Getting Rich Slowly
Could Be Better for Your Wealth
by Robert B. Gordon, Sc. D.
September 14, 2004
Very few investors choose to get rich slowly. They need the riches now so they can enjoy them longer. But it turns out that most people who seek wealth too fast often do not get rich at all. They fritter away their money on get-rich-quick schemes or taking advice from those who get rich
But a new phenomenon is occurring. People are living longer whether they are wise or unwise investors. So a 30-year old could reasonably expect to live to 90 or perhaps 95 and a 50-year old almost that old. Assuming that people continue to work to 65, this means that most people have
If wise investors would plan for the rest of their life instead of the next 15 or 20 years, maybe they would get rich slower, but much surer than
It might happen that today's thirty-year old might work to age 80 due to (a) no federal social security program and (b) improvements in medicines and health care in general. So the possibility of a 50-year investing program may not be so far-fetched. Our thinking for this essay will be based on the possibility of a 30 to 50-year investment program. So please stay with me unless you are over 60 and have no grandchildren
WHAT WILL IT BE LIKE 50 YEARS FROM NOW?
I certainly do not have the answer to this question, so I will make several assumptions. First, I will assume that mutual funds will not be here as they are now. They will be either gone or so different as to be not recognizable. Next, I will assume that a major stock exchange will exist in this country in some form so that stocks can be bought, sold or exchanged. There will be securities offices around the country where stocks can be bought or sold. The offices will contain sales people who will be happy to take your stock certificates and sell them or if you wish, buy and deliver new shares to you. Perhaps these transactions will take place on whatever replaces our current computers. All that we need to know is that stock purchased today can be sold 50 and more years from
WHAT CAN WE BUY NOW AND SELL 50 YEARS FROM NOW?
This is a very important question and can only be answered with perfect assurance from the changes in the securities industry that will no doubt be made in the future. But the western world has been trading stocks and bonds for more than 3 centuries, so I consider it a very good guess that it will still be happening for more than another 50 years. Let's move to the very important topic of what to accumulate for a far away retirement
1. Old, profitable, well established U.S. company.
2. Basic, easily understandable business.
3. Long dividend paying history.
4. Possible purchase candidate.
5. Geographical diversity of group of five.
Let's see how our 5 investment choices make out on the above criteria:
| Stock | 1 | 2 | 3 | 4 | 5 |
| Alexander& Baldwin | 1870 | Sugar, Shipping | N/A | Yes | Hawaii |
| Aqua America | 1988 | Public Water Co. | 1988 | No | East U.S. |
| Executive Off. Prop. | 1997 | Largest Office REIT | 1997 | No | All U. S. |
| Pilgrim Creek Timber | 1997 | 11,000 sq mi trees | 1997 | ? | All U. S. |
| Pan American Silver | 1995 | Major Silver Miner | 1997 | Yes | Mexico, S.A. |
Alexander&Baldwin is one of my favorite companies to visit. They own, and have owned for many years, 68,000 acres on Maui and 21,000 acres on Kauai held on their books for a few dollars an acre acquisition cost as required. Its value now for real estate is quite a few thousand dollars an acre. They also own the Matson Steamship Line, which has a virtual monopoly on traffic from the mainland to Hawaii and Guam. Non-U.S. ships are not permitted on these runs.
For many years Aqua America was Philadelphia Suburban Water Co, but it is now the largest publicly held water company in the U.S. with its ownership spreading along the Atlantic seaboard. I view this as a growth company as I think many small towns will tire of the job of managing their local water company. And in the coming depression, they may have an incentive to sell out for cash.
Executive Office Properties is the largest commercial real estate owner of office properties in the country as the result of a recent merger. It has expert management and will find how to survive in the coming depression. It has 750 properties to keep occupied with tenants and will probably be one of the survivors due to their excellent diversification in locations. EOP is a REIT and is paying a large dividend right now.
Pilgrim Creek Timber is one of my favorites as their huge amount of timber keeps growing 24 hours a day. It also is a REIT and normally pays out 90% of its income as dividends. Their geographically diversified timber holdings cover 11,000 square miles which is greater than the area of our 3 smallest states.
After considerable thought, I have added a leading silver mining company, Pan American Silver, with important mines in Mexico and several South American countries. It is currently using its cash flow to buy other mines and is paying no dividend. Robert Prechter says that the price of silver will drop from its present $6 to about $3 so that dollar cost averaging will be very desirable before it rises toward its old peak of $50 per ounce.
In summary, we have picked five very attractive companies with tremendous geographical and product diversity. I cannot see a takeover in the near future although two companies, Alexander&Baldwin and Pan American Silver, are quite small and may be taken over.
FINANCIAL DATA ON 5 SELECTED STOCKS
| Stock | Mkt. Cap $ Mill. |
Div. Yld. Percent |
P/E Ratio |
DRIP Plan |
Suggested Allocation |
| Alexander& Baldwin | 1,389 | 2.76 | 16.0 | Yes | 22% |
| Aqua America | 2,032 | 2.19 | 27.1 | Yes | 22% |
| Executive Off. Prop. | 11,399 | 7.07 | 23.5 | No | 22% |
| Pilgrim Creek Timber | 6,201 | 4.18 | 19.9 | No | 22% |
| Pan American Silver | 968 | None | 32.3 | No | 12% |
These 5 stocks are impressive now and do not seem to be in danger of disappearing over the next 50 years. True, the smaller companies could be acquired, but there seems to be little danger of them going out of business.
All of these companies are liable to drop in price over the bear market years and gain in the bull market periods, making it possible to acquire shares at reasonable average prices. The dividends on two of the funds will add to the returns and the big winner may be Pan American Silver if the silver price goes over $50 as may well occur as it did years ago.
BUY SLOWLY AND REINVEST ALL DIVIDENDS
I do not plan to tell my readers of any age how to build a retirement fund with these five stocks. If they really have 50 years in which to achieve their goal, they can experiment with several ways and finally select the best one. Perhaps you can find some stocks you like better than my five. Ok, buy them instead. There are probably 50 attractive stocks that could be chosen. The main idea is to pick them and get started.
I have written in the past about the dangers of dollar cost averaging if you end at a bottom price instead of a top. So you have to watch things in the last few years. Otherwise it is clear sailing for nearly fifty years. Good investing and good luck to all.
It is a very good idea to get to know your 5 companies quite well and to read all of their reports. At least one of them, Aqua America, is reinvesting dividends at a 5%, discount which will add up over the years. Few of their annual reports can equal the wonderful pictures in the annual report of Alexander&Baldwin. But then, you cannot ask for everything.
I suggest that you buy these stocks from a broker with an excellent rating by Weiss Ratings who charge $7.95 per ratings published quarterly. Go to www.weissratings.com. I also suggest that periodically you request a stock certificate from your broker and keep it in your safe deposit box in a bank with an excellent rating from Weiss Ratings.
© 2004 Robert B. Gordon, Sc. D.
Contact Information
Dr. Robert B. Gordon
c/o Roger Gordon
1488 Cynthia Lane
El Cajon, CA 92019
