Hello Folks,

Today, we look at how Ronald Read (a janitor) retired with a staggering $8 million in savings, as well as the power of compounding.

Let’s roll.

The Million Dollar Janitor

Meet Ronald Read, a janitor who retired with more than $8 million in savings. Born in 1914, Read also worked as a gas station attendant. But he lived modestly and saved a majority of his earnings.

Read lived below his means, driving a second-hand Toyota Yaris while being a distinguished stock picker.

A self-taught investor with no education or training in finance, Ronald Read poured into the Wall Street Journal daily, providing him with the tools to invest wisely.

Read followed a buy-and-hold strategy, which allowed his wealth to compound and generate exponential returns over time.

Read held blue-chip stocks such as Wells Fargo, Procter & Gamble, and Colgate-Palmolive. Each of these companies enjoys an entrenched position and a wide economic moat, allowing them to grow cash flows and earnings across market cycles.

Read’s portfolio was spread across industries, which helped him to lower overall risk and maximize potential gains. At the time of his death, Read’s equity portfolio consisted of 96 stocks.

After his passing, Ronald Read left $1.2 million to the local library and $4.8 million to a hospital, impacting countless lives in the process.

This story proves that you don’t need to depend on a fancy job title or a flashy lifestyle to create game-changing wealth. In fact, you need to invest wisely and let the power of compounding do its work. Let’s see how.

How to Begin Investing?

The primary reason people work is to earn an honorable living and live comfortably during retirement. To achieve your retirement goal, it’s essential to put your savings to work and invest in a variety of asset classes.

A majority of individuals believe they need at least $1 million to retire comfortably today. So how do you get there?

It will take you 39 years for you to convert a $25,000 investment to $1 million, given annual returns of 10%. You can also accelerate your retirement plans by increasing your investment amount.

For example, an investment of $500 each month (at 10%) would turn to:

• $39,000 in five years

• $103,000 in 10 years

• $209,000 in 15 years

• $383,000 in 20 years

• $1.14 million in 30 years and

• $3.19 million in 40 years

It makes sense to begin your investment journey early and let the power of compounding do its work. We can see you retire with more than $3 million if you invest $500 a month for 40 years.

But if you want to reach $3 million in savings in 20 years, your monthly investment would have to be close to $4,000.

Where Should You Invest?

The asset class you choose primarily depends on your risk appetite, investment horizon, total household income, and much more.

For example, 25-year-olds starting their financial journey can have significant exposure to volatile asset classes such as equities. But as you get older, your risk appetite reduces, and you move toward traditional asset classes such as bonds.

But the key to building long-term wealth is to invest across assets such as:

• Equities

• Bonds

• Real Estate

• Gold and

• Cryptocurrencies

If you are a great stock picker like Ronald Read, you can afford to hold shares of individual publicly traded companies.

But around 80% of investors fail to beat indexes such as the S&P 500, which has returned 10% annually in the last six decades. According to Warren Buffett, low-cost index funds should account for the majority of your equity portfolio, which reduces portfolio risk significantly.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.