Taking Charge of Your Retirement

Here’s one of my favorite stories from my time at a large investment house in Boston. The story may not improve your investing, but it’s definitely worth a smile.

This big investment house was founded by a dyed-in-the-wool Yankee whose Boston roots ran deep in the cold soil of Massachusetts. When the decision was made to begin offering the firm’s services to those outside the coterie of Boston Brahmins, a network of brokers were solicited around the U.S. to sell its investment products.

The business remained small for many years, but when it began to build momentum in the 1950s, it was decided that the company should invite the top brokers from all over the U.S. to Boston to meet with the founder and see the operation, sort of an esprit-building junket.

When the group had done the tour and met the founder, they were all invited out to lunch with the Great Man. But instead of piling into taxicabs, the founder took off walking, with the group in tow, and wound up at a small restaurant in Boston’s Financial District. Taking the lead, the founder announced that he was having the 99-cent lunch special, and recommended that they do the same. And finally, while the folks from the marketing department watched with chagrin, he asked that all of these meals be billed on separate checks.

Needless to say, this wasn’t the kind of deluxe treatment the brokers were expecting, but they all fell into line.

Then, when lunch was over, the founder gathered up all of their 99-cent lunch tickets and paid for them himself. He announced to the group that there was a meal tax on any check over one dollar, and that by getting separate checks, he had saved the 3% tax!

The corporate types who were in charge of showing the visitors around were afraid that the founder’s penny pinching would offend the brokers, but that wasn’t what happened. When they returned to their hometowns in the various states, they kept telling the story to their clients and saying, “See, that’s the kind of a man you want to have looking after your investments!”

I don’t know if it would work today, but it showed exactly the kind of character people wanted in their investment professionals in those days. Come to think of it, maybe we still do.

But the reality today is that you are being forced to take more and more responsibility for your own investing and retirement planning. Many companies are eliminating their matching program for 401(k) plans. Retirement plans that guarantee an income for life are becoming scarcer all the time. And even Social Security, the Great Untouchable of all government programs, is finding a place in negotiations about spending reductions.

And all the while, interest rates are so low that government bonds and savings accounts are just a license to lose ground to inflation.

The bottom line is that if you don’t have a penurious Yankee working hard to save you 3% on your meal tax (and everything else you spend money on), you’d better be prepared (or preparing) to save and grow money on your own. That nest egg isn’t going to hatch itself.

If this seems like too daunting a task, and you don’t know where to start, let me suggest a plan. I don’t like being too predictable, but a Cabot advisory can give you solid, time-tested advice on how to make your money grow. From the low-risk predictability of Cabot Benjamin Graham Value Investor and Cabot Dividend Investor to the faster pace of Cabot Growth Investor, Cabot Emerging Markets Investor and Cabot Small-Cap Confidential, we can get your investment plan rolling, with you in the driver’s seat. That’s no small matter. Click here to get started.

And one more thing. While we won’t buy you a 99-cent lunch, Cabot is inviting Cabot readers and subscribers to our investment advisories to Salem this August to meet our editors, listen to programs chock-full of great investment lore and ask our experts the questions they’ve always wanted answers to. The Cabot Investors Conference (our fourth) will be held on August 10 through the 12. It’s a great opportunity to hone your investing chops while enjoying a historic New England town (witches and all) during vacation season. If you’d like more information, click here.

Fortune Cookie

Here’s this week’s Fortune Cookie. Remember, you can always view all previous Fortune Cookies by here and Contrary Opinion buttons here.


Tim’s comment: On the surface, this is easy to agree with. But then I start wondering about the word “ correction,” and whether it carries the exact meaning that Goethe expressed in German. Google translates the English phrase as such, “Korrektur tut viel, aber Aufmunterung tut mehr,” but a little digging reveals that the original says, “Lehre tut viel, aber Aufmunterung tut alles,” and Lehre means “teaching,” which makes a lot more sense. For life in general, it’s a fine quote. As to investing, it doesn’t resonate with me. In my experience, desire frequently outweighs knowledge.

Paul’s comment: Tim’s probably right, but I can think of one investing application for this quote. I think that learning about the market and how growth stocks work is a great thing, but when the market actually rewards you by making one (or two!) of your stocks go up, it’s a fabulous feeling. Being “encouraged” by the stock market will make you want to experience it again. And that, of course, is when the market will “correct” you.


Paul Goodwin


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