*Sunday Financial Literacy*
An incident in the life of Edward Thorp
Google for Edward Thorp. You'll be amazed to know this multifaceted personality. He is now 91 years old and has a networth of $800 million. Most of his wealth is in just one stock, Berkshire Hathaway. Berkshire Hathaway is the name of Warren Buffett's company.
He has written a wonderful book called 'A man for all markets'. He cites an incident in the book which should be an eye opener for all of us.
In 1985, his divorced house cleaner, Carolyn had two young children, aged five and six dependent on her. She received a $6000 settlement from an automobile accident. She pleaded with Edward to help her invest that money for her children's college education.
Edward was very hesitant because she knew nothing about stocks or investing. Finally he relented due to her persistence. He put a condition she should never sell the stock he suggests without getting his consent. She agreed.
He bought her 2 Berkshire Hathaway stocks at $2500 each. She later left house cleaning for office work. Edward and Carolyn lost touch with each other. In 1987, her stock broker informed Edward that Carolyn panicked during that year's market crash and sold the 2 Berkshire shares at $ 2600 each.
Edward observes that when Carolyn's children would have been in college, Berkshire was quoting around $74,000. $150,000 would have been more than sufficient to cover their education fully. Unfortunately she panicked and sold resulting probably in shattered dreams.
And just for your information: Berkshire Hathaway current stock price is $541,000. Yes one share is worth more than half a million.
Even if you get advise from legends like Edward Thorp or Warren Buffett, unless you stay the course with conviction and extreme patience, wealth creation is not for you. It all boils down to your own conviction and patience.
*Forwarded as Received*
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