The Sterlings (Part 9): Investing for different goals

Read the different chapters of this story: 1234, 567, 89, 10)

Amy and Travis Sterling pulled into the parking lot, fifteen minutes early for their appointment with Jon. They’d been with their financial advisor for six months, and as Amy searched for a shady spot to park, she reflected on how much easier Jon had made their life when compared to the financial insecurities, losses, and nearly empty nest egg they’d struggled through before finding him.

Travis, ever the do-it-yourselfer, still had some concerns. As if cued by Amy’s thoughts, he said, “I just don’t understand why, if some of our investments are so clearly outperforming others, we don’t allocate more of our savings to those options?”

“Isn’t that exactly the way of thinking Jon cautioned us against when talking about diversifying our investments? You know, to see how they’ll act if the market took a turn for the worse.”

“See, I don’t think so,” said Travis. “Because that makes sense if the market is taking a dip. But now, everything is heading up. So, why should we settle for some of our investments to grow at a slower pace?”

“Well, that’s the kind of question we’re here to ask,” Amy responded. “I’m sure he’ll have a good answer.

“But, if you’re left feeling unsatisfied after our review, we can talk about options then. Okay?” Travis agreed, and the couple headed inside.

One thing Amy always appreciated about their appointments with Jon was never being made to wait. Maybe it was his punctuality, or even the advisor’s complete lack of pushiness, but Amy was slow to jump on Travis’s bandwagon. Either way, it was a relief to be immediately ushered into Jon’s comfortable office by the advisor, himself.

Jon also didn’t spend a lot of time on small talk. Instead, he jumped right into reviewing the performance of their investments, reassuring Amy and Travis that everything was on track.

Once they were finished reviewing their reports, Travis piped in. “Jon, one thing I can’t quite understand is why we’re not allocating more of our assets into the investments that are outperforming the others. Why settle for something that’s growing at half the rate?”

“Great question!” replied Jon. “What we’re doing is called ‘goal-based investing’ and my favorite way to explain it is to use the envelope analogy.

“Do you remember saving for different goals in cash, and each goal would have an envelope?”

Travis and Amy nodded in assent.

“Well, think of your investments in a similar way—like envelopes. And each is assigned to a particular goal; such as your retirement, Sean’s college expenses, and that trip to Europe in a few years.”

“I can wrap my head around that,” said Travis. “But, why aren’t we making all the envelopes grow at the same rate?”



Want to understand why Jon isn’t having all the envelopes grow at the same rate? Find out in the “Amy Sterling” book, found here.