2008-06-13

Success Stories: Buy Stock at Age 10, Hold for 40+ Years, Retire Early


The Motley Fool brings us the story of Russ MacDonald, introducing it with the question:

Who buys stock in a company, holds it for 40 or 50 years through ups and downs, lean paychecks and hearty bonuses, and never parts with one lousy share?

In many ways, MacDonald’s grand success comes from a gift of stock from his grandfather—100 shares of Standard Oil in approximately 1957. So where MacDonald’s success is impressive was his willpower in leaving that stock alone for that span of 40+ years. And he attributes that to the lessons he learned from that same grandfather:

  • Diversify, both in terms of industry sectors and in terms of stocks versus bonds—and bonds are not enough.
  • As long as company fundamentals are solid, hold it until retirement—and reinvest the dividends.
  • Pay yourself first—take your savings out of your take-home pay before paying any expenses.
  • Don’t borrow, except maybe for a mortgage and possibly your first car. As MacDonald’s grandfather put it: "If you do not have enough money coming in to meet your expenses, then you need to get a second job or cut your expenses. Never take on debt to address this situation."

Following these lessons, MacDonald realized 13.05% compounded annual returns on that original Standard Oil stock (now ExxonMobil) over the course of 50 years, still owns the original shares, and now has a diversified portfolio.

And he retired about a decade early.

Does this ring any bells? For me, this reminded me of our story on Roberta Langtry, who bought shares of IBM and held them likely for more than 50 years—and she passed away with a net worth exceeding $3.8 million.

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