How to Turn $5000 into $22 million? Lessons From One Successful Individual Investor

Mar 12, 2013: We can learn some basic tenets of investing from Anne Scheiber, who was an auditor at IRS and went on to become a multi-millionaire. Scheiber had a law degree, but because she was a woman, she believed that she had been thwarted in her desire to move up to a better job position at the IRS. She decided to get back by saving until she had a fortune and never give a penny of her profits to the IRS. She did this simply by never selling her shares, by creating her own personal IRA, in effect, but without the up-front tax deduction[1].

Anne retired in mid 1940's. Over the next 50+ years, from her tiny rent controlled New York apartment, using a $5000 lump sum that she had saved and a pension of roughly $3150, she built a portfolio that turned into a fortune. Anne lived quietly and simply. She ate at home, and shopped for discounts at local stores with coupons. To onlookers she might have seemed like a Big Apple pensioner, living on a small fixed income[2].

But at the time of her death in 1995, when she was 101 years old, her investments' net worth exceeded $22,000,000[3]. Her portfolio comprised of investments in companies like Allegheny Power System, Allied Signa, Bristol-Myers Squibb, Coca Cola, Exxon, Lowes, Merck, Pepsi, Rockwell International,and Unocal[4]. She left the funds to Yeshiva University for a scholarship designed to help support deserving women.

Few investors, including the best-known professionals of our age, have matched her record. Her return works out to 22.1%, which is above the performance of the venerable John Neff (13.9%), better than pioneering securities analyst Benjamin Graham (17.4%), and just below Warren Buffet (22.7%) and Fidelity Magellan's Peter Lynch (29.2%)[3]. However some feel that Anne Scheiber's returns were not 22.1% since her net worth was not $22 million at the time of her death[4].

But what's more important here is to learn the keys for successfully building a million dollar portfolio. She definitely proved that small investors can be millionaires too[5]. Here are some concepts that we can learn from this ordinary woman who achieved extraordinary wealth.

1. Keep yourselves informed and do your own research.

2. Invest in leading brands i.e. excellent companies.

3. Favor firms with growing earnings.

4. Invest in small bites i.e. add to your portfolio regularly.

5. Minimize risks with asset allocation and save with tax-exempt bonds.

6. Reinvest your dividends.

7. Hold on to your investments to allow your money to compound uninterrupted over a long time.

8. Give back to society.

In addition to the above principles[6], Anne also inspires us with the fact that no matter what our age is we can start building a nest egg with regular investments in a disciplined manner. Eventually we will have a healthy nest egg due to the magic power of compounding. Anne proved it by investing in small bites while living on a pension.

With a portfolio like Anne's, we'd have perhaps lived a little less frugally than she did :). But that's our opinion and we respect each person's set of choices in life. We look forward to your feedback on Anne's life and its lessons.

Reference(s):

1. Glassman, James K: "Can Americans Handle Their Own Retirement Investing Choices?"
2. Tag Blog: "The Saga of Anne Scheiber."
3. Lalli, Frank, (Money-Jan'96): "10 Secrets From The Investor Who Turned $5,000 into $22 Million."
4. VisOracle: "Anne Scheiber"
5. Farrell, Paul B: "Expert investing on the net."
6. Kennon, J: "Lessons from a secret multi-millionaire."

Image Source(s): iStockPhoto

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