How Anne Scheiber Secretly Made $22 Million
Have you heard of Anne Scheiber? Probably not. Anne Scheiber was a retired IRS auditor who was never promoted and never made more than $4,000 per year (this was the early 1900's). Anne retired in the mid-1940s and had $5,000 saved.
During her 50+ year retirement, she turned that $5,000 into a whopping $22 million. She wasn't a math wiz, and she didn't rely on stockbrokers for advice after getting burned by them in the 1930s. She followed six fundamental principles that anyone can follow:
1. Buying Things She Understood
Eyes glaze over when the words "personal finance, investing, and cash flow" are uttered, and Anne Scheiber was no different. Instead, she studied what people were doing and what they were buying. She saw people refilling medicines and buying soda pop on the corner. So, she looked into Coca-Cola and Pfizer. From there, she started researching these companies to see if they were financially healthy. If they had good earnings and growth potential, she bought them.
2. Buying Shares of Quality Companies
Anne did not get caught up in fads. Over the years, she had brokers tell her to invest in Parisian couture, multiple electric companies, and even portfolio insurance. Anne didn't buy (see principle #1). Instead, she kept pumping more money into investments she knew worked for her. She collected a list of quality companies that she stuck with through the ups and downs of the market.
3. Reinvesting Dividends
Dividends are a distribution of the company's earnings that a shareholder receives if the company performs well. Dividends can either be taken out (cashed) or reinvested (put back into the investment). When Anne received a dividend, instead of taking it out and using it, she increased her earning power by adding it to her investment. What does this do? It compounds on itself and turns earnings into more earnings (read: free money!) This was the true accelerator of her wealth.
4. Using Asset Allocation
Asset Allocation is a strategy that investors use for the sole purpose of protecting their investments against a massive market crash. They diversify the types of holdings they have in their portfolio so that if one kind of investment (company/industry) plummets, i.e. internet crash or if one market booms, they can ride it out. Anne used this to the best of her ability and made sure she always kept 10% of her portfolio cash to buy investments when they were hitting an all-time low.
5. Adding Money to current Investments
Reinvesting dividends is a smart thing to do, but you also have to add money to them too regularly. Adding to your investments on a bi-monthly or monthly basis is extremely important. Investing is not a one and done deal but an activity that should you should participate in frequently. Anne used a portion of her pension every month to add to her growing portfolio. Over time, she was able to use dividends alone as her investing measure.
Time is the most crucial factor in Anne's, and an investor's, success. The longer you hold assets, the longer the investment has to compound (read: more money). So, what we know is that time, instead of the amount of money, is the most critical factor overall between you and wealth.
So, what did Anne do with all of her wealth? She gave it away. She donated her funds to Yeshiva University to create a scholarship for deserving young women. The donation came as an utter shock since her family, nor friends were aware of this type of wealth.
What does this mean to YOU? Anyone can invest and do a fantastic job at investing. It doesn't take a genius to build multi-generational wealth for you and your family. It just takes getting started and maybe a helping hand in understanding it at first.