Do you have any brothers or sisters?
Here’s the story of Bob, Susan, and John, who are not only siblings but hard-working triplets who all just retired.
Besides their physical resemblance, the three have a lot in common. For instance, they:
- Have the same middle-of-the-road investment risk tolerance
- Get paid about the same amount (roughly $50,000) per year
- Each receive a cost of living adjustment increase of about 1.5% per year
Some of the investment and financial differences between the three are:
- How they invest
- What their financial goals are
- How much they contribute to their savings
- How long they’ve invested
- And, who hired an advisor, who didn’t, what type of advisor they hired, and how much they paid for the service
First, let’s look at Bob, who was born six minutes before Susan.
Bob is a do-it-yourselfer, which means he doesn’t pay anyone to manage his savings or investments (he likes to remind his siblings how it “all adds up”).
Bob doesn’t like risky investments, but he’s not overly conservative.
Based on information from the financial television shows he watches, and the articles he reads, Bob’s constantly on alert and, anticipating trends, jumps in and out of the market.
Still, he’s a good, consistent saver, and so he’s put 15% of his income away for 20 years.
Next comes Susan, who was born five minutes before John (she calls him “my bigger, younger brother.”)
An amateur painter, sculptor, and carpenter, Susan knows herself well and understands that she’s more creative than her siblings. In her travels and day-to-day life, she tends to make “interesting” decisions over carefully crafted ones. So, knowing this about herself, she made it her top priority to only work with an advisor who helped her stay focused on her goals, consistently reminded her to “keep doing what you’re doing,” and kept her from jumping in and out of the market.
But while her savings are well diversified, her advisor, a man who also worked with their father, charged her a reasonable annual fee.
Susan invests 10% of her income and has for 30 years.
As for John, he’s the group’s perfectionist. He’s obsessed with having the “very best portfolio” he can create. He even took some economics classes at a local college and has complete confidence in his ability to choose securities.
John loves to tease his siblings about how good he is at picking stocks that eventually become winners, but his problem, one he usually doesn’t mention, is that while he often identifies stocks early-on that perform well over time, he doesn’t always have the patience to stick with them.
John works with an advisor who doesn’t charge a lot but doesn’t advise him against making lots of changes to his portfolio.
John has always believed that, because he knew what he was doing, he only needed to save for 15 years (though he did save a comparatively excellent 20% of his yearly income).