Make Sure You Aren’t Falling Behind

If you had invested $200,000 in the world’s stock and bond markets on September, 11, 2006 (and didn’t add a penny to it) would you have made money?

You should have made $61,257.13, by May, 1, 2011.

How do I know?

That’s what the world’s stock and bond markets would have earned you, if you weren’t paying foolish fees or playing silly games with your money.

  •  You wouldn’t have needed to follow the economy.
  •  You wouldn’t have needed to watch stock market-based television.
  •  You wouldn’t have needed to trade.

Investing is painfully simple:

  1. Diversify your money across the world’s stock markets at the lowest possible cost (with indexes)
  2. Buy a bond representation (a bond index) at the lowest possible cost
  3. Rebalance your portfolio once a year (if you feel like it)

Your original $200,000 on September 11, 2006 would have grown to $261,257.13 by May 1, 2011—with no money added, if you had followed an ultra-simple strategy.

If you made less than that, then you wasted money.  Full stop.

Investment Seminar Accountability Check

On September 11, 2006, I held an investment seminar at Singapore American School.  I said that if an investor bought stock and bond index funds, they would likely beat more than 95 percent of professional investors, after all fees and taxes. 

That’s academically irrefutable. 

The Americans at my school have nearly all of their money in taxable accounts.  And indexes are far more tax efficient than the actively managed products sold by groups like Tie Care, Raymond James, or any other investment service company that sells actively managed mutual funds over indexes.

When I gave that seminar, in 2006, I entered a hypothetical $200,000 into a free online portfolio that would reveal the portfolio’s results.  

The portfolio was simple:

The $200,000 was split into thirds

  • 1/3rd into Vanguard’s International stock market index
  • 1/3rd into Vanguard’s U.S. stock market index
  • 1/3rd into Vanguard’s U.S. bond market index

(Vanguard is an American non-profit financial service company with the lowest fees in the industry)

You can create investment accounts, such as this one, by yourself. 

Or you can hire a fee-based advisor to create one for you.

One of the most important things is this:  if you can’t afford to give money away, then don’t.



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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19 Responses

  1. Steve says:

    Andrew – are you aware of any Canadian websites that allow you to plug in a portfolio in this manner? I'd love to be able to track an iShares or Claymore constructed portfolio in this manner but the SmartMoney website doesn't seem to include Canadian funds . . .

  2. Hey Steve, will allow you to do it with Canadian funds and stocks. They also allow you to plug in U.S. stocks, but once you throw those in, the tracking results become terribly inaccurate. They don't do a great job with the exchange rate, so if you use these guys to track your money, keep it Canadian.

  3. Teach in VN says:

    Hi everyone,

    I've been reading up heavily the last couple of weeks. I've finished "Elements of Investing" by Malkiel and Ellis, and I'm know reading the guide to a financial plan by Swedroe. Quite enjoying it.

    I would like to do some testing of strategies using historical data, focusing on ETFs as I'm not American.

    Can anyone recommend a (free?) tool to do that? I am thinking about changing ETFs, changing rebalancing strategies, etc…

  4. Just one question:

    Why are you interested in historical strategies? The thing about investing is that the past is rarely a prologue to the future. Just keep costs low and rebalance once a year (or through fresh purchases) and you'll beat the vast majority of the pros.

    I'd keep things really simple:

    An international bond ETF

    A world stock ETF

    And a Spanish stock ETF

    If I recall, you're Spanish, right?

  5. Teach in VN says:

    Hi Andrew,

    Yes, you are right in that, and all I've read says the same. I'm not planning to use the historical data in that way, but simply to do some "practice runs" in a somewhat realistic situation. It's more of a learning exercise:

    – What does rebalancing look like when you need to make the decision yourself.

    – How to do a progressive moderation of the risk by increasing bond allocation over time.

    – What purchase schedule minimizes the transaction costs over time, and does that make a difference in the long run.

    – What does it look like, when you go through a market crash like the 2008. It might help me to get mentally ready for when it happens again.

    Regarding keeping things simple:

    I see that does crazy 20something fund portfolios. The Couch Potato goes for 40-20-20-20. You suggest using just three investments. Malkiel and Ellis suggest just one total bond fund and one total stock market fund. Decisions decisions! I feel my "sweet spot" of simplicity might be in 4 or 5 ETFs, and then maybe target two laggards in each purchase? I don't know yet 🙂

    And yes, though I'm Spanish, I think I'm possibly better off by using a German stock ETF, and gain exposure to the Euro through a stronger economy. I don't need my Euros to be Spanish 😉

    In any case, it's quite clear that I won't be choosing ETFs based on historical performance, but on diversifying and ensuring exposure to the economies that are more relevant to me (Europe and Asia). And on their low fees, of course. That said: is there any online catalogue of ETFs you would recommend?

    By the way, I've contacted DBS, and it looks like a foreigner just needs to go to a branch with his passport to open an account with them. And from the DBS Vickers website, once you have a DBS account, opening a brokerage account is very easy. Maybe a quick trip to Singapore is in my agenda very soon.

    Some friends have recommended TD Ameritrade to me, though. They seem to have a flat rate trading fee of 9.99 usd. That seems cheaper than DBS Vickers, and it looks like you can request an account with them from outside the US. Has any non-American tried this?

