Once in a while I like to pull up the web traffic data for the blog and see which specific search terms are leading people to the site. It turns out that a bunch of you are stumbling onto the blog each month looking for “dividend millionaires”. Now I confess I don’t know exactly what a dividend millionaire is, although it sounds pretty cool. Anyway searching for that term leads people to the story of Ronald Read; a humble janitor and handy man who built a fortune through long-term investing. Since Ronald’s story seems to be so popular let’s have a look at another one, that of Anne Scheiber.
Born in 1893 in Brooklyn, New York, Anne lived an extremely unconventional lifestyle. By all accounts she was extremely reclusive and obsessively frugal. She rarely left her rent-controlled studio apartment and the only two people she seems to have known were her attorney and her broker at Merrill Lynch.
Just as with the cases of Ronald Read, Margaret Dickson and Paul Navone the best aspect of this story is the lack of any visible sign of wealth and success. During the course of her working life as an IRS auditor Anne never made more than $4,000 per year. Despite being a diligent worker she never received a promotion; an injustice that likely resulted from being both a woman and a Jew at a time when workplace discrimination against both would have been rife.
When Anne retired she was given a $5,000 lump sum and her annual pension was worth around $3,100. Although she was neither born into great wealth, nor did she generate it during her working life, Anne did possess two very important things. Firstly, she had an awful lot of time on her side. Despite retiring from the IRS in 1944 at the age of fifty-one Anne would go on to live for another fifty years, passing away at the age of 101 in 1995.
The second thing Anne had on her side was an extremely high savings rate. According to Scheiber’s attorney it was as high as 80% of her income. The fact that she never married or had children would have helped enormously in that respect, as would her frugality (which reportedly included wearing the same clothes since the mid-1940s) and a rent stabilized apartment which she rarely left.
In the 1930s Anne had been burned by stock brokers, an experience which turned her towards self directed long-term investing in blue chip stocks as well as bonds. Armed with $5,000 in savings and her $3,100 annual pension Anne started down the road of buy-and-hold investing. Over the following fifty years she would go on to accumulate positions in over one hundred stocks. Her big winners included the likes of Coca-Cola, PepsiCo, Pfizer, Abbott Labs, Colgate-Palmolive and Schering-Plough.
By the time of her death in 1995 Anne’s portfolio had grown to a value of around $22 million – equivalent to around $35 million in today’s inflation adjusted terms. She left the entire fortune to Yeshiva University’s Stern College for Women and the Albert Einstein College of Medicine. Anne Scheiber’s gift would enable new generations of bright young Jewish women to get a head start in life in a way that she never could.
So what was the secret to her success? As mentioned the biggest factor at play is almost definitely Anne’s time in the market. The romantic version of the story begins with the $5,000 lump sum received at the start of her retirement, however it seems likely that Anne also held stocks and was receiving dividends whilst she was still working in the mid-to-late 1930s. Given that she lived until 1995 that means we’re talking about somewhere in the region of sixty years’ worth of uninterrupted compounding.
Now, it goes without saying but a woman born in the 1890s living past one hundred years old was an exceptionally rare thing. Had Anne only lived an additional twenty years after retirement she would have died in the mid-1960s at the perfectly ‘normal’ age of 72. We would probably never have heard her story had she done so.
To get a better feel for how important the time element is let’s consider her initial $5,000 lump sum received upon retirement. Had that been left for just twenty years to compound at a rate of 10% per annum (this is just an example figure not Anne’s annual total return) then it would’ve been worth approximately $33,000 at the end of the period. What if you double the length of the time to forty years? Well, in that case the total return more than quadruples to $140,000. If you then add just ten more years – extending the total “time in the market” to fifty years – then it quadruples again to just shy of $600,000. Time is money as they say.
The second secret to her success was her extremely unconventional lifestyle. Whilst remaining unmarried and childless is of course not uncommon it did help Anne achieve a freakishly high savings rate. Add in numerous eccentricities such as never buying new furniture and wearing the same clothes for nigh on half a century and it allowed her to hit a rate of something like 80% according to her attorney. All that cash was then put into blue chip stocks and bonds and left to compound away.
Thirdly it appears that Anne was a consummate buy-and-hold investor. Many of her investments were in the list of best performing stocks of the last fifty years and would have generated returns of around 15% per annum during her investing lifetime. These were mainly big healthcare companies and consumer defensives; stocks that Anne knew well and which have consistently generated extremely high quality profits. In addition she seems to have practiced sensible diversification in her portfolio. Although most of the focus will obviously be on the stocks and shares portion of her portfolio Anne also contained a healthy allocation of bonds and cash. When the equity bear markets came around this would have served her well.
Finally, and perhaps most important of all, she always reinvested dividends without fail. You can probably link that point to her almost obsessive levels of frugality as well. After all most of us would’ve started consuming our dividends at some point! But that wasn’t Anne Scheiber. Almost every action that she took post-retirement was about increasing her ownership of productive cash generating assets. It’s an eccentric life to lead – some might even say a little sad – but she leaves behind a huge legacy for someone who worked a 9-to-5 without ever getting a promotion.