Marcia, Marcia, Marcia!

Eve Plumb, AKA Jan Brady, recently made headlines for selling her Malibu beach house for $3.9 million after buying it for $55,300 in 1969.   A tidy profit for sure.

I’m a child of the ‘70s and grew up with a heavy dose of the Brady Brunch.  If you grew up watching the Brady Bunch, I’m sure you can recall almost any episode at a moment’s notice.  To this day people are still enamored with this sitcom classic.   One of my all-time favorite episodes was the Tiki Caves.

Ms. Plumb did well with her investment.  How can you go wrong buying Malibu beach front property?  Malibu real estate is probably one of the shrewdest investments one can make.  The return on her investment, before taxes, was 9.4%.   Her investment performed well because she found value in her home and owned it for four decades.   She probably could have sold it many times before and made a decent profit.  However, generational thinking is needed to make a substantial profit.

What if she invested her money in the stock market instead of buying the beach house?  Let’s take a look at a few investment alternatives.

A $55,300 investment in the S&P 500 index in 1969 made an average annual return of 9.8% giving her $4.47 million today[1].   This index purchase put an extra $570,000 into her pocket.

The same dollar investment in the Investment Company of America (AIVSX) mutual fund 47 years ago is now worth $6.9 million for an average annual return of 10.79%.[2]  This mutual fund purchase would have given her an extra $3 million.

A similar purchase in the Fidelity Magellan Fund (FMAGX) is now worth $15.63 million for an average annual return of 12.73%![3]    This investment delivered an extra $11.73 million!  That’s a lot of sand dollars.

What can we learn from Ms. Plumb’s purchase?

  1. She did well with her real estate purchase and found value in her investment.  If you find value in your investments, you’re more likely to hold them for a long time.
  2. She probably purchased the home because of its location and the enjoyment it would bring to her family.  I am positive she didn’t purchase the property at age eleven thinking in four decades she would sell it for a nice profit.
  3. Time wins.   The best way to create wealth is to look to the horizon.  Think long term and do not get spooked or side tracked by short term thinking.   A short term, trader’s mentality will leave your bank account with fewer dollars.
  4. Real estate does well because most people don’t flip homes like they do stocks.  Real estate holders do well because of their long term thinking. Stock investors should follow the lead of Ms. Plumb and other successful real estate investors.
  5. Stocks win in the end.  The long term performance of great companies is hard to beat.  If you want the opportunity to grow your wealth, add stocks to your portfolio.

For the record, I probably would have made the same investment choice as Ms. Plumb.  What eleven-year-old wants a portfolio of stocks?

When it was time to leave, we left and continued on our way. All of them, including wives and children, accompanied us out of the city, and there on the beach we knelt to pray.  Acts 21:5

[1] Dimensional Fund Advisors Matrix Book 2016, page 14.

[2] Morningstar Office Hypothetical Tool.

[3] Ibid.

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