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Welcome to session 24 of the Investing for Beginners podcast. In today’s show we are going to discuss some average, everyday investors who used the principles that we discuss here to become millionaire investors.

In today’s show we look at a few ordinary people that were able to generate incredible returns over their lifetimes, in fact, they earned more money than they could spend in their lifetimes. So much so that they ended up giving the majority to charity, much like Warren Buffett intends to do with his wealth.

We are going to discuss some inspirational stories for you tonight, these people that we will discuss have taken a lot of the strategies and ideas that we propose and have put them to good use. We want to give these stories to you as a way of helping inspire you to continue down the path that you have already started.

• Buy and hold can be a very lucrative strategy
• Reinvesting the dividends is a great way to double compound your money
• You don’t to have a large portfolio with tons of stocks
• With patience and diligence you can become wealthy by sticking to your strategy over the long-term
• The strategies that we discuss can be successful even for average investors like ourselves.

Andrew: I am going to quote what is here on the Wall Street Journal because of I love the way they started this, it reminds me of that commercial for Dos Equis, the most interesting man in the world.

It goes: “She lived in a tiny, one bedroom cottage in Lake Forest, Illinois. She bought her clothes at rummage sales, didn’t own a car, and worked most of her life as a secretary for a pharmaceutical company.”

The Wall Street Journal article talked about Grace Groner, and at age 100 she left $7 million to be used for scholarship. The story behind her is exactly like the intro makes it sound. She is just your average joe, what she did she was able to buy a couple of shares of a stock, and she held onto for a very long time.

She turned a small amount of money into millions of dollars. It was the stock Abbot Laboratories, and anybody who’s been following the market is kind of familiar with some of the bigger stories that have happened.

And bigger success stories will know that Abbott for a very long time has been super successful at compounding money and paying out dividends, growing the dividends, and the stock price has just shot up. The earnings, dividends have been shooting up and even recently too, in the past decade.

It’s been one of those companies that are the pinnacle example of American capitalism, really the American dream. They have been able to create all this revenue, jobs, earnings and dividends and it created some wealth.

That wealth has done some great things for a lot of people through Grace. That stocks were called Abbott, it was $60 a share when she bought it. She bought three shares, and this was in 1935.

It turned into $9 million dollars and when they stopped counting it when she died. It was around 2010; we are talking about very long time, 75 years. What she did was just let it grow, the shares they were splitting over time, and she was just reinvesting the dividends.

That small pile of money or small ownership stake in the company was growing over time, getting compounding interest. And seeing the stock price continue to go up as well.

It’s inspiring to me because it shows how there are a couple of different ways that the average person can make some significant wealth for themselves in the stock market.

One way is to do what Grace Groner did, and she got lucky on the stock. Granted she didn’t put much in like I said it was three shares and it was $180 at the time. That is obviously a tiny amount when you compare it to millions of dollars at the end.

We are not all going to hit a home run with buying one stock and getting an Abbott just like Grace did. But we can find if we diversify, and there are a couple of other stories that we will talk about where they’re great examples of this.

You can leverage your bets and have the probabilities work towards you to give yourself the opportunity to be a part of this great machine of capitalism that grows earnings, creates prosperity, and gives great wealth opportunity to people.

You have to know that it is there and you have to put money into it. You can’t just sit on the sidelines, or postulate, think and theorize about it. You just have to go out and do it.

There is a chance for you. I am buying stocks every month, there is a chance that one of those stocks could be a Grace Groner stock, but you’ll never know, and nobody knows what the future holds.

That’s why you try to buy a lot of different stocks, put as much money in the market as you can, and why you want to buy stocks for the long-term. Let them run and reinvest your dividends because you never know when the next stock is going to be one of these.

Dave: Exactly, and I think that is one of the reasons why we are talking about these today is that we want to give people an idea that you don’t have to be Joel Greenblatt, Monish Pabrai, Warren Buffett, or Charlie Munger. You don’t have to be a superstar to be able to do this.

These people that we are talking about tonight are average, everyday people.

The one that I want to talk about next is Ann Scheiber, she is not as well known, and I frankly had not heard of her before Andrew, and I started talking about this episode.

Her story was that she turned a $5000 investment in 1944 during World War 2 into $22 million by the time of her death. She died at 101, and the thing that I think is kind of interesting about this for me is that she started doing this when she was in her 50s.

This is not a story where she started when she was a young person and did it over 75 years. I mean it was 56 years that she did this.

Her story is interesting because she is a little bit like Andrew and me. She was very interested in what she was doing and learning more about it, whereas Grace was kind of lucky with the stock that she made and just left it there for 75 years.

She became quite the educated investor; she read annual reports, she had a portfolio that had over 100 securities in it. She had some of the big names in there like Pepsi, Bristol-Myers, Pfizer, and Coke.

