Ronald Reid was the last person you would expect to be a millionaire.
He used safety pins to hold his old coats together and cut his own firewood well into his 90s.
He drove a second-hand Toyota Yaris and resisted new purchases.
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His only real indulgence may have been his daily English muffin and a cup of coffee at the Brattleboro Memorial Hospital in Vermont, where a friend remembered him sitting at the exact same stool every morning.
In his career as a janitor and gas station attendant, he was known as a hard worker.
But friends and family never suspected he was building an $8 million fortune.
Decades of Compounding Put to Work
When he died in June 2014, Reid’s will revealed an $8 million portfolio.
It turned out that Reid, in addition to saving diligently for decades, had also been buying quality, dividend-paying companies that he held for the long term.
Reid owned shares of at least 95 companies at the time of his death — names you’d recognize like Procter & Gamble Co. PG, JPMorgan Chase & Co. JPM and Johnson & Johnson JNJ. Many of these companies increased their dividends every year for decades after he bought them.
There’s no doubt Reid’s investments were savvy. But his results are a testament to his patience more than anything else. They call to mind an old Warren Buffett observation that “the stock market is a device for transferring money from the impatient to the patient.”
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Reid ultimately passed away having not enjoyed a large part of his fortune. Reid left a large part of his wealth to an area library and a local hospital.
Reid’s story highlights the importance of building a strong, diversified portfolio and long term investing. But with the average valuation at IPO up 500% between 2005 and 2021, investors might not think they have some of the same opportunities as Reid did in early 90s. Fortunately, investors today have one advantage Reid couldn’t dream of.
Giving Ordinary Investors a Shot at Pre-IPO Glory
For 79 years, if you wanted to invest in early-stage companies like Apple Inc. AAPL in the 1970s, Meta Platforms Inc.’s META Facebook in 2004 or Airbnb Inc. ABNB in 2009, you had to be an accredited investor.
The concept came from a 1933 law that created the U.S. Securities and Exchange Commission (SEC), which also held a provision barring any nonfounders or other company insiders from investing in a company before its initial public offering (IPO) unless they had either a consistent income of at least $200,000 or a net worth of $1 million.
In theory, this law protected unsophisticated investors from falling for scams or pie-in-the-sky business proposals. But there’s no denying that investors like Reid have been shut out from potentially g-fast profits for almost their entire investing lifetimes.
Washington has now lifted the 79-year ban on access to pre-IPO companies — and already, thousands of regular investors are buying shares of exciting startup investing opportunities.
Platforms like StartEngine and Wefunder allow retail investors to invest alongside venture capitalist legends like Kevin O’Leary, Howard Marks, co-founder of Activision, Y-Combinator, Bill Gates, and more.
These platforms have hundreds of startups for investors to browse. This means investors can choose between investing in the earliest stages of healthcare startups or private AI startups worth hundreds of millions of dollars.
It’s not just the legal right to invest that matters — connections in the world of Silicon Valley are important, too. For example, Peter Thiel, who turned a $500,000 investment in Facebook into $1.1 billion, was acting on a tip from a network of Silicon Valley contacts it took him years to build.
For investors without the time or inclination to network like that, equity crowdfunding can offer easy access to companies that some billionaire venture capitalists are already backing. It’s possible to buy thousands of shares for just a few hundred dollars, which is important for any investors following the most basic rule of startup investing — to never risk more money than they can afford to lose.
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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