Occasionally, I pull up the web traffic data for the blog to see which search terms are leading people here. It turns out that a bunch of you stumble onto the blog each month looking for “dividend millionaires”. Now, I confess I don’t know exactly what a dividend millionaire is, though it sounds pretty cool. Anyway, searching for that term leads people to the story of Ronald Read. This was the humble janitor and handyman who built a fortune through long-term investing. Since Ronald’s story seems to be so popular, let’s check out 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 or success. Anne never made more than $4,000 per year during the course of her working life as an IRS auditor. Despite being a diligent worker, she never received a promotion. It was 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.
A $22m Portfolio
When Anne retired, she was given a $5,000 lump sum. Her annual pension was worth around $3,100. Although she was neither born into great wealth, nor generated 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 before passing away at the age of 101 in 1995.
The second thing that Anne had on her side was an extremely high savings rate. It was as high as 80% of her income according to Scheiber’s attorney. The fact that she never married or had children would have helped enormously in that respect. So too would her frugality (which reportedly included wearing the same clothes since the mid-1940s), and a rent-stabilized apartment which she rarely left.
Anne had been burned by stock brokers in the 1930s, an experience which turned her towards self-directed long-term investing in blue chip stocks and bonds. Armed with $5,000 in savings and her $3,100 annual pension, Anne started down the road of buy-and-hold investing. She would go on to accumulate positions in over one hundred stocks over the following fifty years. 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 $22m. (I make that equivalent to around $35m 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.
Secrets Of Success
So what was the secret to her success? As mentioned above, the biggest factor at play was almost definitely Anne’s time in the market. It seems likely that Anne held stocks and was receiving dividends whilst she was still working in the mid-1930s. Given that she lived until 1995, we are talking somewhere in the region of sixty years’ worth of compounding. 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, then she would have died in the mid-1960s at the perfectly ‘normal’ age of 72. We would never have heard her story had she done so.
To get a feel for how important the time element is, just consider the initial $5,000 lump sum she received upon retirement. Had that been left for 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 have 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. As they say, time is money.
The second secret to her success was her extremely unconventional lifestyle. Whilst remaining unmarried and childless is not that uncommon, it did help Anne achieve her 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 that savings rate went as high as 80%. All that cash was then put into blue chip stocks and bonds and left to compound away.
Thirdly, it appears that Anne was the consummate buy-and-hold investor. Many of her investments were in the list of best performing stocks of the last fifty years. Those names 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 generated high quality profits. In addition, she seems to have practiced sensible diversification in her portfolio. Although most of the focus understandably falls on equities, Anne’s portfolio also contained a healthy stash of bonds and cash. This would have served her well when the equity bear markets came around.
Finally, and perhaps most importantly 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 have 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 was an eccentric life, but she left behind a huge legacy for someone who worked a 9-to-5 without ever getting a promotion.
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