She had some really big name companies in there, but she was very inquisitive. Apparently, she worked for the IRS; she was an auditor for them for about 24 years. She never earned more than $3150 a year, which shows that she didn’t make a lot of money during her lifetime.

This is an average, everyday person and she learned from auditing tax returns that the surest, or easiest way to become rich in America was by accumulating stocks. She figured it out by looking at all the people’s tax returns. What she looked at the stock market was the way to go.

She did her investigation, read tax returns, annual reports, she did her research and was very inquisitive and wanted to learn as much about investing as she possibly could.

But she also has this same kind of trademark. She never sold her stock; she kept reinvesting the dividends when the stock would split she would keep the shares and wouldn’t sell them off.

She held them through the thick and thin, through the bear markets of 70 and 80’s, she held onto her stocks because she knew that she had great companies.

The finale of this has she donated the whole fortune. She spent her whole life accumulating this money, and then she donated to a local college, she never attended herself.

But she wanted to help the school. I think this is a great example of somebody that didn’t come from a finance background, didn’t have that education, and also started a little later in life.

So someone like myself, who is starting a little later life. This shows you that by doing the simple things that Andrew that I talk about.

You know investing in solid, steady companies and reinvesting the dividends, looking for those companies that are going to be growing and have great balance sheets, and great cash flow.

Good, high-quality businesses and a lot of times boring businesses. The companies that we were just talking about aren’t exciting, aren’t sexy, and this is one the things that we have talked many times about.

This is a great way to invest, a lot of times the companies that you get super excited about are not always the best investments. Finding that Abbott Industries, finding that Coca-cola. These are the types of companies that are going to set you up for life.

To me, that is where Value investing and this dividend reinvestment is so crucial to building your wealth over time.

Andrew: Not to throw shade at Grace, she also donated her fortune to the college that she went to.

Don’t let Ann outdo her, they both were a very generous woman as they accumulated all this wealth.

The thing that I love about Ann, and Grace too. The way that the Wall Street Journal made her sound, that they are both very frugal woman. They certainly had the opportunity later in life to splurge, but for whatever reason, they choose frugality as a way of life.

And they were able to utilize that, especially in Ann’s case. Building that portfolio in that the way she did. It gives me hope for the average investor. I have this posted on my website, obviously, this is a podcast, but I post all the show notes down below.

I like to put some numbers to illustrate a few things. You don’t have to be completely frugal necessarily or making six figure income to make significant wealth for yourself in the stock market.

What I did on the website I took the median age in the US, the median income in the US and factored in a 401k match, which is an average match. The median age in the US is around 37; median income is around 51k, the average 401k match is one for one up to 6%.

LEt’s say that person invested 10% of their income and got the 401k match and got average stock market returns with all those factors, don’t have to be an early starter; you don’t have to start when you are in the 20s and make a seven figure income.

We are talking about all those median averages by the time they are 65 they would have 1.1 million in retirement, not only does that show what possible in the stock market, but also just the way that the math of compounding interest works its money that works for you. Instead of you slaving away at a job trying to break the back for the next dollar, these dollars are accumulating like a snowball, picking up speed while they roll along. All you have to do is sit there and continuing to invest, and do the things as Dave said.

Doing things like diversification, dollar cost averaging, long-term plan, reinvesting those dividends, those are the kind of things as an average person really why we like to talk about your path to financial freedom, it is possible. You have to put in the “work” and put your skin in the game, and at some point, you have to take off the training wheels.

I know when I first started I was very hesitant, it took me a couple of months of tracking some stocks with a piece of paper before I felt comfortable enough to put money in, even then I wasn’t putting anything significant in. I bought one share and then finally over time I was able to do more and more.

Once you build this habit and then it becomes it second nature, and you aren’t even thinking about it anymore. These are the kinds of things that you can start to setup to set yourself up for success. And you don’t have to have a fancy degree or cushy job on Wall Street.

These are all the things you can do, and in my opinion, there is, even more, opportunity than there was in the past. If you just think about how abundance and wealth work it’s ever expanding and there is no limit to it, that is what so great about the stock market.

The downside is you could lose all of your money, but that’s capped right there, but the upside is unlimited, there is nobody ceiling that says you’ve made ten times your money you have to stop. That’s the way our world works, in the innovation of technology and economies, have we seen the ceiling on population growth yet? No, we haven’t and every time that these experts say that we are about to run out of food on the planet that’s when innovation occurs.

LIke the agricultural boom that brought technological advances that were able to support the expanding populations. We’ve seen that, and maybe one day we will be on Mars, maybe we will be exploring the solar systems, nobody knows what the limit is with these things and what is so great about it all is that there is so much potential.

