Pay for Retirement with a Cup of Coffee and an Egg McMuffin!

The Rational Side of the Investing Pendulum

By Amit Rupani

I want to share two real-life stories about self-made secret millionaires.

The first is Ronald Read, a Vermont based one-time janitor and gas station attendant displayed that you don't need to earn a six-figure income to become a multimillionaire. With a frugal lifestyle and long-term investment philosophy, he accumulated a portfolio worth $8 million over his lifetime. His portfolio included equity shares of Lehman Brothers Holdings which collapsed in 2008 but he was willing to stick with his investments for many years.

The second is Anne Scheiber, a retired IRS agent who amassed $22 million in wealth (Scheiber died in 1995, so adjusted for inflation, that's around $36 million in today's purchasing power). In the mid-1940s, she retired with lump sum capital savings of $5000 and pension of roughly $3,150. She put her financial statement analysis skills to work which she learnt while working at IRS. During 50+ period of managing her own money she acquired equity shares of excellent businesses until her death. These are inspiring stories!

Read and Scheiber shared common investing process with similar final destination. That process is to “Buy Right & Sit Tight." They lived a frugal life and lived within their means. Invested every single dollar they saved for delayed gratification and well understood the sheer power of compounding through equity asset class over a very long period of time. An investment horizon spanning decades along with systematic investing not only allowed them to withstand the market volatility but an opportunity to buy more when others were fearful. They structured their finances in such a way that a single market crash didn't harm them no matter how severe the crisis was.

“Compound interest is the eighth wonder of the world. He who understands it, earns it…. he who doesn't… pay it." – Albert Einstein

Now let's get to the subject of this article: “Pay for Retirement with a Cup of Coffee and an Egg McMuffin!" How many times have you swung by McDonald's on your way to work for a cup of coffee and an Egg McMuffin? It would usually cost roughly $3.50 for this breakfast. Five times a week, your breakfast could cost you $910 annually. As we know very well, small things add up pretty fast. The point I am trying to make is that generally we casually spend $3.50 a day somewhere which can be ignored through self-discipline (like making your own breakfast at home) and put that saved amount for better utility. Let's look at how you can successfully retire by investing $3.50 a day. Don't believe it? Let's look at the numbers.

Investing $910 annual savings compounding at 15% of annual return for 45 years would become $3.75 million. Yes, there is no typo; the final amount is $3.75 million. Now you may wonder – what kind of investment could give me 15% annual return for 45 years? Here you go. The Bombay Stock Exchange's widely known SENSEX index was trading at level of 100 in March of 1979. Today it's hovering close to 36,000 levels giving an annual average return of ~16.49% in last 38 years (without even factoring for dividends received during the same time). Well, now you know it's through right investment in Indian Equities. India is the youngest and largest democracy in the world with over 1.2 billion population and medium base GDP of more than $2.45 trillion. Today's Indian youth essentially determines the longevity of the growth run with decades of opportunity ahead of it through growing middle-class population. If you are not young enough to have 45 years of investment time-horizon for your own, may be you could do a favor by planning for your kids and/or grandkids so that they don't have to live a rat-race life.

If you are concerned about recent macro-economic news like slowing global economy, Fed increasing interest rates, possibility of Trump going on war with North Korea, dollar depreciating versus other world currencies, and crude oil prices rising, you may be worrying about stuff that is irrelevant in the bigger picture of long-term investing. It's about buying equity in businesses which churn out more and more money (net profit and dividends) to its shareholders every year. Warren Buffett famously stated that, “In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497."

According to one study, done by Fidelity in 2014, showed that the investment accounts with best performance were of people who forgot they had an account at Fidelity. All this leads to conclude that it's not an IQ of genius but an iron stomach to withstand the market volatility and tons of patience to be the secret recipe for a successful investor. To sit-tight for decades on “right" businesses is easier said than done, but it is not impossible. It's the right temperament and mind-set of prudent investor focusing on low turnover, a long-term horizon, tax efficiency, and ignoring market noise that generates financial independence and a successful retirement.

Finally, I want to share beautiful lines by Joshua Kennon in his article where he covered the story of how Anne Scheiber made $22 million from her apartment. “It doesn't require a lot of heavy lifting. Instead, you are harnessing a force of nature; something inherent to the universe itself and benefitting from it. Investors make it much harder than it is.

Happy Investing!


Amit Rupani, CFA is an Independent Investor, practices Value Investing principles, manages money for long-term wealth creation through Equities asset class. Email: