Ronald Read spent the better part of his life working as a mechanic and a part-time janitor at J.C. Penney—a far cry from the office jobs that normally make people millionaires over time.
Yet, following his death a few years ago, his estate has made its first distributions of $4.8 million and $1.2 million to the Brattleboro Memorial Hospital and the Brooks Library, respectively. Ronald Read, an everyday service worker whose khaki denim jacket (that he wore regularly) was barely held together by a safety pin, had amassed an estate of over $8 million.
How did he do it?
Saving was a big part of his success. Mr. Read wasn’t a flashy guy—he often wore the same flannel shirt and didn’t care much for material possessions. He packed his own lunch to work every day and pinched pennies wherever he could. Mr. Read wouldn’t even park close to his attorney’s office, because it meant having to pay for parking!
So that’s tip #1: save, save, and save some more.
Indeed, Mr. Read’s frugality made a world of difference. But it was really his investment strategy that made the biggest difference: he was a big fan of dividend-producing stocks. When Mr. Read’s attorney went to retrieve his estate documents from his safety deposit box, she found a “wealth” of stock certificates—worth over $8 million. When it was all said-and-done, Ronald Read had built a mini-empire with a safety deposit box and an investment portfolio heavy on dividend-paying stocks.
A Quick Note on Some of the Benefits of Dividend-Paying Stocks
In addition to producing a source of income through cash payments, dividend-paying stocks have also demonstrated the ability to produce fairly robust long-term growth rates.
Federated Investors conducted a research study using data from Morningstar, and found that from July 1, 1996 – June 30, 2013, a high dividend domestic equity strategy generated an average annualized total return of 10%, which is 278 basis points higher than the 7.22% annualized return realized by the S&P 500 over the same time frame.
One of the cited reasons for outperformance was that since dividend-paying stocks pay a sizable portion of their returns in cash, they may help cushion a portfolio’s downside when the broader market is posting losses.
Dividend stocks, therefore, offer the investor three potential benefits:
All pretty great benefits, in my opinion!
Dividends Aren’t the Only Solution
In reality, Mr. Read could have been probably attained the same fortune had he created a diversified portfolio of quality stocks – they didn’t all have to necessarily be dividend payers.
If I could adjust Mr. Read’s strategy into three tips for investing success, here’s what I think it would look like:
In my view, investing success does not have to be much more complicated than that.
So, the natural next question is: how do you build a diversified portfolio (#3 above) that withstands the test of time?
Tickeron has a solution.
If the millionaire janitor has inspired you to save and invest more, you can use tools on tickeron.com to help you push forward on the right foot. The best way to get started is to use Tickeron’s Artificial Intelligence (at no charge) to evaluate your current investment portfolio. The A.I. will tell you how well diversified your portfolio is now, and what it thinks you should do to improve your overall diversification. That's your starting point.
From there, the A.I. can help you stay diversified over time by keeping an eye on the portfolio and alerting you when it's time for changes. With savings habits like Mr. Read's and a well-diversified portfolio, I think anyone can achieve investment success.