Another great way to approach it, obviously you have the Grace thing getting lucky with a stock pick. You have the Ann approach, being more the researcher and you this third character, his name was Ronald Read and what he did was he left $8 million dollars at the end of it.

He invested in a lot of blue-chip stocks, and we did a session about blue-chip stocks and talked about the pros and cons behind them and how they are known for being stable and paying a lot of dividends.

He was the stereotypical dividend investor that we think about when you see people talk about investors who are in retirement, a lot of older investors tend to gravitate towards income. Try to find those more secure stocks and dividend yields.

He didn’t wait until he was necessarily that old, there are some portfolio holdings on here. Wells Fargo was his biggest one when he passed away, Proctor & Gamble, Colgate, Amercian Express. You have these everyday brands and businesses that were just spitting out cash.

He was just an another average person who was able to take advantage of it. He was just an ordinary person, didn’t have a finance degree or an MBA, did the same things the other two investors did. Just held for the long-term, reinvested those dividends, and over time was able to build his portfolio.

There is not a lot of information on exactly which stock he picked and what times, but the principles are all there. We have good diversification, long-term investing, all those types of things. Really to be able to be the type of person who can create and earn millions of dollars in the stock market.

You can see that for all three of these it wasn’t a billion heiress or they didn’t have trust funds, these are all average people with average salaries with middle-class expenses just like the rest of us. They were able to create these huge portfolios, but just think about the income they were getting from these dividends, and you can see how it expands that wealth in a very fast way.

I think it is interesting how it’s not clear about Ronald, but with Grace and Ann, it sounds like they reinvested until death. They never even used any of that income to spend when it got to that point. People like to bemoan about social security, how you can’t trust it and we don’t have pensions anymore all this and that.

If you have a solid portfolio with great dividend stocks and they are paying you these reliable, growing incomes over time that’s the kind of financial freedom that you can’t get anywhere else.

I don’t see you getting by stuffing money under your mattress or buying a lot of gold and burying it in the ground. There is just a special magic about strong dividend stocks and especially a portfolio like Ronald’s with these really strong blue-chip stocks. Many of them are continuing to grow their dividends, and so you have this sweet double compounding, and I love it so much.

I want everybody to be able to experience at some time and hopefully we all can where you’re going to have an income that is growing, a portfolio that is growing and everything is growing at the same time and beating inflation, and providing a lot of comfort and security.

These are a couple of stories that have proven that it is possible to achieve these things. And again to harp back before the possibilities are endless and we don’t know, the internet is a new thing, and we haven’t arguably seen that play out over the very long term as how it affects business.

We don’t know what the next invention is going to be tomorrow and the sky is the limit and maybe not even the sky, beyond space is the limit. And I am excited to see how this will play out and I hope that excitement can kind of bleed into the listener’s conscience and hopefully, they can absorb it and feel excited as well.

Dave: I agree with, those are the things that I get excited about, and this is a big reason why you and I have started this podcast. Why we talk about the things that we talk about is because we want to help people, and we want people to see the light like you, and I have seen the light.

To throw a few numbers at what Andrew was pointing out. Ann when she died her portfolio was paying $750,000 in dividend and interest income annually, we talk about setting yourself up for financial freedom, imagine being able to do absolutely nothing and earn $750,000 a year for absolutely nothing, that is just insane.

Grace’s portfolio was generating $250,000 in annual dividend income a year, Ronald’s was averaging around $240,000 in annual dividend income.

If you have that kind of portfolio and you have done the work throughout your lifetime, you don’t have to worry about social security, and I think that is what Andrew and I are trying to get at is this could be your way to get that retirement that you want. Being able to do the things that you want to do and have the financial freedom to do it.

And that’s why we get so excited about this, and that’s why we wanted to talk about these stories today so we could give our listeners a little bit of inspiration and make them feel like, yes this can be done.

Sometimes there are days, weeks, months where you are lost, but you have to be patient. I think the common theme that runs through all three of these investors is that they all were extremely patient and very diligent in what they were doing and they didn’t give up.

You know my grandmother used to have this saying that I just love, it sums up my view on life and what I need to do to succeed at anything. She used to say that even water is dripping on a stone eventually makes an impression.

Patience is so key to this investing, and it is the path that must be taken to find financial freedom, and you think about the superstars and big guns of investing they all exhibit large amounts of patience. These investors did not get rich over night; Warren Buffett was not a go zillionaire when he was 22 years old, he was broke like the rest of us.

As a matter of fact, I read somewhere that his great wealth, actually didn’t come until he was in his 70s, so he was toiling away for a good 40 or 50 years before he hit it big. The reason why I say that is that I want you to understand that it can be done and you can do, it is possible.