What's under Grandma's mattress?

How many pennies did Grandma have under her mattress?

There was always great debate over just how many pennies Grandma had under her mattress. In fact, it had been a topical discussion at every family get-together for a number of years, and with good reason. After all, Grandma’s husband was a successful businessman who retired young and subsequently (and most unfortunately) died soon after, leaving the couple’s entire lifetime savings to his beloved wife.

But whilst you could have forgiven Grandma if she had decided to enhance her lifestyle, thirty years on, Grandma still collects her much-anticipated pension on a fortnightly basis, proceeding to spend the exact same amount over the following two weeks.

So what happened to Grandma’s lifetime savings? Did she lose it all and, if not, why isn’t she spending up large? Just how many pennies did Grandma have under her mattress?

Despite the speculation, all anyone really knew was that Grandma did not have a mortgage on her house, possibly a few shares somewhere and was able to contribute towards the grandchildren’s tertiary education. That was until a month ago. Grandma still has all her wits about her, clearly shown in her ability to effectively manage her own financial affairs. However, her body is beginning to fail her and, acutely aware of this, she recently asked me to take a look over her finances in case the worst was to happen.

What I discovered was a mixture of both the expected and unexpected. There was, of course, the usual swag of Bonus Bond certificates and term deposit statements, a familiar sight in any pensioner’s portfolio. Grandma had kept every statement she had ever received relating to her investments, so it wasn’t long until I had organised papers for each respective bank term deposit highlighting rollover after rollover for the past 20 years.

However, what I found incredibly interesting was the last envelope of statements I attended to. Having originally put this envelope marked ‘Westpac’ in the pile with all the other bank term deposits, I now realised its contents were all relating to Australian Westpac shares. Whilst obviously lacking diversification, I was at least heartened that Grandma had had the good sense to maintain a growth component to her portfolio, (after all she was now well into her nineties) and I proceeded to calculate the value of these shares today.

These shares were now worth over a quarter of a million dollars. That was over five times as much as they were worth when they were originally purchased. It turns out it was the annual dividends of these shares alone that paid for the grandchildren’s tertiary education.

Now I’m certainly not recommending Grandma’s ‘all eggs in one basket’ strategy to anyone and have already explained to her the risks of not having diversified her portfolio (you can imagine how well that conversation went). However, I think this shows that at a time when speculation is rife, patience has its virtues. A buy and hold strategy really can pay dividends if maintained for the long run