Grace Groner Way
I read about a true case in USA. Grace Groner.
She brought 3 shares of Abbot Laboratories, held it for about 70 years, and leave behind USD 7 million for charity.
Jim Royal, How You Can Become an Accidental Millionaire, May 28, 2010
Jonathon Hoenig, The Perfect Hedge for a Risky Era?, 8 March 2010, SmartMoney.com
Details of above posts or articles can be found at the end of this post or at the links.
She brought the 3 shares of specially issued Abbott Laboratories for USD 180 (about USD 3,000 in today’s dollar) around 1935. She held on to these shares until she passed away in 2010 leaving behind a fortune of USD 7 million to her alma mater, suburban Lake Forest College.
How did she amass such a sum?
She lived within her means. Groner was thrifty perhaps from her experience with the Depression. Grace did not drive but walked around her town of Lake Forest, Ill. just outside Chicago. She owned a house that she had inherited from a friend. The one-bedroom place was stocked with the barest of possessions. She bought second-hand clothes at yard sales. She also enjoyed giving money to needy local residents, and many years ago she even established a scholarship program at Lake Forest College by donating $180,000.
You can do that?
Grace's story demonstrates the power of buy-and-hold investing and compounding by reinvestment of dividends over a long period of time.. After many stock splits over decades and reinvested dividends, her three original shares became 129,000 shares worth roughly $7 million.
Her simple living is what permitted her to hold on to her investment over a lifetime.
What I think happened?
After graduating in 1931, Groner began work as a secretary at Abbott. A few years later, she bought the three shares of Abbott. She worked there for 43 years. She is likely to have brought the 3 shares on urging of her colleagues or as a form of loyalty to her employer.
She was not likely to be active in the stock market at all. She was not likely to know the complexity of the market and may deemed it too dangerous to buy and sell stocks with her Depression era experiences. As a result she is not affected by investment pornography and noises.
As Hoenig put it, “she didn’t use Fibonacci retracements, high-frequency trading or advanced moving averages, but simply reinvested her dividends and never sold.” Likewise, she is unlikely to have read Ben Graham or Taleb. If she did, she may have sold her stocks much earlier (because she was likely then to be an active investor).
She may even have a stoic and imperturbable attitude in life as I presume from her simple living. She was regularly employed and thrifty and had no demands for extra money. She did not put a lot money into the stocks and is not concerned about its performance. As a result, she had the fortitude and discipline to hold on to her stock during its ups and downs.
Of course, these are my presumptions. I know it is not easy doing what she and perhaps Uncle Chua had done. What I am trying to deduce is how we can act like her in our investing behaviour.
Warren Buffet said “Investment is simple but not easy.”
Simple as Grace Groner or Uncle Chua have done.
But difficult …. The human temperament. Most of us don’t want to wait 65 years for our money to compound into millions.
Most of us want to get the hand on some extra money to spend – we are not thrifty and often lived beyond our means.
Most of would have sold much earlier ……
Extract from:
Jonathon Hoenig, The Perfect Hedge for a Risky Era?, 8 March 2010, SmartMoney.com
An Everyday Millionaire
I doubt Grace Groner thought that “capitalism is broken” or that “the market is dead money” when she died in January at age 100 outside Chicago.
Groner’s estate left a $7 million fortune grown from a small stake in Abbott Laboratories (ABT: 52.73, +0.45, +0.86%) to her alma mater, suburban Lake Forest College. It was the largest gift in the school’s history.
How did she amass such a sum? After graduating in 1931, Groner began work as a secretary at Abbott. A few years later, before the advent of 401(k)s, IRAs or any other prodding from the government, she bought three shares of Abbott, which cost her $180 – about $2,900 in today’s dollars.
Then she waited. She waited through the depths of the Great Depression and through a massive World War. She waited though the Cuban Missile Crisis, and Vietnam, and Korea, and the historic inflation of the 1970s. She waited through Republican and Democrat administrations, through periods of political liberalism and conservatism.
She didn’t use Fibonacci retracements, high-frequency trading or advanced moving averages, but simply reinvested her dividends and never sold. After many splits, her three original shares became 129,000 shares worth roughly $7 million.
What permitted her to hold on to her investment over a lifetime was that she lived within her means. Groner was thrifty, rarely splurging on purchases outside of travel and charity. Even after she became a millionaire, she didn’t live like one.
Extract from:
How You Can Become an Accidental Millionaire
Jim Royal
May 28, 2010
So how did Grace Groner, a secretary for 43 years at Abbott Labs (NYSE: ABT ), manage to amass such a fortune?
It certainly wasn't by playing the horses or winning the lottery. Instead, Grace purchased three $60 shares of specially issued Abbott stock in 1935 and never sold them. Thanks to decades of stock splits and Grace's practice of reinvesting dividends, her nest egg grew into millions.
You can do that
Grace's story shows the power of buy-and-hold investing, dividend compounding, and good old fashioned time. A back-of-the-envelope suggests that she must have managed to grow those initial three shares into nearly 130,000 shares. And she did it with a system so simple that anyone could follow it.
Now, of course, Grace was fortunate to buy one of the great businesses of the 20th century. But she had the good sense to compound her decision by allowing reinvestment and time to work their magic on a dividend portfolio, instead of selling after she made a double or a triple.
As you can see from Grace's example, selling a stock with a lot of potential could be throwing millions of dollars away. Surprisingly for a novice investor such as Grace, she had the fortitude and discipline to hold on to her stock during its ups and downs. According to super investor Warren Buffett, this ability to master your temperament is the most difficult but most vital skill an investor can have. With a disciplined temperament, you can turn hundreds into millions
Of course, unlike Grace, most of us don't want to wait 65 years for our money to compound into millions. (I'd be happy with next week.)
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