Investing

Get Inspired by Sylvia Bloom

There was a news story a couple weeks ago about Sylvia Bloom, a legal secretary from Brooklyn, NY who died at the age of 96 after working at the same law firm for 67 years.  Her 67-year run is notable, but friends and family were astounded to learn shortly after her death that she had amassed more than $8 million dollars on a secretary’s salary.  Sylvia left some money to relatives and friends, but he bulk of her estate was donated to fund scholarships for needy students.

Reading about Sylvia’s story reminded me of another, similar story from a few years ago.  Ronald Read was a janitor who lived frugally and, seemingly, within his means.  He passed away at the age of 92 with a fortune of more than $6 million dollars, that he donated to a library and a hospital in his home state of Vermont.

What Sylvia and Ronald both had in common was smart spending and investing habits.  Neither one had a crystal ball.  What they did have was discipline.

Let’s break down Ronald’s potential investment timeline to see how his discipline paid off in a big way.

1945 - Lets say Ronald started investing in 1945 with $1,000.

Thereafter, he invested $50 a month, every month, until 2014.

1967 - It took Ronald 22 years to grow his investment account to $100,000.  That was in 1967. 

1965 – 1975 - Between 1965 and 1974, Ronald kept adding $50 per month, but the stock market was fickle and his account had ups and downs.  His account stagnated -- it totaled $93k in 1965 and $98k in 1974. 

Many people would have been afraid of the market fluctuation and gotten out during those years.

1989 - Ronald stayed the course.  By 1989, his investment account was worth $1 million.

1999 - Just ten years later, in 1999, it had grown to $5 million.

2002 - When an economic downturn hit, Ronald’s account shrunk to $3 million in 2002.  Many investors were spooked and got of the market at that point.

2007 -  Not Ronald.  He stayed the course and his account doubled, to $6 million, just five years later in 2007.

2008 - Another downturn followed, and he lost $2.2 million.  In 2008, his account had shrunk to $3.8 million.  Ronald didn’t flinch. 

2014 - He kept investing and in 2014, his account was worth $10 million.

I know most of us don’t have 60+ years to invest at this point, but Ronald’s trajectory illustrates the importance of consistency and of staying the course even in down markets.  After the time periods when his portfolio took the biggest hits, the largest gains followed within five years.

Take a look at Ronald’s chart below for some inspiration! 

1945 - $1,000

1965 – $93,000

1967 - $100,000

1974 - $98,000

1989 - $1 million

1999 - $5 million

2002 - $3 million

2007 - $6 million

2008 - $3.8 million

2014 – $10 million

The best investment advice you can follow is this:  start early and stay consistent.  History has proven that even investing small amounts – consistently – and staying the course in down markets, will pay off in the end. Let the market work for you!

So think of Sylvia and Ronald, and get started.  If you want some investment advice, please don’t hesitate to contact me.

Cobb Financial Advisor, Economist React to Stock Market's Fluctuation

Marietta Daily Journal:

By Ricky Leroux

Investors took a hit early Monday as stock prices saw a significant decrease, but in the afternoon, the market began to climb back after the initial decline, an example of why one local financial
advisor said he told his clients to stay the course.

Kenneth Baer, managing partner at east Cobb’s Baer Wealth Management, said Monday morning his firm had gotten a few calls from clients concerned about the market, but he and his staff attempted to reassure them.

“This is just part of the risk of owning stocks,” Baer said. “This is expected to happen. It’s not a matter of if, it’s just a matter of when. You have to understand and accept this risk with a
part of your portfolio if you want to achieve return over time.”

Baer said he’s told clients to “stay the course” and be disciplined in their approach to investment.

“That’s part of what we do here is to act, really, as a coach,” he said. “We’ve got a game plan, and we’re going to stick to that game plan. Now we might make adjustments down the road, but as of
right now, we’re going to make sure that we stay disciplined.”

Days like Monday are an example of why investors need a diversified portfolio, Baer said.

“To me, it’s just a blip on the radar,” he said. “Whether it lasts longer or goes deeper is unknown, but that’s why you don’t have a portfolio that’s 100 percent stocks. You have a portfolio that’s a mixture of stocks and bonds, and bonds have done well over the past few days and are doing well (Monday).”

Roger Tutterow, an economist and professor at Kennesaw State University’s Coles College of Business, said Monday morning’s drop in prices is simply a “market correction” after years of growth, but that doesn’t make it more palatable to see such a decline.

“It’s painful to watch for anyone,” Tutterow said. “We see that this dropped, really you’ve lost well over 10 percent of your value or 10 percent of the prices between the corrections we had late
last week and (Monday morning), but you also have to put things in context. We had a really strong run in the broad market from the summer of 2009 to date. Over long periods of times, these days of
volatility tend to wash out a little.”

Because it’s difficult to outguess the market in terms of timing, Tutterow echoed Baer’s comments, saying investors should keep a diversified portfolio and “ride the market” to benefit from the
recoveries that follow the downturns.

“The big worry I have is that many times when you see these kinds of events, after a lot of the damage is done, people sell their stock, and so they absorb the downturn, but then they’re not in place when there is a recovery,” he said. “In particular, during the market correction of 2008-09, there were a lot of investors who panicked toward the bottom and got out and so they absorbed the losses, but then they were not in place when the market started recovering in the
summer of 2009.”

Tutterow said investors who don’t need cash in the near term should try not to get distracted by these kinds of downturns and instead, focus on the silver linings.
 

“Remember that when prices go down, it means that there is an opportunity to buy,” he said.