A portfolio manager made a goal, plotted a course for it and reached it. Thanks to a buoyant market, he actually hit his mark early, a pleasant surprise.
Martin Leclerc recently drove his son, Alex, down to college at the University of Mississippi. He dropped him off with all of the requisites necessary for a child to move on to the next level, plus one big extra, the guarantee of no college debt.
Leclerc, chief investment officer at Barrack Yard Advisors in Washington, D.C., could make that promise to his son because he had already saved for tuition. He had planned for the day his boys would reach college from the moment his children were born.
He made a goal, plotted a course for it and reached it. Thanks to a buoyant market, he actually hit his mark early, a pleasant surprise.
“Investing is simple,” Leclerc was telling me as he prepared for the trip with his son. “It’s just not easy.”
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But Leclerc made it look easy when it came to college savings for Alex and Billy — his younger son who heads off to school a year from now — yet his story is not about how parents should save for education but about how all investors should be saving with goals in mind, and then having a plan to hit their targets.
“I hear people say they won’t be able to afford college for their kids, or they have put some money into a 529 [college savings] plan without really knowing how much they will need,” Leclerc said recently. “And I know that plenty of people are just throwing money into a retirement plan and hoping it will be enough, and it could be just right or it could be too little or too much.
“I don’t understand why people don’t lock it in, plan for it, make it a sure thing.”
Of course, for most people, investing feels like anything but a “sure thing.” It feels more like a gamble, a roll of the dice on money managers and markets that are beyond control.
Leclerc, of course, is a portfolio manager, so it’s not surprising that he has the confidence that he can reach a goal.
What is surprising is that his confidence had nothing to do with his skills as a stock-picker — in fact, he didn’t really do much to choose the investments that are paying off his son’s education — and everything to do with his belief that investing itself is a sure thing, given sufficient time.
Financial advisers and experts are never supposed to talk about investments with any sort of certainty. Leclerc knows that, and he generally follows the script.
“Short-term, you wouldn’t want to plan on or count on anything [in investing]; short-term investing is gambling,” he said. “Long-term, however, you can predict with a reasonable amount of certainty how things will turn out and you can therefore be comfortable that you will reach your goals.”
Here’s how Leclerc did it with his children and their college savings.
When each child was born, Leclerc opened 529 college-savings accounts through a brokerage firm he works with. It was “the state plan,” he said “and not me going out and picking one that was supposed to be the best; you could do this with any 529 plan.”
He plowed $375 a month into the college-savings plan, starting as soon as the kids had Social Security numbers.
That’s $4,500 per year — not an insignificant amount — and it doubled when his second son was born. Leclerc acknowledges being fortunate to be able to set the money aside and knows that not everyone could afford to.
But he picked the dollar amounts not because he could afford it, but because of the math behind them.
With $375 per month earning a hoped-for 7 percent over 18 years, Leclerc knew that he could accumulate a quarter-million dollars, which he figured would be sufficient to pay the tab on college.
Mind you, he was doing this thinking when his son was born, roughly at the turn of the century, at a point when the internet bubble was popping and investors were being clawed by a bear market that extended for several years, only to see the financial crisis of 2008 hit a few years later.
From a timing perspective, the Leclerc children came along just in time to get the worst of the market; the first deposits were decimated early and there were points along the way when it would have been easy to question whether this plan was working.
“My boy was born at the peak of the last cycle, in April 2000,” Leclerc said, “so just setting the money aside ever since then has been a successful strategy despite two of the worst bear markets in the history of our country thrown in the middle.”
Leclerc has friends who said they could make the money grow faster, but the point for him was to keep plowing the field and investing the money until his goal was reached.
Thanks to the bull market after the 2008 crisis, Leclerc’s money grew faster than planned; he actually stopped contributing to the boys’ plans a few years ago, in order to avoid “over-saving” in the college plan.
It wasn’t fancy. It wasn’t easy — saving that much money never is — but it was painless and virtually stress-free.
And just as important, it can be duplicated. Leclerc wishes more people would try.
“Whatever your goals are, make them concrete, figure out what it takes for the numbers to work and then save and invest based on those numbers,” he said. “Whatever you believe the stock market can do for the next 20 years — say 7 percent or 9 percent, whatever you expect — if you put an equal amount into the stock market every month, the odds are that you will get a decent rate of return on your money.”
It works for retirement plans, college-savings plans and any other type of long-term savings, Leclerc said.
“Regular savings — this stuff we all talk about — it really works,” he said. “Don’t complicate it.”