Hetty Green has got to make the top ten list of eccentric investors. She was one of the most successful investors of all time, accumulating a fortune worth billions in today's dollars and becoming America's richest woman.

But she was a legendary miser and had a ferocious reputation. Her father's motto was "never owe anything to anyone, including a kindness," and successful application of that philosophy led to Hetty getting the "Witch of Wall Street" nickname.

Millions of dollars, penny by penny
Hetty Green's recipe for wealth was a combination of extreme frugalness, shrewd investments, and a huge $5 million inheritance that she received at the age of 31 in 1865. At the time, women were thought to be incapable of managing money, so such assets would typically be held in a trust managed by a man. In a 19th century display of Foolishness, Hetty struggled against the establishment and eventually was able to gain control over her inheritance.

Once she had the cash, she didn't spend it. In fact, it was almost impossible to pry a single penny from her grasp. Hetty would purchase a newspaper for 2 cents, then resell it after she read it. On her birthday, she didn't want to waste the candles on her cake by lighting them. When her guests finally persuaded her, she quickly blew them out, so that she could wash them and take them back to the store the next day for a refund.

Hetty's attire was distinctive, if not fashionable. The cheapest and longest-lasting footwear she could find were fisherman's boots, so she clomped around in rubber boots while conducting business in prominent investment banks. Every day, she wore the same long black dress, only buying new clothes when her outfit became threadbare. And her clothes weren't really even clean. Hetty would not wash her bedding or underclothes, or even her entire dress. She would only wash the hem of the dress, where it dragged on the ground, since she could do that for less than it would cost to clean the entire thing.

She worked, surrounded by most of her possessions and securities, inside a vault in the Chemical National Bank, now a subsidiary of J.P. Morgan Chase (NYSE:JPM). The bank manager ignored the boots and allowed her to use the vault as her "office" for free.

Probably the most extreme example of her miserliness was when Hetty's son, Ned, injured his leg in a sledding accident. She didn't want to pay for a doctor, so she dressed Ned in rags and took him to a charitable clinic. Unfortunately, the doctor recognized Hetty and demanded $150 for the treatment. She refused and attempted to take care of Ned herself. It didn't work out so well. Ned developed gangrene and the leg had to be amputated. At the time, Hetty was worth about $50 million.

Hetty's investment strategy
Unsurprisingly, Hetty was a value investor. As she said, "There is no secret in fortune making. All you have to do is buy cheap and sell dear, act with thrift and shrewdness and be persistent." She invested in a variety of assets, including stocks, bonds, railroads, and mortgages, but her specialty was buying when everyone else was panicking. After all, this was a time when the stock market was not nearly as regulated as it is now. Margin requirements were minimal -- people could get huge amounts of leverage by buying stocks almost entirely with borrowed money.

So, when the markets fell, there were great opportunities. Hetty did not borrow, she maintained significant liquid assets, and she knew the value of stocks and bonds. As a result, she had both the means and knowledge to profit when a crisis arose. For instance, days after the end of the Civil War, she bought Civil War bonds that everyone thought were worthless, soon doubling her net worth. Later, during the Panic of 1907, when a string of banks failed and the stock market crashed, Hetty was buying with both hands.

Hetty liked real assets, and was neither speculative, nor ultra-conservative. Union Pacific (NYSE:UNP) and Burlington Northern Santa Fe (NYSE:BNI) are relatively slow-growth, cyclical companies today. But in the second half of the1800s, the first transcontinental railways were being built. The railroads that Hetty owned were in an exciting growth industry. If she were alive today, I wouldn't expect her to own speculative Internet stocks, but it wouldn't surprise me if she bought solid, reasonably priced tech stocks, like Microsoft (NASDAQ:MSFT) or Inside Value recommendation Intuit (NASDAQ:INTU). Her investments in railroads showed that she liked growth, as long as she could purchase it at the right price.

Some lessons
One lesson from Hetty is that you can get rich if you never spend a dime. Unfortunately, while this sounds great in theory, I've discovered that when I refuse to change my clothes, rarely wash my sheets, and have a rank odor, it tends to make me sickly and drive people away. But there are other ways to save. You could avoid your morning trip to Starbucks (NASDAQ:SBUX); many people seem to mention this as a great way to free up money for investing. (Don't feel too sorry for Starbucks. From its growth, it's apparent that while everyone gives the advice, people seldom follow it.)

A subtler lesson is that long-term compounding works. The heiress transformed $5 million into more than $100 million over the course of 51 years. That seems like a great investing. But, if we assume she generally didn't spend her principal and rarely paid taxes, then she really only made about 6% (or perhaps a tad more) a year. This makes sense, considering that she held a lot of cash and bonds. But it doesn't compare well with the stock market's long-term returns or the even higher returns investors can achieve with value stocks. If she had made 10% a year, she would have died with about $650 million rather than $100 million. If she had made the 20% returns that some value investors like Buffett have achieved, she would have been worth almost $55 billion.

A third lesson is that investing opportunistically in undervalued securities can lead to great profits. Instead of trying to make a quick buck by flipping stocks, Hetty recognized that buying bargains was both the least risky and most profitable way to make money. Her methods seem similar to what the Inside Value team does (other than the dirty clothes). Research a bunch of companies until you have a good idea of their intrinsic value. Wait patiently until a company's stock is priced significantly under fair value as a result of neglect or panic, then greedily purchase the bargain. Hold the stock until it appreciates to fair value or beyond, and exit with a large profit. Repeat until wealthy.

What's next?
If, like Hetty, dirt cheap value stocks appeal to you, you should consider joining the Inside Value community. Not only will you receive the Inside Value newsletter, but you will also be able to chat with hundreds of other like-minded investors on the Inside Value message boards. Right now, we're offering 30-day trials at a price that even Hetty Green would appreciate: free. Click here to give it a try.

Richard Gibbons finds it fitting, somehow, that Hetty's two children gave away most of their inheritance to charities. Richard does not have a position in any securities mentioned in this article. To get hygienic tips on living below your means, check out the Motley Fool message boards.