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When Russ Gremel bought $1,000 of stock in Walgreens, he was thinking long-term.
“He figured people would always need medicine and women would always buy makeup,” the Chicago Tribune reports. “He planned to hold onto that stock for a long time, as an investment.”
It was nearly 70 years ago now that the Chicago resident made that investment. By the time Gremel reached his late 90s, the stock was worth more than $2 million.
Gremel, now 98, opted to donate the stock to the Illinois Audubon Society last year. His story provides real-life proof of the power of four core personal finance concepts.
1. Invest for the long run
Commonly referred to as “buying and holding,” this means making an investment and keeping your money invested in it long-term. It enables you to maximize your profit from long-term gains and minimize losses from expenses such as trading fees.
Money Talks News founder Stacy Johnson has his own way of remembering this concept: “Live like you’ll die tomorrow, but invest like you’ll live forever.”
2. Invest in quality companies
As legendary investor Warren Buffett recently said, “American business is going to do fine over time.” That’s why experts like he and Stacy invest their own money and often recommend that others invest theirs in stock index funds like an S&P 500 fund.
Index funds are also less risky investments than individual companies’ stock, although index funds didn’t exist when Gremel invested $1,000.
3. Ride the power of compounding interest
“Compound interest is interest that’s earned and added to an account balance so that the interest, too, earns interest. Compounding speeds up earnings because, as your account balance grows, each new interest payment is based on a larger amount.”
Compound interest is also part of why it’s critical to invest for the long run: Nothing can make you more wealthy than combining compound interest with a long time horizon.
4. Spend less money than you make
Dietitians and their ilk are annoyingly fond of reminding us that there’s only one way to lose weight: Consume fewer calories than you burn. Well, the way to gain wealth is similar: Spend less money than you earn.
Gremel’s investment was able to grow so much because he never needed to tap into it. Gremel tells the Chicago Tribune he’s “a very simple man” who has lived a simple life. That enabled him to live frugally without feeling like he was missing out. Heck, he was able to retire at age 45.
It also helped that Gremel has lived in the same home since age 4, so he never had to take out a mortgage. He also never had a wife or children to support.
As Stacy recently wrote in “Want to Be Rich? Here’s All the Advice You’ll Ever Need, in 10 Simple Sentences,” there are only six ways to get rich. Gremel is a textbook case of the sixth way to get rich:
“Spend less than you make and invest your savings wisely over long periods of time.”