Wise Wealth Advisors

D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

  • Blog Stats

    • 851,875 hits
  • Enter your email address to follow this blog and receive notifications of new posts by email.

    Join 813 other followers

  • Follow me on Twitter

How Agnes Plumb made $98 million from Kellogg’s shares?

Posted by Muthu on August 13, 2017

ITC got listed in 1954. I’ve seen families holding this stock for two generations.  A small sum invested decades ago is now worth several crores for them, earning yearly dividends in lakhs of rupees. Likewise, I’ve met people who are holding diversified equity funds for last 2 decades. Thousand of rupees have become lakhs of rupees for them; money multiplied by 40 to 50 times.

In 1996, Agnes Plumb died at the age of 88. She was a single woman who lived with her mother till she passed away in 1960. During last four decades of her life, after her mother passed away, she led a simple life. As her mother was crippled due to an accident, she kept doing small charities for crippled and disabled people. She was also very fond of children and used to help the less privileged.

On her passing away, she left $90 million for hospitals and societies which work for the children with birth defects and are crippled. She also left $2 million each for four of the families who were close to her during her life time.

How come a normal middle class woman made $98 million fortune?

Her father, during his life time was a shareholder of Kellogg’s. She inherited it from her father after his death. Her father has been holding the shares for few decades. After his death, she held it for many decades until her death. The shares continuously got split, resplit and kept doubling. What was once a modest number of shares became 1.3 million shares over many decades and two generations, amounting to a fortune of $98 million. Agnes used to receive $2 million as dividend every year for a small sum invested many decades ago.

During many decades of holdings, there would have been instances when the stock price of Kellogg’s would have corrected 50% or more. There are many years when the price would not have moved at all, as returns are always lumpy in the stock market. There has been wars, booms and bursts, bull and bear markets, gut wrenching corrections, recessions etc. during the holding period. She kept on holding the Kellogg’s shares ignoring all these.

‘Buy & Hold’ works for companies which can survive and grow over many decades. This involves skill, knowledge, luck and huge control over one’s emotions. Some companies succeed and many fail. The long term survival rate is low. But buying and holding index or diversified equity funds is no brainer. Good companies come inside and bad companies keep exiting the index. In diversified equity funds, the fund manager takes care of buying and selling companies. All it needs is to hold on ignoring ups and downs for many decades.  It is very difficult to go wrong and not make wealth if you follow this.

As I always repeat, in fund selections, we focus on what to avoid. Once that is taken care, choice of funds is merely a hygiene factor. What is important is staying the course ignoring market cycles and negative news (most of the news is always negative). 90% of our work is shaping your behaviour and ensure you stay the course. All the other advice and services we do is only 10%.

In a country like India, we can make good wealth if we can start thinking in terms of decades as holding period. It doesn’t require a great brain but an excellent temperament.

I hope we all develop and sustain right temperament.

Agnes Plumb did it. We can also do it.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: