Ronald Read died last summer at the age of 92.
Sad, you might think, but why should a stranger care? Because if you’re a serious investor, you’ll be inspired by Mr. Read’s investing story. It’s the stuff of legends.
As for the man himself, “legend” is a distant word.
Mr. Read set the bar curiously low on career ambitions. He earned his living as a gas station attendant and as a janitor in a small Vermont town. Rarely does either occupation arise in conversation with the desultory high-school guidance counselor, and for good reason: Salary.com reports $20,611 as the median annual income for a full-time gas-station attendant. Janitors earn considerably more, though hardly enough to puff your chest. Salary.com reports $25,900 as the median annual income for a full-time janitor.
Mr. Read unlikely earned much through his labor. Nevertheless, what he earned he was able to parlay into an $8-million fortune.
How did he do it?
Let’s first clear the table of what he didn’t do. Mr. Read employed no bet-the-farm exotic trades. He wasn’t exceptionally prescient; market timing played no role in his oversized success. Surely, then, it was luck. Mr. Read was a ground-floor investor in Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Cisco Systems (NASDAQ: CSCO), or some other IPO rocket shot? Nope.
Mr. Read amassed his fortune employing frugality, patience, and a favorite investing strategy of mine – dividend-growth investing. You might be inclined to focus on the dividend-growth aspect, but dividend growth works most efficiently when conjoined with frugality – saving more than you spend – and patience.
I’m frugal (Not to be confused with the pejoratives miserly, cheap, or moneygrubbing. False economy is just that), and proud of it. I save and I invest. What’s more, I don’t mortgage the future by paying for current consumption with future earnings (debt). I live within my means, and within my means I invest. (I rarely used leverage.)
Few of us are genuinely frugal, which is no surprise. As H.L. Mencken noted in England’s Sunday Chronicle, “The human race detests thrift as it detests intelligence.” Indeed, modern culture relentlessly promotes current consumption. The future be damned. Indeed, an entire strain of economic thought – Keynesianism – is predicted on spending today.
Patience is closely aligned with frugality. Patience entails foregoing present pleasure for future pleasure. Future pleasure is the very essence of investing. You invest not to make money per se, but to improve your ability to consume in the future, thus generating future pleasure.
Mr. Read might have had a middling education and low career ambitions, but he certainly appreciated the potential of intelligent frugality and patience. Mr. Read also understood how frugality and patience amplify the returns in dividend-growth investing.
I refer to dividend-growth investing as the “9th Wonder.” As the dividend goes, so goes the share price: dividend growth equals share-price growth equals wealth accumulation. It’s a formula for success.
Mr. Read exploited the “9th Wonder” with aplomb and with big-cap dividend growers that fly under no one’s radar. According to Mr. Read’s attorney, Mr. Read’s portfolio included AT&T (NYSE: T), Bank of America (NYSE: BAC), CVS (NYSE: CVS), Deere (NYSE: DE), General Motors (NYSE: GM), and High Yield Wealth recommendation General Electric (NYSE: GE).
But here’s the most intriguing and most encouraging aspect of Mr. Read’s legend. He achieved millionaire status by investing, not by the business of investing. The distinction is worth highlighting.
Sure, Warren Buffett, Bill Ackman, Carl Icahn, and John Paulson are billionaires, but they become billionaires by managing huge sums of money and taking a cut of the profits earned on that money. They didn’t become wealthy by investing their own money and patiently and passively reaping the rewards like Mr. Read.
So if you want to emulate an investor, you’re more likely to achieve success emulating the investor Mr. Read than you are emulating investor-businessmen Mr. Buffett et al. Most have the potential to be a millionaire investor; few have the potential to be a billionaire investor-businessman. Set your sights accordingly.
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