While I was reading the psychology of money by Morgan Housel (that I strongly recommend to read), I came across this unbelievable story which looks more like a tale than a genuine story. Most of the time, the famous millionaires stories covered by the media are the lottery ticket winners and not the ones who worked hard or have been steady and consistent with investing.
The Ronald Read investment journey
Ronald’s life is enlightening and inspiring. Ronald Read, a man from the Vermont State, USA was a gas station attendant and then a janitor. For most people in his town, Ronald was known for being the quiet/unassuming man. That doesn’t paint a compelling picture of a finance guru or a Wall Street elite. Nobody therefore suspected that behind this humble appearance was a brilliant investor with a portfolio worth over $8 million. He didn’t go into high-risk private equity investment or day trading, he was just able to control his temper and be consistent/steady on his investments.
The Ronald Read investment approach
Ronald was a buy-and-hold believer. He therefore didn’t try to time the market or pick the next multibagger stocks. His strategy was investing consistently in a set of blue chips stocks which paid off dividends and holding them for the long term.
Three key principles can explain Ronald Read’s high net worth: patience, consistency and steadiness. He consistently invested a portion of his income in well-known/blue chip companies that distributed dividends. These dividends were then reinvested, allowing the magic of compounding to work for himself. We can see here below a sneak peek of his 10 biggest positions as of his death as stated by The Wall Street Journal :
Lessons from Ronald Read’s Journey
The first lesson from this story is to start at the earliest possible time. Ronald didn’t indeed wait for the right moment to invest (no market timing), he started early and remained consistent. Besides that, the income generated by some dividend stocks can be reinvested to earn even more. Repeated over time, can lead to exponential growth like Read’s portfolio or the Buffett one.
The second lesson is to stay away from bad debt as much as possible. By keeping your debt levels low, you have more to invest which will accelerate your wealth accumulation.
The third lesson is do not panic ! Just like humans, markets have their ups and downs. Ronald didn’t fall into the panic sell trap and held his positions, believing in the long term growth potential.
The fourth lesson is that you do not need to turn yourself into a buy-side equity analyst or a stock market expert. You can simply choose a low fees index fund i.e. ETF, and let time work for you.
The last lesson is stock investing is a waiting game. The stock market can be volatile in the short term, but over the long run, the market has performed well (based on past stock market performances).
In a world where we seek for “get rich quickly” schemes, Ronald Read Story proves that shortcuts to wealth are a myth. All you need is consistency, patience and belief in the power of passive investing.
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