Stop the Presses: "Old School" Investment Strategy Makes Millions

Dear Friends,

The story got picked up by all the major news sources last week, with headlines like "How a Secretary Made and Gave Away $7 Million." But for me, this wasn't news. This is a story with which I am well-acquainted.

I didn't know Grace Groner, the Lake Forest, Ill., woman who lived frugally while her initial three shares of Abbott Laboratories (NYSE: ABT) grew into more than 100,000 shares through dividend reinvestment. But I did know Lillian Calistri.

The last time I saw Lillian was in 1990. I remember that a nephew had the misfortune of addressing her as "Lillian." She promptly looked us all in the eye and said, "You will continue to call me Aunt Lillian." We were all over 25 years old at the time, but in Lillian's world, there was no excuse for bad manners.

Aunt Lillian taught home economics at Charleroi High School in Pennsylvania. After she retired in the 1950s, Lillian and her sister, Neva, moved to Tucson, Arizona. During my visit, I noticed that Neva's twin bed in the one bedroom apartment was still neatly made, even though she had passed away more than ten years earlier.

I remember thinking it was nice that Lillian had been able to live comfortably, if not frugally, in her golden years -- aided by a teacher's retirement and a nest egg from the 1952 sale of the family's ice cream business. When Lillian died in 1993, her estate was worth north of $5 million.

Her broker was the only one who wasn't shocked. "They should have that kind of discipline on Wall Street," he said. Dividend reinvestment? You bet.

While some money was dispersed to the family, the vast majority went to found the Calistri Family Foundation, per Lillian's wishes. Every year, universities, libraries and churches are its beneficiaries. I have Lillian's rhinestone bollo-style necklace, an heirloom I will always treasure.

But perhaps the biggest legacy Lillian left was the lesson that disciplined dividend reinvestment is the gift that keeps on giving.

The $7 million estate of Grace Goner is being left to Lake Forest College, her alma mater, to be used for scholarships. I hope along with their degrees, Goner's scholarship recipients remember the disciplined investment strategy that made their educations possible.

Of course, I was fortunate enough to learn about the power of dividend reinvestment from Lillian. Correction: Aunt Lillian.