Several years ago, a family friend came to my father for advice regarding his retirement fund. I could attend this meeting and my father’s advice to this long-time friend marked me so much that I remember it very well, some twenty years later.

Self-employed, my father’s friend had about five years of active work ahead of him before taking gradual retirement. He had set aside a retirement fund, but he was worried about whether that fund was enough to support him in retirement. He was particularly interested in knowing what returns my father thought reasonable for the coming years. In his mind, it was essential that the returns on his portfolio be attractive in the years to come.

After analyzing his investments, my father’s verdict was straightforward. The sums invested were barely enough to ensure him a comfortable retirement.

Two options were therefore offered to his friend:

1- increase his yields in the years to come or

2- significantly increase the sums saved and invested over the next few years (or more: my father made him understand that it would be a good idea to continue working longer, which would allow him to add to his savings).

In our friend’s place, which solution would you have chosen?

Personally, if I have the choice between a highly uncertain option beyond my control (increase the returns on my investments) and a rather certain option (even if unpleasant), I will choose the second every time.

This is what my father recommended to his friend: “Keep working hard and force yourself to save and invest a significant part of your income over the next few years.” It was the surest way to assure him of a comfortable retirement. This is what his friend did, and he is doing very well today.

I have written in the past that, as a long-term investor, we should focus our energies on the factors that we can control. I would cite the following factors among those that can be controlled:

  • Our savings rate;
  • The construction of our portfolio, including asset allocation and the choice of investment vehicles;
  • The costs incurred by the management of our portfolio.

Among those we do not control:

  • The returns of our portfolio;
  • The state of the economy, the level of interest rates, etc.
  • The geopolitical situation.

You cannot increase your stock market returns by snapping your fingers! But such a goal could tempt us to take undue risks and cause us to lose a lot of money.

On the other hand, increasing your savings rate is a factor that you can control. This is often the best strategy for ensuring a more comfortable retirement. Although it is not easy to do!