Why the Tortoise Retires A Millionaire

by Alex on December 19, 2011

Today I am proud to introduce my newest staff writer: Alex Humphrey.  I am confident that you will enjoy Alex’s crisp and sometimes edgy writing style.  You can read more of Alex over at his site: Entreprelife.

You’ve heard the story about the Tortoise and the Hare, right? For those that weren’t exposed to the childhood favorite, it goes like this:

Tortoise is sick of Hare teasing him for being so slow. One day he challenges Hare to a race. As the race begins, Hare easily rushes ahead. When Hare is half way, he looks back and sees Tortoise far behind. To make tortoise look even worse, Hare decides to take a nap right on the track! But when Hare wakes up, he sees Tortoise inches from the finish line! He runs as fast as he can but is beaten by the tortoise who gleefully says,

“Slowly does it every time!”

The moral is simple: do the work and you’ll win the race. Hare thinks he can get by without effort and he loses. The tortoise slowly plods along, even when he’s far behind, and eventually wins the race.

If Tortoise was an investor (and I’m sure he is) he would become a millionaire the same way he won the race: slowly every time.

Invest Like the Tortoise

Imagine the Tortoise as a “normal” investor. He puts about 15% of his income into mutual funds with a pretty boring breakdown:

  • 25% in Growth
  • 25% in Growth and Income
  • 25% in Aggressive Growth
  • 25% in International

It’s average, boring and gets a normal 12-to-18% return. Some months are up, some months are down, but the tortoise plugs along for 30 years. If his investments were in a Roth IRA and he contributed $414 a year at a 12% interest rate he would have 1.46 million in 30 years. Even more exciting, our tortoise only contributed $149,000 dollars!

He’s a millionaire by year 27 and if he increases his contributions at any time he’s a millionaire significantly sooner.

What About the Hare?

The Hare doesn’t want to wait 30 years to grow that nest into a million bucks. Watching 4,000 become 5,000 that first year isn’t exciting. He’s investing in junk bonds, gold, and learning to time the market. He thinks he can get 10 or 20 times his investment by taking the risks. It’s more fun than the tortoise’s method and he will be a millionaire in a few years!

Sadly for him, history shows us that Hare investors get about the same returns as gamblers. They may see significant early gains, but in the end the house wins and they lose everything.

Be the Tortoise

It’s easy to get swept up in big numbers and “secret methods”. The Ponzi scheme works because the Hare’s method is more exciting than the tortoise’s.

But if you want to retire a millionaire, then you need to remember: “Slowly does it every time!”

And if you have more questions about investments, Joe has a several investing resources here on the blog.

Are you investing?

Alex Humphrey is a personal finance writer and coach at EntrepreLife a personal finance blog that teaches easy ways to dominate money by dropping debt, investing well, and saving for the things you love to do. When he’s not blogging he leads a youth group, spends time with his wife, and figures out new ways to teach people personal finances. You can follow him on Twitter and Facebook and subscribe to the EntrepreLife mailing list.


{ 9 comments… read them below or add one }

krantcents December 19, 2011 at 1:39 pm

Slow and steady trumps everything else! It is tough to be patient tough or keep your eye on the ball (long term goal).


Alex December 19, 2011 at 5:12 pm

It feels impossible! But everyone who gets there is happy for it.


Corey @ Passive Income to Retire December 20, 2011 at 11:29 am

I am investing for the long term like the tortoise, but I can’t wait that long. I am also working to build up a cash flow so that it can do all the work for me. Best of both worlds.


Alex December 20, 2011 at 10:53 pm

Yeah, in other areas of life there are advantages to going fast, however, it’s always a good idea to go slow enough to make sure everything is going well.


Geoff December 20, 2011 at 7:08 pm

My investments and retirement definitely sit firmly on the “tortoise” side, while my entrepreneurial work keeps my income in “hare” mode. I guess a good mix of both can work out if you have a long investment horizon. (although I’d really like my horizon to be 5 years 🙂 ).


Alex December 20, 2011 at 10:54 pm

LOL! Me too. haha


Nick Hays March 4, 2012 at 9:47 am

Nice post, I am in the process of writing a series on this topic (first post be up on my new site soon).

One point though from my humble perspective – the “normal” 12-18% p.a. returns you cite are way too high considering the long-term trend of stock market returns. S&P 500 (incl dividends) returned about 9% p.a. from 1965-2011. That is before inflation ate into that by around 2 or 3% p.a.


Alex Humphrey March 5, 2012 at 1:10 pm

while the S&P 500 is a good measure of the market as a whole, it is not necessarily a good measure of mutual funds in general. While there are plenty of them that make less than 15%, I have several friends (and personal experience) making more than 15% from year to year – this includes during the recession.


Nick Hays March 7, 2012 at 7:27 am

Hi Alex, Granted – if you had been predominantly in, say, mining funds during the past decade you would have out-paced the broader index. However my view is that for most retail (‘tortoise’) investors, over the long-run we can’t expect to consistently pick winners at a stock-level, sector-level or fund manager level. Furthermore it is a mistake for them to try. This decade’s outperformer is likely to be next decade’s underperformer. Second guessing the market will lead to over trading and under performing. Long-term retail investors should aim to achieve the overall market performance. If they do that then they are doing well, and actually will be outperforming most retail investors who succumb to picking winners and ‘market timing’.

That’s my 10 Taka worth! Nick


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