Teacher To Student: “It’s Better To Be Lazy”

I’ll admit that I wasn’t a hard-working student, when I was a kid. 

Life was meant to be lived, I figured, rather than spent hunched over a desk, amidst books, and listening to the drone of a dull teacher.

That lazy 11th grade Andrew Hallam would have been tempted to sign a pact with the devil if Satan himself had offered this proposal:

“There are 30 kids in each of your classes.  I can promise that you will rank number 3 or number 4 in every one of your courses, and you won’t have to lift a finger: no homework to do, no tests to take, no classes to attend!”

As an adult, if you were offered the privilege of having your investment returns rank #3 or #4 out of a batch of 30 professional investors, would that interest you?

Think about it. 

Each year, a couple of the professionals would beat your investment returns.  But those who beat you during one time period, wouldn’t likely be the same professional investors beating you in another time period.  And your investment returns would continue to rank 3rd or 4th out of 30 investment professionals, decade in and decade out.

As a school teacher, I want to pass this along:  You can manage your money yourself, on less than an hour a year, and beat the vast majority of professional investors.  It’s better to be lazy, as an investor.  And you don’t have to sign a deal with the devil.

Paul Farrell sums it up nicely in his book:  The Lazy Person’s Guide To Investing

And he would agree with the investment decision that I made this month.

My portfolio is split three ways:  40% bonds/30% U.S. stock index/30% International stock index.

I just got paid yesterday, so I took a look at my portfolio to figure out what I was going to invest in.

My international stock index has outperformed both my bond index and my U.S. stock index over the past 30 days.

Currently, I have 40% in bonds/29% U.S. stock index/31% International index.

So what do you think I’ll be buying this month?

It’s not rocket science.  By simply purchasing the lagging index every month, I will beat the vast majority of investment professionals who watch the markets, the economy, read The Wall Street Journal daily, and who (in many cases) sacrifice real living for “investment watching”

I can kick their butts without going to class.  And the devil knows that.

By indexing your personal investments, you can do the same.







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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8 Responses

  1. DIY Investor says:

    Well put. I feel that people are slowly getting the point that hidden costs and fees wreck an investment plan. Even the major magazines are touting the use of low cost index funds. The point that is not gaining acceptance or understanding , I feel, is that less effort usually beats more effort if done the right way! I see so many personal finance bloggers who you would expect to have gotten the message tag on " indexing is a good way to go for those who don't want to put in the effort to do the research etc. it takes to manage assets".

    For some reason these bloggers who are very knowledgeable in personal finance don't take the time to examine the evidence. At least that's my take.

    • Hey Robert,

      You speak, based on experience and a financial education.

      Too many others speak, based on hope.

      Most of those who claim that they can beat the market are young, and new to investing.

      Over their lifetime, they won't be able to do it.

  2. The Dividend Ninja says:


    A nice summary of why index investing makes sense 😉

  3. RobberBaron says:

    Andrew, would you consider a dividend-oriented index fund as superior to a general index? Why or why not?

  4. Hey Robber Baron:

    To be honest, I don't know what kind of index will perform better in the future.

    And I don't think anyone else knows what the comparative future will hold for a high dividend yielding index versus a total market index either.

    We can look at historical data, but that's about it.

    And looking at history isn't always a great indicator.

    What do you think?

  5. RobberBaron says:

    Hi Andrew,

    History can be a guide. Especially if you slice and dice it various ways.

    The 2000-2010 decade was flat for the general market, but according to various studies, by reinvesting/compounding dividends, dividend-paying stocks climbed approximately 100% over that 10-year period.

    Studies over other periods indicate that dividend stocks, reinvesting dividends, do better than the market overall. Most of the time.

    Of course, dividend-paying stocks are typically less volatile than the market overall, which means less "growth" increases in the value of the stocks themselves). In the go-go late 90s, non-dividend growth stocks outperformed the broader market. (We now call this the "dot-com bubble" period, but lots of other growth stocks did NOT crash.)

    SPY vs SDY ETFs (S&P500 versus Dividend-paying members of the 500) is a typical comparison. Vanguard has such funds too, as do most other ETF providers.

    So it might be a question of whether one believes the economy will grow, or remain relatively flat, over the investment term (the rest of your life?). Or whether you will want, at some point in your future, to reallocate (by selling rather than simply adjusting contributions). Since Dividend-stocks are often considered more conservative investments. Bonds, of course, would be considered still more conservative, unless one is investing in "junk bonds."

    I have a preference for dividend-based funds and higher-dividend stocks (by higher, I mean, better than 3% annual dividend with dividend growth expected).

    Andrew, I look forward to reading your book!

    • Thanks Robber Baron,

      You might end up being right. But I suppose there's another possibility. It seems to have become so accepted, based on history, that higher dividend paying stocks will outperform the market in general, but when people recognize this, as they have, it can get built into the prices of dividend paying stocks, providing higher than normal PE ratios, relative to what they have been in the past. When reinvesting dividends, the yields may end up lower, as a result of higher PE ratios,and the past might not repeat itself. That's why I'm definitely on the fence, as it relates to high dividend indexes. Either way, I think both strategies (standard indexes and high dividend indexes) will do well in the future. If we're disciplined, and save well, while keeping costs as low as possible, we're likely going to do very well over our investment lifetimes. And thanks for supporting my book! I look forward to hearing what you think, when it eventually comes out. Wow–book writing, editing etc, is a lot of work! Cheers Robber Baron!

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