"There is no great secret in fortune-making. All you do is buy cheap and sell dear, act with thrift and shrewdness and be persistent."
Hetty Green - The first billionaire woman on Wall Street
Of the 1125 billionaires in the world, only a small percentage are women. Among those women, only a handful are self-made billionaires, amongst them: Oprah Winfrey, JK Rowling (author of the Harry Potter books) and Margaret Whitman.
Why are there so few?
Some of these answers lie within the story of Hetty Green - The Wicked Witch of Wall Street, as she was commonly known in the 1800's.
Hetty Green was 82 when she died in 1916, leaving an estate that in today's terms would be worth about US$2.5 billion. She became the richest woman in the world with no help from anyone. She was an eccentric woman and tough as nails, both of which account for her nickname.
Hetty's road to wealth was always an uphill battle, as a woman on Wall Street in the 1800s. Women had few rights back then and did not even have the vote at that time!
Hetty was quoted as saying; "I wish there were more women in business. I find men will take advantage of women in business in ways they would not attempt with men. I have found this particularly so in the courts, where I have been fighting all my life." However, she didn't let the fact that she was a woman stand in her way of becoming a billionaire.
Four Secrets of Hetty Green's Success
Buy low, sell high
"When I see a thing going cheap because nobody wants it, I buy a lot of it and tuck it away. Then when the time comes, they have to hunt me up and pay me a good price for my holdings."
She simply bought quality assets cheaply, then sold them at a large profit. She subscribed to the classic strategy of 'Buy Low, Sell High'. Warren Buffett is certainly a follower of Hetty's investment style and is only doing what she did 100 years ago.
The traditional picture of a billionaire is the lavish lifestyle of Donald Trump. Hetty Green, however was wealthier than Trump, but lived very cheaply. Her apartment was a $l4 a month rental in Hoboken. She saw no need for an office and regularly sat on the floor at Chemical Bank during the business day. Instead of designer clothes of the finest fabrics, she generally dressed in black.
Shrewd about tax
Hetty was unbelievably shrewd about reducing her taxes. At that time there was no federal income tax and Hetty was able to find the loopholes in the state tax laws with remarkable ease. She utilised her wealth in a tax efficient way. In an unspoken agreement with the New York city controller she acted as the bank for the city of New York. She would hold New York Bonds, allowing the city to pay her less than market interest rates. She effectively gave the city cheap loans in exchange for favourable treatment by the taxman. We could do with Hetty in the current credit squeeze!
Hard assets were the key
She bought real estate and railroads cheaply and held them for the long term. She wanted paying properties with good yields and rail tracks in the boomtowns. At the time this included Denver, St. Louis and Cincinnati.
A typical move by Hetty was to buy on the outskirts of town, and wait for the city to grow to her. This has been a sound investment strategy throughout the history of the United States and the world in general.
Here is a quick review of Hetty Green's secrets:
Buy what nobody else wants
Live miserly or well within your means
Invest in a tax efficient manner
Overweight your holdings in hard assets that pay real dividends
What can we learn from Hetty Green?
Hetty Green thrived when the cards where stacked against her. All the incredible obstacles could not deter her from goals. She was not a follower, she was innovative and made her own way. Whilst it is unrealistic to wear black everyday and live in a US$14 apartment, many women would certainly be able to cut back on a broad range of excessive expenses.
None of Hetty Green's secrets are particularly novel and anyone can adopt them. If you broadly follow Hetty's investment strategy, then you can't go far wrong. Due to women like Hetty Green, it is much easier for us today, to enter the investment world.
Pink Investments fresh approach to financial independence is reducing the barriers to women, which have continued to exclude them from the inner sanctums of the investment world.