Alex walked to the office after dropping off his daughter at the MRT station. Every morning, the father-daughter pair departs at 6:30. Helen goes to school, and Alex heads to the office. Alex is an overprotective parent who wants to ensure his children are financially cared for. He doesn’t have extra money to give to Helen. So, he thought carefully and decided to teach Helen how to manage and invest the money she does have. Over the years, Alex had, through business dealings, squandered Helen’s inheritance. He always compared himself to Mark Twain; for him, investing was a way to make money, and he was good at it, but he had spent the last 10 years as an operator.
Reflecting on his situation, Alex knew he had to re-examine his life and find purpose. It was 9 o’clock at night, after putting the kids to bed, that he jumped on a call with his sister.
“Hey, what’s up? Good morning,” he said.
“So you need to make money? You need enough to retire? You know, you should’ve started this a long time ago.”
Anne, a music teacher in the elementary school system, wasn’t overly stressed about money. Her husband was the breadwinner, and they lived comfortably in a suburb in California. However, she wanted to put some money aside for retirement.
“I know, right. You don’t really think about things until you need to,” Anne said.
“Well, how much money do you have?” Alex asked.
“I don’t make a lot, but I still need to figure out retirement.”
“How much do you need?”
“I think I need about $100,000.”
“How many more years will you work?”
“I want to retire at 65, so I have 15 years left. I just got a promotion, so I’m thinking of saving $500 a month. Is that enough?”
“Well, let’s see. If you live about 20 years after retirement, $100,000 will only give you $5,000 a year. That’s not much. What can you do with $5,000 a year?”
“My expenses are low, and Bill is working.”
Bill, Anne’s husband, was a generous man who led a simple life and did well at work.
“I know Bill is working, but what if he’s not around one day?” Alex asked. “You have to be realistic; $5,000 a year is not enough.”
“How much is in your trading account?”
“$13,000.”
Alex sighed, then tapped away at his calculator, pausing occasionally to ask Anne for more information.
“So, you have $13,000, and you can add $500 a month. What interest rate is the bank giving you?”
“Maybe one percent.”
“Let’s use one percent,” he continued calculating. “You won’t reach the $100,000 you need, but it will be close—around $99,000. But I’m telling you, that’s not enough. Can the bank offer a higher interest rate?”
“Maybe I could open an IRA account. What if they give me 2%?”
“Changing to 2% won’t make a huge difference,” Alex calculated. “You should learn about investing.”
“I know, but I’m not like you; it’s boring to me.”
“Why not try to like it? With some effort, you could do it.”
“I can’t. What if I save $1,000 a month?”
Alex punched the keys again and said, “If you put some time into investing and make 20% a year, you could have about $900,000.”
“That’s a lot of money. I don’t think I need that much,” said Anne.
“Well, how much do you need?”
“Maybe $200,000.”
“If you live for 20 years, that’s $10,000 a year. If you don’t want to work for it, you have to settle for less interest. With 2%, you’ll reach $200,000.”
Anne thought for a moment and said, “Maybe $500,000.”
“Then you have to work for it.”
“I can’t; it’s too boring.”
“Didn’t you do it before?”
“Yes, but I only acted on your advice. Besides, the stock market is risky, isn’t it? I’ve read that.”
Alex interrupted her rudely. “If you’re going to tell me what people believe, then talk to them. If you want to know what I think, I’ll tell you. Did you read my book? I know you didn’t.”
“How much did you start with?”
“$1,000.”
“How long ago?”
“About 14 years ago,” Anne replied.
Alex calculated again. “Did you know you’ve made 20% every year for the past 14 years? If you were doing this professionally, you’d be great, but no one would believe you. The average hedge fund makes about 5 to 6% a year. If you tell people you can make 20% a year, they won’t believe you. That’s my problem. I can always make unlimited money in the stock market, but no one will believe me. So, you better not tell anyone what you did because no one’s going to believe you.”
“I’m not telling anyone. Can I just send you the money?”
“No, because what if I die before you? Besides, these things are easy. Why don’t you do what you’ve done before? Every month, send me a statement. I’ll highlight and make corrections, and then you can buy what you need yourself.”
“OK, I can do that.”
Alex pondered for a moment and then said, “It’s time to bring back that project.”