I Just Found $35,000 – So What Did I Do With It?

Earlier this summer I found $35,000.

It was in a brown envelope, in a ditch, about a mile from my parent’s place.

OK, I made part of that story up.

The only thing I’ve found in a ditch recently was a currently valid Platinum Visa card belonging to a certain Tong Wah Tay. It was across the street from the condominium estate where I live in Singapore. Like a good boy, I called the number on the back of the card last night and had the thing cancelled and reported “found”.

But back to that $35,000. It was real. I didn’t find it in a ditch, but my wife (who rarely knows the status of her own investments) “found” it after one of her U.S. bank CDs reached the end of its term.

This morning I invested that $35,000.

My weakness is investing money in individual stocks. I’m a bit like a friend of mine who has won vast amounts of money in casinos. He keeps playing, and he knows that eventually, the casinos will have the last laugh. That said, gambling is fun for him, and buying individual stocks is fun for me.

If you’re a regular reader of this blog, you’ll know that I’m pretty conservative. I rebalance my portfolio allocation when things get out of whack, but I don’t trade stocks. Trading, in my view, is a slippery slope. I buy when things are cheap, and I rarely (if ever) sell my holdings. Read more in this article: Teacher Waits for Investment Opportunities.  

I’ve beaten the market handily over the past decade, but I’m no dummy.

I’m not going to keep beating the market.

Eventually, the casino will bite me in the rear, and I’ll be forced to index everything. Only the best investors fully index. The rest of us are driven by vanity and a silly illusion.

The vast majority of my money is indexed, which proves that I have at least some potential as an investor. My wife’s account (which I manage) is in Vanguard’s total U.S. stock market index, Vanguard’s total U.S. bond market index  and Vanguard’s international stock market index.  I’m no genius, but I’m no fool either.

My Singaporean based account holds a Canadian short term government bond index and Vanguard’s first world international index among a variety of common stocks that (as a group) have knocked the lights out over the past decade with some lucky bottom feeding purchase strategies. (a euphemism for lucky timing)

So what did I do with that $35,000?

I wanted to prove to myself that I was evolved, and I added to my international stock market index.

Since 1999, my individual stock market picks (the stocks I’ve bought) are ahead of the S&P 500 index by 120%.

So what do you think? Am I crazy to buy indexes at all, with such a track record?

I don’t think I am. But what do you think?


Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School and Millionaire Expat: How To Build Wealth Living Overseas. My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions.

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28 Responses

  1. It really depends on your diversification percentage I would say. It may be where it was needed.

    My question to you: Do you not feel the market are still beaten down for a bargain price company that you follow?

  2. Hey Passive Income Earner,

    I own shares in the Wallboard manufacturer, United States Gypsum (USG) and I think they're selling at a super price. Their management is incredibly honest, from what I've seen and they have faced and passed a tougher hurdle than a slowing (halting) housing market. They overcame messy asbestos related issues seven years ago. They were the last pure wallboard manufacturer to seek bankruptcy protection in June, 2001. Companies that weren't as strong, folded. In the process, they increased market share. This leading business (founded in 1903) can weather the mess and eventually thrive. But I didn't buy any more shares. My cost average is $9 per share. I think it sells at around $12. I still think it's "super cheap" but I feel more confidence buying the international stock index. I can't really go wrong, long term, with a really broad index. But if I'm wrong about USG, I want to know that I don't lose my shirt.

  3. larry macdonald says:

    Would we advise Warren Buffett to buy index funds? I don't think so. You seem to have the Buffett discipline, so perhaps you don't need to put your savings into index funds to any great extent.

  4. Hey Andrew,

    International stock index? XIN? 927 holdings? Only provides distributions twice/year. Really? (If that is the one you bought.) I'll be honest, I'm surprised. I don't think you're crazy, just surprised.

    Why not a brand-name, proven dividend-payer with that $35,000? At least half that anyhow. Imagine the dividends being reinvested?!

    Do respond, I'd like to understand more of your logic sir. Cheers!

  5. Hey Financial Cents,

    I actually bought the Vanguard first world international index (VEA on the NYSE).

    This might surprise you, but I chose it over the same product on the NYSE (ticker symbol EFA) because VEA pays lower dividends than EFA does—thereby making it more tax efficient in taxable accounts.