  6. gibor says:

    Andrew, and if you were started the same portfolio not in Sep 11, 2006, but in Sep 11, 2008 or 1999, numbers would be completely different 🙂

  7. @gibor

    True, but it was Sept, 2006 when I gave the seminar. The portfolio would have looked much better if I started it in 2008 (you're right) or 2003. Even if I started it in 1999, I think it would be higher today, than it is in my example.

  8. @Teach in VN

    The Ameritrade option might be a good one.

    But you never know: brokerages sometimes allure investors with low cost commissions, but their bid/ask spreads can be higher. Whatever option of indexes you choose, if you're diversified, and consistent, you'll do very well…as long as you're mentally strong when markets collapse. And from time to time, they will fall heavily. You're smart to think about this and prepare yourself. Keep me updated on what you eventually decide to do. I really appreciate your detailed comments: let them be a guiding light for other expats in Vietnam!

  9. gibor says:

    @andrew, I don't think so 🙂 for example in Sep 11, 2007 VTI was 73.7 and now 69.41, in addition there is inflation and US$ fluctuations, so without rebalancing you would loose money. Yes, you can say that in Sep 2007 there was a "bubble", but who knows if there is a bubble right now?! And looking at the chart, you would do much better investing in one of the dividend aristocrats like MCD or ABT

    • You're forgetting something Gibor: rebalancing. My account is significantly higher today than it was in late 2007, for one reason. When the markets started to collapse in 2008/2009, I started to buy stock indexes with the bond indexes I was selling.

      At one point, just by rebalancing, I had sold a healthy six figure bond component, and bought stocks with the proceeds. Then I bought nothing but bonds when the markets recovered, and in June, 2010, sold some bonds to buy stocks when stocks had falling back again. I wasn't trying to time the market; I was just trying to keep it aligned at the following: 40% stocks, 60% equities. I wasn't lucky either. When my portfolio's stocks rose, I bought bonds, because my alignment was off. And then when the markets fell, big time, I had to sell bonds to buy equities, just to keep everything aligned. I made some very nice profits, following an emotionless strategy of rebalancing. And that's the same strategy that I promoted at the indexing seminar I gave.

  10. gibor says:


    "You’re forgetting something Gibor: rebalancing." – no, I didn't… I mentioned in my last post "without rebalancing".

    "40% stocks, 60% equities." – did you mean 40% bonds?

    Andrew, how ofter you advise to rebalance? For me, it's a challange to understand when stocks are really falling back and for how long they are falling and when they are recovering

  11. Barry says:

    Hi Andrew

    Its now August 2012, how does the portfolio look?

    When it made $61,257.13, by May, 1, 2011, did this include dividends?

    I see where rebalancing would have made sense as well and appreciate its not included in the figures


    • Hi Barry,

      Rebalancing and dividends are both included in the figures above. As you know, global equities suffered since 2011. This portfolio, however, is slightly higher in value, despite that. I'll do an annual report on the portfolio on September 11, 2012.



  12. Julia says:

    Hi Andrew, I just finished reading your book (which was actually recommended by a friend of mine who taught with me in the US and has been in Singapore for the past three years). I’ve also done some independent research, and I do feel that I’m ready to go.

    I’m going to use Vanguard and am going on your recommendation for the Total Stock Index, the Total International Stock Index. But, I am confused about the recommendation for the Total Bond Index. In talking with Vanguard, they told me that Index uses 5- to 10-year bonds, with an average of 6 year maturity date. But, in your book I know that you suggest using 1-3 year bonds. Vanguard does have an Index with shorter-term bonds (VBISX). It’s rated 1 (very conservative); the Total Bond is rated 2.

    Other resources I found recommend the same Indexes that you do, but I’m just confused about the length of the bonds. Do you recommend using the Total Bond index with 5- to 10-year bonds? If so, why? If not, would you recommend the VBISX index?

    Finally, since I’m splitting my stocks 50-50 (35% in domestic, 36% international), and the remainder (my age, 29%) in bonds, do you recommend splitting my bonds 50-50 and buying international and domestic? If so, do you recommend the Total International Bond from Vanguard or should I look into others?

    I loved your book and used it in my Algebra 2 class this year to help the kids start to understand where they can go if the plan and act early. Thank you!

    • Hi Julia,

      Go much lighter on the international bonds. You may not even really need them. If you choose them, keep them to about 1/5th of your total bond allocation. Wherever possible, it’s better to go with short term bond indexes versus longer term bond indexes. Shorter term, as I mentioned in my book, will nearly always beat inflation because even when interest rates (globally) rise, new bonds will replace older ones more quickly with an index comprising shorter term bonds. I think it’s fantastic you have started down this road at such a young age. Keep it up! And remember, your biggest challenge won’t be the exact allocation of each fund, but your emotions.


  13. Julia says:

    Thanks so much, Andrew. I’ve noticed that the same exact accounts in Vaguard that are ETF’s have much lower fees.

    For example, the Total Stock Index has a fee of 0.17%, but the ETF has a fee of 0.05%. The Total Bond Index fee is .2%, while the ETF is 0.1%.

    Is there any reason that I should not choose the ETF?

    Thanks again!


  14. Julia says:

    By the way, I would hold ETF’s like I would the Indexes: I wouldn’t be continuously buying and selling, just rebalancing my portfolio monthly.

    • Hi Julia,

      Those ETFs are great. As long as you realize you won’t be able to set your deposits into each of them on auto pilot, as you could with the indexed mutual funds.

  15. Julia says:

    Thank you so much, Andrew. I so appreciate your help and quick responses!


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