This Sweet Old Lady Turned $180 into $7 Million in One Move
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She looks like the kind of lady who has a bowl full of those strawberry candies waiting for you in her parlor. Even has almost the same hairstyle my grandma did (miss you, Mee-Maw!).
But you’d never guess this sweet old lady made $7 million in the stock market by making just one smart move early in her life…
Ah, but now you can see it. All in that sly, knowing smile…
This woman’s name is Grace Groner. And her story has been told countless times by financial writers just like me to demonstrate the power of investing in quality, capital-efficient, dividend-paying stocks and reinvesting those dividends over the long haul.
I’m going to tell you her story today, shining a light on this most powerful of the simple, stress-free investment strategies.
Grace proved that this strategy works during up markets and down markets. Periods of war and peace. Major societal change, natural disasters, and everything in between. And it works just as well today as it did almost 100 years ago.
Let me show you why…
How Grace Groner Made $7 Million Doing (Almost) NothingWhen Grace was 26 years old in 1935, she purchased three shares of $60 each in the company she worked at, Abbott Laboratories (ABT).
She then did… nothing. She didn’t invest another penny or, as far as anyone knows, trade any other stocks.
But she didn’t need to. Because during the time she worked at Abbott – for 43 years until she retired – her three shares had split into several dozen that were worth much, much more than she paid for them.
She held firm. The shares kept splitting… eventually growing into 1,152 shares after ABT’s final stock split in 1998.
That’s a whole lot of dough for doing nothing. And that alone would be an impressive trade. But it’s not enough to make $7 million. So she must have done something else, right?
Well, it was more about what Grace didn’t do. You see, every dividend that Abbott Laboratories issued, she plugged right back into her position. She never took the cash.
This simple decision resulted in those 1,152 shares she purchased ballooning into over 100,000 shares worth over $7 million by the time she passed away in 2010. And all $7 million of Grace’s fortune went to students of the local college in Lake Forest, Illinois.
Grace was a class act in more ways than one. And she shows the power of investing in quality dividend-paying companies for the long haul, never straying from the path.
Just how powerful is this technique? Let’s look at the data…
A Dividend Time MachineLet’s say you’re 25 years old. You’re smarter than most other 25-year-olds and want to start a position in a quality dividend payer and promise yourself you’ll never sell until you retire at 67.
We’ll use Walmart (WMT) as an example, as it’s one of my favorite stock holdings and one contributing editor Lucas Downey recently highlighted.
Walmart is trading at $167.76 as I write on Monday afternoon. You’re 25, so you don’t have a ton of cash and only buy five shares. That’s an initial investment of $838.80. That’s also all the WMT stock you’re ever going to buy.
Walmart has raised its quarterly dividend by one cent every year for the last 10 years, so we can conservatively assume a 1.5% increase in dividend over the next 42 years for the purpose of this exercise.
WMT has also gained about 11% each year over the past 10 years, so we’ll assume it keeps rising at that rate, as well.
Okay, you’re set up. Let’s jump into a time machine and meet you in 42 years…
Hello! You’re 67 and it’s time to retire. Hope it’s been a great life. Time to check in on Walmart…
Hey, your WMT shares are worth almost $67,000! That’s a 7,895% return doing… nothing at all.
Not to mention, your dividends earn you $1,521 in income every single year.
That’s not bad. It’s not life-changing, but it’s not bad.
Wait a minute… did you forget something? Ah, right, you did. Good thing we have a time machine.
Let’s go back in time and make sure you wisely choose to reinvest your dividends in WMT back when you’re 25. What happens then?
Your investment more than doubles to over $138,000… and so does your dividend income, at nearly $3,135 per year.
That works out to a 16,367% gain on your $838 investment.
This is the power of Grace Groner’s one-move technique. Buy great dividend stocks… hold them forever… and keep reinvesting those dividends. By the time you’re retired, you can stop the dividend reinvestments and have a payout that moves the needle on your yearly income.
Do this with a few other high-quality stocks – like Lucas pointed to here – and you’ve got a dividend portfolio that might even rival your Social Security check. (Or, if you’re fortunate or frugal enough, you can be like Grace and let the dividend compounding go vertical to build a huge legacy for your loved ones.)
And if you think this advice only applies to 25-year-olds, it absolutely doesn’t.
It’s never too late to start buying up shares of quality dividend-paying companies and making those positions as big as your risk tolerance allows. It’s a great way to supplement a fixed income in retirement.
And of course, we’ll keep sniffing out and sharing these ideas with you right here in TradeSmith Daily.
To your health and wealth,
Editor, TradeSmith Daily