Investors, meet Anne Scheiber.
Scheiber started investing in her 50s after she retired as an auditor in the United States Internal Revenue Service in 1944. When she retired, she had only US$5,000 as savings and had never earned a salary of more than US$4,000 per year. However, when she passed away at the age of 101, she had managed to amass a mind-boggling sum of US$22 million.
The secret behind her success was to invest for the long-term, in companies that pay solid dividends and with strong brands. Scheiber focused her attention on strong businesses which had the opportunity to grow their earnings and hence pay higher dividends over time. Remarkably, her investing period encompassed numerous economic booms and busts, and episodes of war, such as the 1972-1974 bear market, the 1987 Black Monday crash, the Korean War, the Vietnam War, and the first Gulf War.
Scheiber’s discipline in the stock market eventually paid off despite the many ups-and-down she experienced. She was investing for the long-term. Not one week, one month, or one year – but decades.
The long-term mentality
Warren Buffett, one of the best investors in the world today, once famously said that his favourite holding period is forever. In his 1988 shareholders’ letter, he mentioned:
“In fact, when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever. We are just the opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang on to businesses that disappoint. Peter Lynch aptly likens such behavior to cutting the flowers and watering the weeds.”
David Gardner, one of the co-founders of The Motley Fool, once revealed the secret behind investing success. In an article of his, he told the world (emphases are mine):
“Find good companies and hold those positions tenaciously over time to yield multiples upon multiples of your original investment.”
The key here is to find outstanding companies to hold onto for decades with conviction, no matter what the stock market does. By holding onto the best businesses for the long-term, we can take advantage of the beauty of compounding.
The Foolish bottom line
As the saying goes, Rome wasn’t built in a day.
The key to being successful in the stock market is to buy great business and hold onto them tenaciously for the long-term, if possible, forever. Businesses take time to grow and flourish, but by trading in and out of the stock market, we would only hurt our returns.
Let me end off with another pithy Gardner quote from a recent interview of his:
“Find excellence, buy excellence, and add to excellence over time.”
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.