Today’s secret millionaire story comes from the vault. It starts all the way back in 1893, the year our secret buy and hold millionaire Anne Scheiber. Like most other secret stock market millionaires, Scheiber did not come from a family of means. In fact, her early childhood was worse than most.
Anne grew up in poverty. Her father died when she was very young. As a result, she was forced to began to work in her teen years. Through sheer determination and graft, she saved some money, put herself through law school and began a career’ at Internal Revenue Service’ – the tax department of USA.
Anne excelled at her work. But she faced a lot of discrimination. Due to this, she never got a promotion during her entire 23 year career. She never made more than $3,150 a year
Most people would have given up, but not Anne. Most people would have thought they they could never become rich from this lowly position – but not Anne.
Anne retired in 1944 at the tender age of 50. She had $5,000 to her name. Although this was not a substantial enough amount to retire on, she figured out a way to grow her money. Her experience as an IRS auditor, scanning numerous income tax returns, showed her how people grew their wealth by investing in stocks. So at the age of 51, she became an investor and remained so for next 50 years, until her death in 1995.
One stock Anne Scheiber bought early on was Schering-Plough. She bought 1,000 shares of the company in 1950. At the time of her death in 1995, the value of her stock in Schering-Plough was $7.5 million – her return on this investment was about 15.9% a year!
Another one of Anne’s stocks was Coca-Cola. This stock was another big winner. Even excluding dividends, the price of the shares alone grew by 26 times from $28,000 to $720,000 between 1980 and 1995, a return of 24% a year.
All in all, Anne Scheiber had $22 million at the time of her death. Yes that is right, she was able to turn a paltry $5,000 into a $22,000,000 fortune. Simply amazing.
The best part is no one knew she was rich except her stockbroker and lawyer. This akin to other secret buy and hold millionaires like Phyllis Stone. In life, you want to be rich & anonymous, not poor & famous.
If you are reading this thinking Anne had a secret, some magic stock market formula, than you are wrong. Her investment strategies were simple, if not old-fashioned and boring. She bought good companies, reinvested the dividends and held on for the long term. That is it.
Anne understood the power of compounding. She knew that investing in excellent companies over a long time frame would exponentially grow ones wealth. This is a simple idea but a hard one for people to grasp and execute. Doing nothing is boring. But it is exactly what makes you rich.
Annes investing success is proof of how well a simple buy-and-hold strategy works. All of her stocks went through rough patches. Her broker said there was a time “during the ’70s when Schering dropped off and lost half its value.” But Scheiber didn’t panic and sell. She knew that the market become irrational from time to time. She simply held on to her stock and was amply rewarded for her discipline.
As Warren Buffet said “ Look at stocks as parts of business. Ask yourself, ‘How would I feel if the Stock Exchange was closing tomorrow for the next three years?’ If I am happy owning the stock under that circumstance, I am happy with the business. That frame of mind is important to investing.”
Another benefit of her buy and hold approach was that she kept costs to a minimum. She had minimal brokerage costs due to not overtrading. And she avoided capital gains taxes by not crystallising profits by selling her stocks – thereby getting one up on the IRS who refused to promote her during her career working for the organisation. Most investors have a high stock turnover in their portfolios which leads to repeated tax bills that drastically reduce the power of compounding.
Anne Scheiber understood what stocks represent – an underlying ownership of a company. To her, they were not ticker symbols that seemed to move at random. But instead, they were claims to the profits of actual real world businesses. This mindset led her to think as an owner and not a trader. This mindset led her to becoming a buy and hold investor. As her broker at Merrill Lynch said “She was never looking for a quick buck. “Her whole idea was to get performance on a long-term basis. She felt over the long run the value would grow.”