Tale of Two Brothers

Financial literacy is wonderful if you have it,
expensive if you don’t.

Peter and John are brothers. Since young, Peter always had the habit of stashing away a portion of his lunch money, saving up to buy something bigger later on. John on the other hand, loved buying the latest trinkets he could find from the bookstore.

At the age of 21, both brothers entered the workforce together, earning a starting income of $30,000/year.

Peter, true to his nature, set aside 20% of his earnings to be invested ($6,000/year) so that he could fulfil future life aspirations.

This meant that Peter could not drink Starbucks as often.
He could not catch movies as often.
He had to budget his spending whenever he went out.

Peter continued investing 20% of his income until the age of 30.

John on the other hand, was living large.
He had the coolest clothes.
He went on beautiful holidays often.
John was having the time of his life.

When both brothers turned 30, they fell in love with their respective romantic partners. They both decided to settle down and start a family.

Peter stopped contributing to his investments as expenses started piling up but kept his portfolio in the market without any new contributions.

John stopped spending money frivolously and concentrated any excess savings into his family expenses.

By 40 years old, John started to worry about retirement and decided that he had to start getting serious about setting aside money.
He invested $12,000 annually.

At 65 years old, both brothers contemplated the idea of retiring and looked at their portfolios, and the results were in:

Peter contributed a total capital of $60,000 and ended with a portfolio value of $1,299,320.

Jack contributed a total capital of $312,000 and ended with a portfolio value of $966,028.

Investment rate of return assumption: 8%, based on a market neutral globally diversified portfolio over the long-term

This shows that you need not invest a lot of capital to make good returns, you just have to do it early. While John tried to play catch up in his later years, Peter had time on his side which ultimately proved to be his most significant edge over Jack, as his investments had time to compound.

The best time to start investing was 20 years ago, the second-best time is today. Perhaps you want to start on the journey of securing your financial future but are unsure about:

·         What should I invest in? Where should I invest?

·         How should I manage my portfolio?

·         How do I ensure that my portfolio does not go to zero?

·         How do I achieve a rate of return that I can reliably rely on?

If have these questions or feel that this short story has made an impact on you, do not hesitate to reach out to us for a review meeting.

While most people feel that the current market conditions are scary, we actually view this as the best time to invest. Click here to schedule a 30-minute no-obligation exploratory discussion where we can listen to what financial concerns you have at your life stage and allow us to assess if we are able to help and add value to your financial journey.