Yet, one question remains: did Read’s wealth help him enjoy life and could a financial advisor have helped him to better enjoy the fruits of his labor? Friends and family were shocked to learn that Read, a resident of Windham County in Vermont, had left behind an approximately $8 million estate when he died at age 92. In his will, he directed that most of his wealth be given to a local hospital and library.
Read had served in World War II and saw action in North Africa, Italy, and the Pacific. He married in 1960, only to lose his wife 10 years later to cancer. Read was known for being frugal and living a lifestyle that didn’t reflect his substantial wealth. By some reports, he would take extraordinary actions to save money, such as parking a considerable distance from his ultimate destination to avoid paying for parking and then completing his journey on foot.
His modest income, first as a gas station attendant and then as a janitor at J.C. Penney until 1997, provided no indication of the wealth that he was accumulating. Among other lessons, Read’s lifestyle illustrates the financial merits of being frugal.
As a man with a modest salary, living a frugal lifestyle allowed him to invest a portion of his income. Even if he was only able to invest a small amount each week or month, his long-term discipline and slow and steady approach yielded big results. He appears to have benefited from combining his frugal lifestyle with a disciplined buy and hold strategy.
In these days of instant online trading, he still held paper certificates for his stock positions. That meant that he couldn’t trade stocks in haste because he would have to physically deliver the paper certificates to a broker to make a transaction. Read, however, wasn’t interested in active trading. Rather, he held on to his stocks, which were primarily blue chip holdings, for decades.
His holdings consisted of more than 90 positions, which provided his portfolio with diversification across sectors. Some of his holdings included Johnson & Johnson, Dow Chemical, Procter & Gamble, General Electric and other large steady companies.
At the same time, he shunned the latest hot stock tips and avoided investing in technology companies. Rather, he preferred dividend paying corporations, including railroads, banks, utilities, telecoms, and consumer products companies.
He also reinvested his dividends, which helped him grow his wealth. By holding securities for the long term, Read was able to postpone paying capital gains taxes on increases in values of his holdings. He may have even avoid paying capital gains taxes altogether by holding his positions until his death.
Read also benefited from investing over the long haul. As illustrated by the age of his stock certificates, he apparently began investing at an early age. That meant he allocated a portion of his income to his investments over a period of years, so the cumulative amount that he invested was substantial, even though his individual contributions to his savings program may have been modest.
By having a long-term investment horizon, furthermore, he was able to benefit from compounding investment returns and avoid panic selling when markets declined. In most cases, investors who panic sell typically sell their holdings at or near market lows and therefore miss out on future equity gains.
Clearly, Read’s life illustrates the value of being disciplined when it comes to saving and taking a long-term investment approach. Yet one question remains: if Read had worked with an advisor, would he have been more likely to enjoy his wealth?
Perhaps he was content with a frugal lifestyle, so having a higher standard of living may not have mattered. But, he may have taken gratification in gifting a portion of his wealth to charities while he was alive so that he could see the benefits of his donations unfold at the local library and hospital.
Perhaps, an objective financial plan from an advisor may have helped him realize that he could make gifts to charities and still enjoy financial security.