Ava, Ruby and the 42 year race

Ava and Ruby are twins, both 18, both finishing year 12 in Geelong, both working casual jobs. At a family barbecue their uncle says something that sticks with Ava: the best investor in the family is whoever starts first. Ruby laughs it off. Ava opens a spreadsheet.

Ava decides to invest $50 a week, about what she spends on takeaway, into a broad market ETF that holds hundreds of companies. She sets an automatic transfer for every payday and turns on dividend reinvestment. Her plan is to keep it up until she turns 30, then stop adding and simply let it ride. Ruby decides investing can wait until her career is going properly. Her plan: start at 30, and make up for lost time by investing $100 a week, double Ava's amount, all the way to 60.

To compare the plans, they agree on an illustrative average return of 7% a year. Both twins know this is a made up smooth number for planning only: real markets lurch up and down, some years fall hard, and past returns do not predict future ones. But it lets the race be scored.

Age 24: the market tests Ava's nerve

For six years Ava's plan runs quietly, and by 24 her balance has grown to about $18,600 from $15,600 of deposits. Then a global shock hits and markets fall 20% in a few brutal months. Ava opens her app and sees roughly $3,700 gone, her balance down to about $14,900, less than she has put in. Her stomach drops. Ruby texts her a screenshot: told you this stuff was gambling.

Ava nearly sells everything that night. Instead she remembers the difference between a paper loss and a real one. Nothing is actually lost until she sells: she still owns exactly the same slices of the same hundreds of companies, and the only thing that changed is the price strangers are offering her today. She was never going to sell before 60 anyway. She leaves it alone, and her $50 a week keeps buying, now at 20% off. Over the following two years the market recovers, as diversified markets have after every fall so far, though nothing guaranteed it, and the cheap units she bought in the gloom turn out to be some of the best buying of her life.

Exhibit: the investor Ava forgot she was

During the crash, Ava checks something she has never looked at: her super. She has been working since 17, and her employer has been paying 12% of her earnings into her fund the whole time, on top of her wage. The balance dipped in the crash too, and recovered the same way, because her super is invested in much the same mix of shares, property and bonds as her ETF. Two compounding machines, one she built and one that came with the job. She makes a note to keep her super in one fund so duplicate fees never eat it.

Age 60: the finish line

Ava stops contributing at 30, exactly as planned, having deposited $31,200 in total. On the illustrative 7% track her balance at 30 is about $46,500, and left alone for 30 more years it grows to roughly $354,000 by age 60. Ruby starts at 30 and never misses a week, depositing $100 for 30 years, $156,000 in total, and lands at roughly $491,000.

Ruby finishes with the bigger number, and she earned it. But look closer at the race. Ruby invested five times as much money as Ava for a result only about 40% larger. Every dollar Ava deposited became about $11; every dollar Ruby deposited became about $3. And it took Ruby until roughly age 45, fifteen years of contributing double, just to catch up to a sister who had not added a cent since 30. Ava's 12 years of small deposits very nearly matched Ruby's 30 years of doubled ones, because Ava's dollars had the one thing money cannot buy back: time.

The spreadsheet has one more row. If Ava had simply kept her $50 a week going from 30 to 60 as well, depositing $109,200 in total, the illustrative track puts her near $600,000, comfortably ahead of Ruby on half the weekly amount. The early start was never an alternative to contributing. It was a head start that made every later dollar work harder.

Ruby reads the finished spreadsheet twice. Her instinct at 18, that investing was gambling, was not entirely wrong about one thing: markets really do fall, and hers would have too. Where she went wrong was treating the falls as a reason to stay out, when they were simply the price of admission to the growth underneath. She still finished with the larger balance, and she is glad of it, but she got there by contributing five times as much money across three times as many years. The early doublings, the cheap ones that cost Ava almost nothing, were gone by the time Ruby began, available only to whoever had been in the market to catch them. That is the part money genuinely cannot buy back.