A community in Vermont was surprised in 2015 when Ronald Read, a retired gas station attendant and janitor, turned out to have been worth nearly $8 million upon his death -- and left about $5 million to his local library and hospital.
How Read amassed such a vast sum may or may not surprise you, but you probably will be surprised that someone of modest means, who didn't have a fancy job, could grow so wealthy. You may also be happy to learn that the strategies he employed are ones we can use, too.
Ronald Read's long life -- he lived to 92 -- saw him doing many things that many financial experts recommend. Here's a closer look at how he got so rich.
He was patient
For starters, he was patient. Read's wealth grew over many decades, via the power of compounding. Here's a simplified example, to help you appreciate the power of time and patience: Imagine that he was earning an annual growth rate of 10%. When he had amassed, say, $500,000, 10% of that would be a $50,000 gain for the year, taking him to $550,000. When he hit $1 million, though, a 10% gain would get him $100,000, taking him to $1.1 million. At the $3 million point, a 10% gain would be worth a whopping $300,000, and at $5 million, it would generate a whole half-million dollars.
He lived below his means
Ronald Read lived below his means -- way below them. He drove an old, inexpensive car, and kept his old coat together with safety pins. He didn't dine out frequently, except for inexpensive breakfasts at his local hospital's café.
He looked more down-on-his-luck than wealthy, leading one neighbor to knit him a hat and another to pay for his meal. When visiting his lawyer, it's reported that he would park fairly far away and take a longer walk than necessary to avoid having to put change in a parking meter.
His recreation wasn't costly, either. Instead of paying for time on golf courses or travel, Mr. Read enjoyed chopping wood -- which also saved him some money for heating. He also avoided buying too many books by patronizing the local library.
You don't necessarily have to live as far below your means as Mr. Read did. You can simply be frugal and spend a good sum less than you bring in -- and in the process, build meaningful wealth. But if you choose to employ some extreme frugality, you can really grow your money even more powerfully.
He invested in stocks
Next, Mr. Read invested in stocks. That's rather important, because the stock market is one of the most powerful ways to build wealth. Check out the long-term growth rate for stocks vs. some common alternatives in the table below. It reflects returns from 1871 to 2012 compiled by Wharton Business School professor Jeremy Siegel:
Annualized Nominal Return
Mr. Read also invested effectively. His portfolio featured many familiar blue-chip names, such as Procter & Gamble, JPMorgan Chase, General Electric, and Dow -- companies he'd stayed invested in for many years.
He also held significant positions in companies such as AT&T, J.M. Smucker, CVS Health, Bank of America, General Motors, Deere, and Johnson & Johnson.
You could study and select individual stocks on your own, as Read did, but you don't have to go that far. You can do quite well over the long haul by just sticking with low-fee, broad-market index funds, such as one that tracks the S&P 500 index of 500 of America's biggest companies. Index funds are no kind of lame compromise -- they tend to handily outperform most mutual funds actively managed by financial professionals: As of the middle of 2019, over the past 15 years, the S&P 500 outperformed fully 90% of large-cap stock mutual funds.
Good index-fund candidates for your portfolio include the SPDR S&P 500 ETF (SPY), Vanguard Total Stock Market ETF (VTI), and Vanguard Total World Stock ETF (VT).
He invested in dividend-paying stocks
You may have noticed that the blue-chip companies above generally pay dividends. Keeping a good portion of your assets in dividend-paying stocks tends to lead to better results than avoiding dividend payers, as various studies have shown.
For example, Researchers Eugene Fama and Kenneth French, studying data from 1927 to 2014, found that dividend payers outperformed non-payers, averaging 10.4% annual growth vs. 8.5%. That's a meaningful difference.
Imagine Read's portfolio. If, when it was worth $2 million, its overall average dividend yield was 3.5%, he would be collecting $70,000 from those holdings in a single year -- that's money he could redeploy into more growing shares of stock. When the portfolio was worth $5 million, an overall 3.5% yield would deliver $175,000. Better still, that income would be on top of stock price appreciation, and dividend payouts tend to be increased over time. Dividends are powerful.
He aimed to buy and hold
Mr. Read also benefited because he was aiming to buy and hold, for the long term. That doesn't necessarily mean that one never sells -- it's good to keep up with your holdings and to sell when they are no longer promising. But you should aim to buy and hold, ideally for many years.
He didn't retire early
If you're aiming to be a multimillionaire (or just a millionaire), you might want to give up dreams of retiring early. Read was able to amass nearly $8 million in part by working a lot, even if he didn't earn high salaries.
That steady income -- he retired at age 76 -- meant that he always had extra cash to invest. He actually did retire from his gas-station-attendant job at one point, only to go back to work later, as a janitor. Many people find that retirement is a bit more boring than expected, and they miss the socializing and structure that a regular job offers.
He kept learning
Mr. Read also was a believer in learning. He made good use of his local library, and read the Wall Street Journal regularly. The more you know about investing (and beyond), the better investor you'll likely be.
He didn't do everything perfectly
Finally, note that just like all of us, Ronald Read didn't do everything perfectly. Some of his investments went south, or even belly up -- Lehman Brothers is one example. Also, he held about 95 or more stocks when he died -- that's a lot to keep up with and is far more than a more manageable 10 to 20 stocks.
After all, it's generally best to focus your money on your best ideas, not spread it far and wide. If you're not going to follow your holdings closely and don't have great confidence, holding more can be safer, and favoring index funds can be better still.
Overall, though, know that Mr. Read's example is one we all can follow to some degree, and it can help us amass greater wealth. If you can sock away $500 per month for 50 years and you average annual growth of 8%, you can amass more than $3.5 million -- which is pretty good!