Tony Robbin's story of 20% compounding to 70million (Theodore Johnson)

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What do you think of this interesting story of compounding told by Tony Robbins? The headline are Theodore R. Johnson worked for UPS and "never made more than $14,000 a year" which is actually a lot of money in the 1950s equal to 140k today by chance. After a 28 year career with the company, he retired in 1952 with $700,000 in company stock. Over another 39 years he invested using a save and hold strategy and made an amazing $70 million and in fact is said to have given away 35million.

Tony claims he simply"taxed" 20% on his salary and saved that in a stocks and made it to 70million (https://www.youtube.com/watch?v=9O8haH2tHWY&t=11m10s). Obviously this wouldnt work because taxing 20% of 14,000 is a fixed sum of 2800. BUT if he used 2800 per year with additional consistent annual compounding every year then to make it to 70million would require an additional 12% compounded on the savings pool, which would grow to 1million in year 29, 10 million in year 49 and 70million in year 66 (with no payaways) assuming no tax, no fees and no withdrawals....presumably a buy and hold growth strategy.

OK now lets talk about a more realistic model.

First, the payaways....to make the payaways work (35million) its actually not impossible, but you really have to delay taking money out until savings for 40 years and then only at 3% per year.

Next tax, this is a big one, and tricky to estimate but let assume this a more realistic dividend capture stratgy (which is logical as estimates of the contribution of dividends to overall growth vary from 40% to 90% of total gains eg https://www.simplysafedividends.com/int ... retirement) then lets assume 20% tax on all dividends and lets make one payout per month then this would reduce the gains at year 66 to 17million purelly due to costs of the tax, nothing to do with dividend capture.

Finally, if we model in brokers fees of 11 buys/sells per year then its now reduced to gains of 8.8million.....and I am not including GCT tax on withdrawals OR to look at it another way, to now make it to 70 million by year 66 (66x year of savings) then the compounding rate would now have to be 15.5% per year without fail. Now 15.5% compounding is really up there in terms of the world's best over 30-40-50 years.

This is an interesting story of the power of compounding but perhaps also the effect of fees and strategy.

[AsleepInYorkshire]

What do you think of this interesting story of compounding told by Tony Robbins? The headline are Theodore R. Johnson worked for UPS and "never made more than $14,000 a year" which is actually a lot of money in the 1950s equal to 140k today by chance. After a 28 year career with the company, he retired in 1952 with $700,000 in company stock. Over another 39 years he invested using a save and hold strategy and made an amazing $70 million and in fact is said to have given away 35million.

Tony claims he simply"taxed" 20% on his salary and saved that in a stocks and made it to 70million (https://www.youtube.com/watch?v=9O8haH2tHWY&t=11m10s). Obviously this wouldnt work because taxing 20% of 14,000 is a fixed sum of 2800. BUT if he used 2800 per year with additional consistent annual compounding every year then to make it to 70million would require an additional 12% compounded on the savings pool, which would grow to 1million in year 29, 10 million in year 49 and 70million in year 66 (with no payaways) assuming no tax, no fees and no withdrawals....presumably a buy and hold growth strategy.

OK now lets talk about a more realistic model.

First, the payaways....to make the payaways work (35million) its actually not impossible, but you really have to delay taking money out until savings for 40 years and then only at 3% per year.

Next tax, this is a big one, and tricky to estimate but let assume this a more realistic dividend capture stratgy (which is logical as estimates of the contribution of dividends to overall growth vary from 40% to 90% of total gains eg https://www.simplysafedividends.com/int ... retirement) then lets assume 20% tax on all dividends and lets make one payout per month then this would reduce the gains at year 66 to 17million purelly due to costs of the tax, nothing to do with dividend capture.

Finally, if we model in brokers fees of 11 buys/sells per year then its now reduced to gains of 8.8million.....and I am not including GCT tax on withdrawals OR to look at it another way, to now make it to 70 million by year 66 (66x year of savings) then the compounding rate would now have to be 15.5% per year without fail. Now 15.5% compounding is really up there in terms of the world's best over 30-40-50 years.