    I don't pay capital gains taxes here in Singapore, so I'd rather have my companies reinvest their profits, rather than pay me dividends. If they pay me a high dividend, I get taxed on that. If money can get reinvested back into the business, then the business value increases (intrinsically) which increases the stock price over time (Berkshire Hathaway is a great example) and because of my Singaporean residency, I'll never have to pay tax on that capital gains. I buy great businesses too (individual stocks) and sometimes, they pay high dividends. For me, that's a drag.

    When a business pays a dividend, it decreases its intrinsic value because the dividend is like a liability payout. When it keeps the dividend and reinvests it, the company increases its intrinsic value.

    Because I don't pay capital gains taxes (thanks to my Singaporean residency) on stock appreciation growth, I opted for a lower dividend paying index.

    When Berkshire Hathaway was a lot smaller, Buffett looked for great businesses that reinvested their profits (paying little or no dividends). Now, he has such a massive portfolio that he has to buy goliaths–and thus, reasonably high dividend payers.

    By Buffett's rationale, paying dividends to Berkshire Hathaway shareholders isn't fair. If he can increase Berkshire's intrinsic value at a high rate, then he serves shareholders better by retaining the dividends. The investors who would (if they had the option) reinvest their dividends in Berkshire stock would pay friction costs and taxes to do so (in a non taxable account). Paying out dividends has business costs (friction) associated with it as well–beyond the cost of the dividend itself to the business. This, to Buffett, isn't fair, so he refrains from paying dividends. When Berkshire's intrinsic rate of return falls significantly, as a result of size anchoring performance, then Buffett (or the Berkshire board, if Buffett is gone) will re-instate a dividend. (Berkshire paid a dividend for a couple of quarters in the late 1960s, but Buffett says the policy was passed when he was on a bathroom break)

    I didn't buy XIN off the Toronto stock exchange because it's hedged to Canadian dollars. And this costs the shareholder an extra 1% (roughly) per year. That's not a great deal.

  6. Hey Mark,

    Going back to the big question, can I beat a cheap international or domestic index fund by buying blue chip stocks (or any stocks, for that matter)? Statistically, I'm not supposed to be able to.

    I would suggest that Canadians index their portfolios instead of trying to pick which dividend paying blue chips would do well. I think the indexes will beat nearly everyone who does it on their own, with individual stock picks. That's probably the main reason I chose VEA. I'm not convinced that I can match a compilation of a thousand randomly selected stocks over time.

  7. Mich @BTI says:

    Hey Andrew,

    I think you did the right choice. Who will be picking up the demand slack from the USA? The emerging markets! There's still growth out there and the international index funds you chose will expose you to that growth.

    Now the question is, why doesn't my wife find 35000$ somewhere? 🙂

  8. Mich,

    I'm going to tell you (and whoever is reading) a funny story. First of all, I used to be really really frugal. I wrote down every penny I spent in a little book. You could have asked me what my bank balance was at any time, and I could have told you.

    Before my wife and I got married, we went on a trip. We both work at the same place, and once a year, we get a bonus of about $7,500. It was "bonus month", so she would have received $7,500, plus her regular monthly pay. When she went to the ATM machine and came back with a few hundred dollars, I asked her if we had been paid yet (money gets deposited monthly into her account, automatically, so I figured she could tell just by looking at her bank balance). She looked at the bank statement printout, but she couldn't tell me whether we had been paid or not. She used to keep loads of cash in her account, but she never knew how much she had. So the CD story is pretty typical. It beats finding an extra $20 in a pair of pants, don't you think?

  9. You bet Andrew!

    I guess my wife is similar to yours in the sense where she has no idea of our current balance. Alas, because we share the same bank account, there's no possibility of finding hidden treasures. In this case, finding that extra 20$ in a pair of pants does just fine 😉

  10. Andrew, that's an interesting explanation on dividends versus no dividends. I'm sure it helps greatly that you don't need to pay taxes on capital gains.

