street money managers -- as has happened over many long periods.
He invested in familiar companies. We're often drawn to high-flying stocks we've barely heard of, but Read's success reminds us that old, familiar blue chip stocks can be high-flyers, too -- over the long run. His attorney noted, "He only invested in what he knew and what paid dividends." Some of his holdings were AT&T , Bank of America , CVS , Deere , General Electric , and General Motors . I suspect you've heard of every one of those. Here are their average annual gains over several time frames (excluding General Motors due to its bankruptcy):
*over 28 years
He favored dividend-paying stocks. His preference for dividend payers is worth calling out, as dividends can really turbocharge a stock's performance. The folks at Ave Maria Funds recently offered a great example of the power of dividends, noting that the S&P 500's average annual gain from the beginning of 1970 to the end of 2014 was about 7.2% without dividends, but 10.5% with them. Over many years, that's a huge difference, turning $1,000 invested in 1970 into $22,382 (just prices) or $88,593 (including dividends) at the end of 2014.
Regular, disciplined investing can build a lot of money. (Photo: Jeff Belmonte, Flickr)
He was a buy-to-hold investor. Read kept stock certificates in a safety deposit box, which means he most likely didn't trade very often. These days it's most common to let your brokerage hold your stocks in "street name," keeping you on record as the owner, but not bothering to send out certificates. That makes selling shares very easy, as you don't have to find certificates and mail them in. But it also makes it very easy to buy and sell frequently, which has been shown to lower returns.
Read is no longer with us, but his investments funded gifts that will make it hard for him to be forgotten anytime soon. We, too, can surprise ourselves and others with our investing success -- if we take many of his lessons to heart.
The article How Did a Janitor Amass $8 Million? The Same Way You Can originally appeared on Fool.com.
Longtime Fool specialist Selena Maranjian, whom you can follow on Twitter,owns shares of General Electric Company. The Motley Fool recommends Bank of America, CVS Health, and General Motors. The Motley Fool owns shares of Bank of America and General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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