This is an interesting story of the power of compounding but perhaps also the effect of fees and strategy.

This is extremely interesting. Do you really think typing it all out was necessary?

You could have dropped a link in?

http://funancials.biz/heres-can-learn-u ... 0-million/

There's a Tony Robbins here - is it the same guy - he looks like an amazing guy
https://www.tonyrobbins.com/

AiYn'U

[Dod101]

The point of the story seems to on the power of compounding and not on an investment strategy. It certainly adds very little to that.

Dod

[GoSeigen]

What do you think of this interesting story of compounding told by Tony Robbins? The headline are Theodore R. Johnson worked for UPS
[...]
This is an interesting story of the power of compounding but perhaps also the effect of fees and strategy.

It's a stupid strategy. As Johnson himself said, "I got very lucky."

Many posters here will know the username JimSusan, who tried practically the same strategy but with Lloyds shares. JimSusan was wiped out in the 2008-9 banking crisis. No £70m for him and probably not much to spend over these past ten years of his retirement either. Who knows, perhaps he got his idea from Johnson's story?


This is not so much a story about the power of compounding as about pure blind luck, a huge punt on a single horse.


GS
P.S. And it's Tony Robbins, not Tony Robbin.

[PinkDalek]

[Many posters here will know the username JimSusan, who tried practically the same strategy but with Lloyds shares. JimSusan was wiped out in the 2008-9 banking crisis. No £70m for him and probably not much to spend over these past ten years of his retirement either. ...

JimSusan does get mentioned from time to time.

From another thread on TLF viewtopic.php?p=224247#p224247:

I think many people will not remember JimSusan and his one-stock portfolio that was Lloyds bank. ...

Except I don't think that was the whole story by a long way. He enjoyed writing and entertained us. He had other investments.

Such as briefly recalled by:

Who remembers 'jimsusan' from the old TMF who had a totally disproportionate percentage held in LLOY shares.

Wasn't it the case that he was also invested in other assets such as property, so that it was a humungous amount of his equity holdings but not of his total investment income or assets? ...

Source: viewtopic.php?p=56427#p56427

With thanks to breelander, here are two of his gems:

Here are a couple, for old times sake...

https://web.archive.org/web/20041213093 ... id=8935451
https://web.archive.org/web/20041213101 ... id=8940611

[JoyofBricks8]

JimSusan saves me a fortune: him blowing up so publically really gave me the hint about diversification...

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It's a stupid strategy. As Johnson himself said, "I got very lucky."

So to clarify you think 67 years of excellent returns were a combination of luck with a bad strategy.......And which areas of the story (which might not be 100% accurate) are "stupid" for investors now?

Investing on the stock market?
Investing with compounding?
Investing regularly?

or do you mean.......

Investing in one stock? I never mentioned that or advocated it; I don't know anyone who would advise this.....is that what you are meaning?

[GoSeigen]

It's a stupid strategy. As Johnson himself said, "I got very lucky."

Investing in one stock? I never mentioned that or advocated it; I don't know anyone who would advise this.....is that what you are meaning?

Absolutely. Look at the subject of your post. It is about Theodore Johnson. You do know how he is reputed to have achieved his returns, don't you?


And by the way I didn't suggest you were advocating anything: you asked for opinions on Robbins's story about Johnson, and I simply gave you mine.


GS

[ffacoffipawb64]

This is Jimsusan I think (Jim Norris from Otley) ... https://www.thetelegraphandargus.co.uk/ ... -resident/

[Dod101]

This is Jimsusan I think (Jim Norris from Otley) ... https://www.thetelegraphandargus.co.uk/ ... -resident/

This seems to be a repeat of an earlier post. It is all a bit of a non story is it not? Given the conditions we could all have made that sort of money. Tony Robbins was extremely lucky but the other point to take away is that systematic saving will usually result in a decent pot at the end of the day.

That seems to me to be about the only message to take from this tale.

Dod