    What are your thoughts on VT? http://finance.yahoo.com/echarts?s=VT+Interactive

  11. Andrew,

    Thanks for your detailed reasoning in your replies. What I particularly like about these discussions is the decision process and being able to understand the results. I know a millionaire (multi-millionaire) that is doing well with the dividend strategy (retired for 20 years) and you are also proving out the index investing strategy and growth. At the end of the day, I take all that information and absorb it like a sponge to form my own strategy and hopefully accumulate my wealth!

    Taxes implication are also interesting to hear along with how people strategize around RRSP. I think the strategies tend to change when someone accumulate wealth.

    As always thanks for sharing!

  12. Congratulations on being evolved! 🙂

    Hey, you have to do what you are comfortable with. There is no perfect answer with investing. Well, there may be, but you don't know what it was until 20 years later.

    I think it's great you have the 35k that you don't need to allocate to anything else!

  13. Thanks for the reply Andrew (I knew you would). I probably should have figured you would have purchased a Vanguard product (VEA) and not XIN. I now realize why not XIN (hedged to Canadian dollars; costs you money n Singapore).

    And…yes, if you're keeping this in a taxable account, then certainly go with the one that has growth potential and not dividends. You don’t pay capital gains in Singapore? WOW. What an incentive… I understand your logic better now. Great businesses are great buys but given where you live and work, it would be a drag to pay taxes on this; not have any opportunity to take advantage of a dividend tax credit (like here in Canada). It's really the main reason why I'm dividend investing, keeping all that unregistered like many other DIY investors.

    To Passive's point, I think your blog is great because not only do we learn from each other (and you) about investing in general, but about the finer points of investing; how tax implications change investing strategies based on where you live and work. Dividend investing works for me in Canada, but not so much for you in Singapore.

    Again, great sharing and dialogue.

  14. @Kevin@InvestItWisely

    Hey Kevin, I think VT is a great one-stop shop. It's amazing to think about how easy and effective investing can be. Just buying this one ETF gives you cheap exposure to the world, based on representation of global capitalization.

    When I asked my readers a year ago to name one stock, quite a few of them "cheated" by picking VT. I think it was my most popular post: http://andrewhallam.com/a-narcotics-accusation-a-

  15. @The Passive Income Earner

    Hey Passive Income Earner:

    I think reinvesting dividends directly is one of life's best kept secrets. You can buy shares for free, reinvest partial shares, and grow your wealth without the middle man. Few things are sweeter than that. Before I moved to Singapore, I had nearly everything set up directly, instead of with a brokerage. And the stock certificates sure looked cool as well!


  16. @Financial Cents

    Thanks Mark,

    I also enjoy the intelligent exchanges we have in this little blog community we've established. The nice thing about steady dividend payers, like JNJ and the Canadian banks, is that they are great businesses, and only great businesses can pay dividends over and over and over, while increasing them over time. I own some high dividend payers like Coke, JNJ and Pfizer because they're great businesses. I'm not keen on the high dividend, but it's the price I have to pay for a great business sometimes. I net about 2.8% on a 4% dividend. My biggest holding of all is Berkshire Hathaway–fully made for expatriates!



  17. I think you made a smart, safe choice with your index investments. The speed of change in business is only increasing, and today's hot company may be on the trash heap in a few years. It is hard to pick individual stock winners. As John Bogle might say, you've guaranteed yourself that your portfolio will capture all the economic gains the world economies will generate.

  18. @The Biz of Life

    Hey Biz,

    I agree. We don't want to end up like the Gotrocks, right?

    I can tell by your phrasing that you'll know what I mean by that.

    Thanks for visiting,



  19. Andrew, what do you think of these guys? http://www.davisfunds.com/dnyvfoverview.html
    Fluke? Long-term luck?

  20. @larry macdonald

    That's the perpetual battle I have with myself Larry. To what point am I that chimp who has just called "heads" a dozen times in a row? I'm no Buffett, that's for sure.

  21. @Kevin@InvestItWisely

    Hey Kevin,

    Long term, I don't see that those guys have a reasonable after tax margin over the S&P 500 index. So I'm not sure if they're of statistical relevance. Remember that an actively managed fund has to beat an index by roughly 1% annually, just to draw even with it, after taxes (in a taxable account). If the Davis funds have done that, long term, they haven't done it by much.

