Monday, February 21, 2022

Not All Heroes Wear Capes

Shield

AN OXFORD CLUB PUBLICATION

Wealthy Retirement

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Editor's Note: In today's Wealthy Retirement, Chief Income Strategist Marc Lichtenfeld looks back on the lessons he learned from his greatest hero, his grandfather.

It's safe to say that if Marc's grandfather were around today, he'd be appalled by the reckless buying and speculation that has led to the recent collapse in growth stocks.

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- Kyle Wehrle, Assistant Managing Editor

Timeless Investing Advice From My Hero

Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Marc Lichtenfeld

My grandfather was born in 1904. He died 31 years ago, and he was my hero.

His life was the quintessential American Dream. The son of immigrants, he was very poor as a child.

He started working when he was 6 years old, selling newspapers on the corner (although the age always got younger every time he told the story). He went to high school, college and grad school at night so he could help support his family during the day.

My grandmother would tell us how he would come home from night school exhausted, eat a bowl of cornflakes for a late dinner and fall asleep at the table. And then do it again the next day. And the day after that...

He eventually got a good job, owned a couple of companies and lived a prosperous life - enough that both of his kids chose jobs (in education) that they were passionate about, rather than picking a career for the money.

Nothing was more important to him than family. He helped support his mother, mother-in-law and sister-in-law.

He was generous with his grandchildren too, but what I wanted most from him was his time.

You see, my grandfather owned a seat on the New York Stock Exchange through the brokerage firm that he ran with his brother and a third partner. Fortunately, before he died, I spoke with him about the markets and what he learned over the decades.

My grandfather was conservative. He didn't like to speculate. He saw too many of his customers go against his firm's guidance and get blown up.

Looking back on his advice, he reminds me a bit of Warren Buffett. The nuggets of wisdom that I remember most are these...

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Buy good businesses - My grandfather was a certified public accountant and owned two companies in his life. One was a steel company that he bought; the other was the brokerage firm that he started.

I asked him what he knew about steel or running a brokerage when he began. He replied, "Nothing. I knew how to run a business."

He hired steel and brokerage industry experts. But he was very talented when it came to taxes and finance.

I've applied that lesson to the markets. Even though stocks can be used as trading vehicles, I buy the stocks of companies that are solid businesses and that are undervalued, have strong growth prospects or both.

Invest for the long term - I can picture him shaking his head in disgust had he been around during the dot-com boom, seeing people jumping in and out of stocks and assuming they were market wizards.

He believed you buy great businesses and stocks and own them for years. Pretty simple.

Value investing, or investing in stocks that are undervalued despite their sound fundamentals, is an excellent way to accomplish this long-term goal, and value stocks are having a once-in-a-generation moment.

Collect dividends - Like Buffett, he wanted his stocks to pay him dividends. By owning great businesses that paid dividends for years and years, my grandparents were able to enjoy a comfortable life in retirement.

And the strategy allowed my grandmother to remain in their beautiful Manhattan apartment until she passed, more than 10 years after he did.

Dividends are often (though not always) signs that a company is stable. Dividends can supplement your income or generate wealth when you reinvest them over time.

And when you invest in Perpetual Dividend Raisers - stocks that raise their dividends every year - you ensure that you're getting more income each year.

I've read lots of books about investing, but without a doubt the greatest lessons I've learned were from my grandfather.

Leading by example, he taught me how to be a husband, a father and a man. Listening to him taught me some old-fashioned investing principles that are as effective today as they were when he was in the markets.

The greatest compliment anyone has paid me came from people who knew my grandfather: They told me that I would have made him proud.

I try to follow his example every day of my life. And I hope that, as I share his investing philosophy, help people make money and do it conservatively, he is looking down and smiling.

Good investing,

Marc

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