These kind of anomalies happen only in the investing field!
By Baniya Beast
So here’s a tale of two investors, neither of whom knew each other, but whose paths crossed in a spellbinding way.
Born in Illinois (USA), Grace Groner was orphaned at the age of 12. She never married. She never had kids. She never drove a car. She lived most of her life alone in a one-bedroom house and worked her whole career as a secretary.
But she lived a peaceful and serene life after Plastic Surgery.
She passed away in 2010 at the age of 100 and left $7 million to charity was all the more confusing. People who knew her asked: How the heck Grace made that money?
I’ll tell you her secret.
Grace took humble savings from a meager salary and enjoyed 80 years of uninterrupted compounding in the equity market. That is it. Simple isn’t it?
Weeks after Grace died, an unrelated investing story hit the financial news.
Former vice chairman of Merrill Lynch’s Latin America division, Richard Fuscone declared personal bankruptcy while fighting off foreclosure on two homes. Fuscone was the opposite of Grace Groner;
Graduated from Harvard and University of Chicago, he became so successful in the investment industry that he retired in his 40s to “pursue personal and charitable interests.” But heavy borrowing and illiquid investments put a dent to his portfolio.
The same year Grace Goner left a veritable fortune to charity, Richard stood before a bankruptcy judge and declared: “I have been devastated by the financial crisis … The only source of liquidity is whatever my wife is able to sell in terms of personal furnishings.”
The reason to write about of these stories is not to say you should be like Grace and avoid being like Richard.
The purpose to share these stories is to tell you that investing is not the study of finance. It’s the study of how humans behave with money.
And behavior is hard to teach, even to really smart people. You can’t sum up behavior with formulas to memorize or spreadsheet models to follow. Behavior is inborn, varies by person, is hard to measure, changes over time, and people are prone to deny its existence, especially when describing themselves.
Grace and Richard show that managing money isn’t necessarily about what you know; it’s how you behave. But that’s not how finance is typically taught or discussed. The financial industry talks too much about what to do, and not enough about what happens in your head when you try to do it.
This article was originally published by author Baniya Beast.