    If you want to see something really impressive from the intellectual village of Graham and Doddsville, check out this recently re-opened American mutual fund:


    I'm going to suggest that Bill Ruane established this track record without luck, but with a special emotional aptitude and an education from the greatest investment teacher of all time: Benjamin Graham.

    I missed out on meeting Bill, unfortunately. He was my friend's uncle, and he passed away a few years ago. His team, however, carries on his legacy in a similar fashion. Going forward, this one will be very interesting.

  22. @Everyday Tips

    Everyday Tips:

    Thanks for the commendation. And I think you're right about people doing what they're comfortable with.

  23. larry macdonald says:


    In some respects you have a few advantages over Buffett. For one thing, you are not restricted to investing in only the biggest and most liquid of large caps.

  24. @Andrew Hallam

    Very interesting… that fund averaged 14% CAGR vs 10% for the S&P 500.

  25. @Kevin@InvestItWisely

    Hey Kevin,

    Considering a 4% annual advantage for the Sequoia Fund over the S&P 500 index (for the past 40 years) I suppose we could call that statistically significant. It closed to new investors in the early 1980s, which all great funds do when their assets grow to a certain point. To have sustainable outperformance, they can't get bloated in assets like Fidelity Magellan or Legg Mason Value Trust did. It's tougher outperform when your assets bloat. That's part of Larry McDonald's point about Buffett is, above.

    When a company shuts funds down to new investors, it's pretty special. You know that they have an alignment with investors' interests, rather than with continuing to take assets from people, thanks to their track record. I believe, in the industry, it's referred to as "Elephantitis"

    Anyway, with many of Sequoia's oldest investors dying off (most had been investing with Sequoia since the early 70s) Sequoia had to re-open the gates to American investors last year (or the year before). The big question: will their culture continue? Is there enough of Bill Ruane left in that place?

  26. @larry macdonald

    Hey Larry,

    You're right. If I believe in a business, like I did with Fastenal (I’ve been buying on dips since 2004)

    then I could put 10% of my portfolio in it and really "move the needle". Buffett's asset base is probably too big to do that with any company, let alone a relatively small or mid-sized one. He could buy shares in a company like Fastenal, but even if they went to the moon, it wouldn't improve the Berkshire bottom line a heck of a lot.

    That said, Buffett also has advantages I don't have. He's a heck of a lot smarter and more experienced than I am. I really bow down to the man. I own 5000 shares of Berkshire, so it bodes a funny question. Am I a great stock picker for buying Berkshire (I like to bottom feed on that one too) or am I just a guy putting faith in a guy who's a better stock picker than I am—and putting faith in the idea that his successor will also be a better stock picker than I am?

  27. kristin b says:

    Hi Andrew! I just listened to your two part interview on Afford Anything and loved it! It led me to your blog and I’m so grateful. My husband and I started a bit late with investing (I’m 33 and he’s 41), but we now see our foolishness and have been putting 35% of our ncome each month into a few Vanguard index funds. Sometimes when we have a little extra, I experiment with Lending Club, Groundfloor, and online Reits (like mogulREIT). Mostly for fun/curiosity/”diversification”. Is this pointless? Is there a place for these types of investments, or should I stick with index funds all the way?

    We’ll be getting a huge windfall soon- more than 4x our annual salary in one chunk (!!!), and I need to figure out where to put the money. Soon. I think you’ll probably tell me keep adding to our index funds. If I told you my hubs wants to take a couple year sabbatical from work to build our own homestead and will need extra cash flow from investments to fund this dream, is your answer the same? When I think of cash-flow producing investments, I don’t think of index funds, I think of real estate, dividend stocks, etc. But maybe this is a fallacy. Do people use index funds for cash flow before they are “officially” retired? Thanks so much for all you do!

    • Hi Kristin,

      Some people use cash flow from a portfolio of index funds before they are officially retired. But there’s a rule of thumb suggesting that they should have the money invested for at least five years. I wouldn’t add money to the markets that you might be needing before a five year period. The markets could always go backward. To answer your first question, I wouldn’t “experiment” with money. Short term results mean nothing. Long term results mean everything. Consider putting this windfall in a diversified portfolio of index funds….if you don’t decide to take time off to build your homestead.


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