Gyroscopic Investing

[quote=http://www.cnbc.com/id/102410730]Ronald Read, a Vermont gas station attendant and janitor, invested in recognizable names when he amassed an $8 million fortune, according to his attorney. A large part of that fortune was later bequeathed to an area library and hospital after his death, stunning a community that had no idea about his wealth. [/quote]

Amazing story. Until:
"However, Diane Garnick founder and CEO of Clear Alternatives, cautioned that the environment these days is much different than when Read invested. She noted that he likely saved cash in the '70s before moving into the stock market, and then caught the tech boom. On top of that, interest rates are literally at zero, she noted."

So in other words, my generation is screwed ?

Mike59 wrote: Amazing story. Until:
"However, Diane Garnick founder and CEO of Clear Alternatives, cautioned that the environment these days is much different than when Read invested. She noted that he likely saved cash in the '70s before moving into the stock market, and then caught the tech boom. On top of that, interest rates are literally at zero, she noted."

So in other words, my generation is screwed ?

Commission fees during that time were through the roof. And the policy that has brought rates down to zero--ZIRP--has also inflated a massive stock bubble. Even the dumbest stock picker would have had a good chance of making out like a bandit in the last 6 years. There's always a silver lining.

What a great story!

We are NOT screwed.  Relax!  If you want $8M by age 92 you can have it - although I wouldn't mind retiring early to enjoy some of those millions before they increase to that point.

..to reach Read's $8 million fortune, Hogan calculated that investors would have to invest about $300 a month at an 8 percent interest rate over 65 years.

Given the PP's average CAGR of 9% and our collective ability to save far more than $300/month, this sounds like a piece of cake to me.  PROVIDED that we manage to avoid the traditional temptations to buy high and sell low, i.e. market timing :-).

You might also recall the thread that PS started that echoed that same "we are screwed because interest rates are low" sentiment.  We ended up simulating a PP in retirement from 1973 on with a 4% withdrawal rate, and found there were many scenarios that ended up with a stunningly large portfolio.  Big testament to the "just leave it alone" philosophy.

The story needs a little more finesse.  In 2015 dollars, you would need to put away $524 a month to be equivalent to an inflation-adjusted $300 in 1948.  But, because stocks are way more overvalued than they were in 1948, you actually need to put away $1831 a month to reach $8 million (both in 2015 dollars) in 65 years, which is exactly what the guy did...  but didn't get to enjoy any of it because he was a "poverty consciousness" frugal miser.  What an idiot!  Also, if we have another Great Depression or even a secular bear market low and your ride it all the way down, the monthly balance to save goes up even more.  This is why timing matters as far as what you pay for an asset.  The PP absolves that issue quite nicely, although personally I avoid overvalued public equities like the plaqgue.

Touche!

Not to pile on, but yeah that's pretty funny!

Thought I should post this link here:

http://www.nytimes.com/1995/12/02/nyreg ... rtune.html

I remember reading this story at the time. Any New Yorkers on here may remember the woman who left 22 million to Yeshiva University in 1995.

barrett wrote: Thought I should post this link here:

http://www.nytimes.com/1995/12/02/nyreg ... rtune.html

I remember reading this story at the time. Any New Yorkers on here may remember the woman who left 22 million to Yeshiva University in 1995.

Great story!  It should not be overlooked that the key strategy of these two multi-millionaires was dividend investing.  They weren't buying speculative stocks like much of the junx today.  But you can do it smarter today by focusing on dividend growth investing.  That could, in theory, potentially make up for buying such overvalued stocks.  I have considered it but it still seems foolish to me to overpay.