Millionaires

valoren wrote: »

Millionaires.

Imagine a husband and wife, with a baby on the way, who, 40 years ago, at age 30 came into a small inheritance of $2500.
They decided to invest this along with an additional $2500 of their own savings.

They like the look of Coca Cola. It's been around for 90 years they reckon and has a straightforward, understandable business, they sold soft drinks.
So they invested the 5k at $82.25 per share for 60 shares in the company in October 1976.
They received a small dividend every 3 months but it was so small that they kept it aside.
Eventually it became a bit larger and on the advice of a business friend, they instructed the stockbroker to re-invest the dividend instead.
The dividend would be more shares, which themselves provided a dividend. Money making money.
The investment does well for a few years, and the wife decides to invest an additional $2,500 every 5 years into Coke stock without fail.

Feeling a bit more confident, the husband decides to invest his yearly savings into other enterprises.
With a banking background, with a firm grasp on the industry, through the 80s/90s/00s, he dollar cost averages his savings over time into Enron, WorldCom and Lehman Brothers although he also invests in Royal Dutch Shell, Johnson & Johnson and Colgate Toothpaste as well along the way.
With the coke investment chugging along, he wants to 'diversify'. These investments begin making great returns, so he decides to focus on other industries and plans to let them compound, just like Coke.

Today, 40 years later, they are retired.
They never touched the investment and went about living their lives, while saving and investing.
Not through several market panics where the share price crashed, oil crises, global terrorism, gulf wars, booms and busts.

After a total investment amount of $20,000 over 40 years, they would now hold 39,629 shares in Coca Cola through stock splits and reinvested dividends. The value of the shares would be $1,651,000.

Their dividends will amount to gross $12,820. More than double than they invested initially way back when (5k).
Every 3 months.
The yearly dividend will be $51,280.

As they have cleared their mortgage on their modest 3 bed semi, they are Millionaires through nothing but budgeting, forward planning, discipline and patience.

But you wouldn't think it to look at them. No Mercs or Rolex watches or status symbols. They can well afford them but it's not their thing.
Note: The Enron, WorldCom and Lehman Brothers investments are worth $0. The annual dividend will be $0.

With the additional savings and profitable investments they made through their lives they don't worry about money.
They have told their daughter that the shares will be her's when they pass away.
She is shrewd enough to understand that selling the shares will incur taxes etc.
The Coke dividend alone would currently pay for her mortgage and her monthly expenses.

She knows that she may invest herself in her generations WorldComs but she knows that Coke is the golden goose and it will never be touched as the board of directors raise the cash dividend modestly every year.
That snowball will be allowed to roll down the hill, reinvested for more shares and more and more dividends.

She figures that when she herself passes away her own children's money worries will be non-existent, and their children etc etc.
Intergenerational wealth which began with a modest investment way back in 1976.

You would never bregrudge anyone who had an investing success story like that.