The Investing Philosophy of a 92 year old Self Funded Retiree

We take a look at 92-year-old self-funded retiree, Gus, and his five basic rules to successful investment.

This week I had the pleasure of attending the Christmas meeting of the Australian Investors Association.  The format of the meeting was to hear the investment philosophies of four of their members, all of whom are now well into their retirement and are committed DIY investors.

For those who want to be independent investors, joining a group of like-minded people is a very good place to start.  Listening to people who have been successfully investing for many years has so much to offer the beginner. For the experienced investor, it is just an absolute delight to listen to alternative strategies than your own.

The best story to come from this meeting was the advice from a member, Gus aged 92.  He tells the story that when he retired from his working life as an engineer, he started to learn about investing in the share market.  Twenty-eight years on and after a successful career as a share investor he gave a hand-out of the rules he forced on himself when investing.  Gus and I would like to share his rules with you.

5 Basic Rules of Investment:

I have certain basic rules of financial management which, so far, I have been able to observe diligently.

1. I separate income from capital, and I do not draw down capital to fund living expenses.
2. Proceeds from the sale of capital assets are reinvested to produce more income.  If at times income exceeds requirements, the excess is transferred to the capital.
3. I do not buy anything I cannot afford to pay for from currently available cash resources.
4. I do not go into debt.
5. I follow the dictum I learned as a child of the 1930s Depression “Waste not, Want not”.

Following these rules has not made me wealthy but it has given me a sense of security. I have survived (and generally enjoyed) 28 years of retirement as a fully self-funded retiree, using lump sum superannuation invested partly in Australian shares and partly in residential property.  Nine years ago, I sold the property, and now my income is derived almost solely from dividends from Australian shares.

Gus’s Rules for Managing a Share Portfolio:

I invest only in Australian companies which regularly pay reasonably high yielding fully franked dividends.  I regard yields above 6% with suspicion.

If a company reduces its dividends or its franking, it is on its way out of my portfolio.

I thoroughly enjoyed Gus’s stories and after the meeting, we had a chat.  He showed me his spreadsheet of every share he owned in the last 28 year years.  There were only 56 shares and for each year of ownership, he recorded the dividends as a return on investment.

What I found interesting was that Gus was not the only presenter who did not start investing in the share market until they had retired.  All had embraced the philosophy of educating themselves about wealth management, having a plan, keeping it simple, and sticking to their strategy.  While the strategies were different, each had been exceptionally successful in maintaining income and capital.

The Australian Investors Association is active in helping members learn from each other and from investment professionals.  A similar group is the Association of Independent Retirees.  Both these organizations have a wealth of good information on their websites and are very active groups.  There are other groups dedicated to both share trading and property investments.

Glenis Phillips SF Fin – Member of the Australian Investors Association