Millionaire Teacher’s Money Moves

The world’s stock market index and the S&P 500 have gained roughly 5% during the past three months, to April 18, 2012.

Depending on your age, and your response to the gain, I can tell whether or not you’re an astute investor:

If you’re employed, below the age of 50, and you’re happy to see the markets rise, then you probably don’t understand how investing works.  And that’s a shame.  Investors are collectors.  And while you’re collecting assets, you shouldn’t celebrate when those assets rise in price while you’re stockpiling them.

If you’re like most people who celebrate rising prices, you’ll buy when you’re happy and shift your money when you’re sadly disappointed.  Writing for Barron’s, Martin Conrad wrote in The Money Paradox that the average investor made just 1.9% per year from 1988-2008, while the average actively managed mutual fund made 8.4% annually.  If you’ve read my book, Millionaire Teacher, you’ll know that an indexed strategy is far better than investing in actively managed mutual funds, but that isn’t the point of my argument here. 

An investor’s behaviour is far more crucial than decisions based on what funds or stocks they buy.

While the world’s stock markets were sinking in 2011, I bought nothing but stock indexes with my monthly savings.  I even sold $50,000 of bonds to add to my stock component, on October 20th.

I’m not a gambler. 

In fact, I might be one of the wimpiest investors you know.  I keep a low cost account of just three ETFs representing the Canadian short term bond index, the first world international stock index and the total U.S. stock market index (XSB, VEA and VTI respectively).

The low cost index or ETF you select isn’t all that important.  Reams of investors fruitlessly debate the merits of one index over another.  And I often get questioned as to why I own, for example, the short term Canadian government bond ETF (XSB), rather than the total bond index (XBB) or some other promising fixed income instrument.  My response?  It doesn’t matter.

Your behaviour is far more important.

Create a diversified account of stock and bond indexes.  Rebalance it with new purchases (buying the lagging market) or through a manual rebalancing once a year.  Over your lifetime, you’ll likely outperform everyone you know.  I promise.

The rising stock market over the past few months has dropped my bond allocation considerably, as  a percentage of my total portfolio.  Today, I have roughly 33% of my portfolio in bonds because my stock ETFs (which I loaded up on when they were low) have now risen in price.

Am I worried that my bond allocation is below my 40% target? 

Not really.  I’ll just keep adding my savings to my bond index, which I’ve been doing for months.

I suppose I’ll have to get off my duff to sell about $100K of stock market indexes if the stock markets rise further.  At some point, I’ll need to get back to my 40% bond, 60% stock allocation.  But I’m not too worried about that.  I think the best investors are low key Buddhas, rather than highly tuned market watchers.

Does the hard core mathematician (who rebalances with accurate precision) beat the lazy guy like me who occasionally lets his portfolio drift?  I don’t think so. 

I like my approach. 

It’s stress free, easy and has probably beaten the returns of everyone I personally know, over the past decade.

If you can be dispassionate, keep your costs low, and not get too carried away about your specific indexes of choice, you’ll do just as well as me over the next decade.

I can guarantee that.

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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20 Responses

  1. Mark says:

    Thanks, Andrew, for another great post.

    I think you nailed it on the head in the last paragraph when you stressed the importance of being dispassionate. I find that really hard to do. It seems counterintuitive when you're trying to make money in the stock market. For some reason I want to take a peak at the indexes a few times a day. At 52, hopefully I have enough years left that I want the prices to be as low as possible, but I must admit that my heart sinks a little when it's a "down" day in the market and the value of my portfolio has dropped.

    I know your passive approach to investing is the best approach. I'm just finding it a lot harder than I anticipated it would be!

    • Hi Mark,

      I know that it can certainly be a challenge. But if you can collar your emotions and hope for cheaper price levels, then you'll be happier when the markets drop, and perhaps you'll feel neutrally about market rises.

  2. Blues says:

    Hi Andrew, I am really glad that I came across your book! Really "opened" my eyes to index investing which I gave very little regard to previously.

    One question – will you consider having a commodities ETF in your portfolio? This could be another way to diversify.


    • Hi Blues,

      A small portion (less than 15%) to a commodity index would also be a very good idea. By rebalancing your asset classes, you would also smooth out the volatility of the portfolio as well. Thanks for the kind words about my book!

  3. Rookie says:

    Hello, Andrew,

    I bought your book recently and have just finished reading it. Thank you very much for simplifying the financial terms and sharing your investment approach – it is simple and yet compelling. I have always found financial investment books to be impossible to finish reading but your book came across as down-to-earth, genuine and entertaining. Well done!

    I am 39 and am now in the process of effecting the changes in my investment portfolio which comprises of two properties with mortagages and stocks as I feel real estate is also a form of longterm investment particularly in Singapore.

    My plan is to convert most of the stocks to indices. I also read about how you tried to clear your mortgage in the quickest time possible. My question is at any point of time if I should have additional cashflow and regardless of the market performance, should I be putting the money into clearing the mortgages as priority over injecting into the indices portfolio or should I split the cash between both?

    In addition, for my age at 39, what would you recommend as a guideline reference only for the indices investment portfolio value to be?

    I look forward to hearing from you and getting your advice on this matter. Thank you.

    • Hi Rookie,

      With additional cash flow, you might be wise to allocate some to the mortgage and some to your investments. You'll never know what will actually be better, at the end of the day. But if you're comfortable splitting the extra money this way, you should go for it.



  4. Kristen says:

    Hi Andrew,

    I recently read, highlighted, bookmarked, and made notations all over your Millionaire Teacher book. I'm a 41 year old former teacher who wishes she'd learned this stuff years ago.

    To keep this comment/question simple, I'll just say that I'm totally stressing out because I now don't know what to do with all the stocks I own. I'm up 33%, which I know is great and it's probably a good time to get out, BUT do I just up and sell all those things and buy the ETFs instead? Even the ones that are in the hole? And the ones that are cranking in 100%+ returns?

    I stink at this. I actually haven't sold a stock in 17 years. I'm always afraid to sell and 17 years ago we bought our first house – that's the only reason I sold then.

    So – what do I do? Any comments, critical or otherwise, hyperlinks or reading suggestions would be greatly appreciated.

    Totally sweating it in Texas,


  5. Hi Kristin,

    Where is your money currently invested? If you give me an idea of your breakdown and funds, I may be able to offer a suggestion.


    • Kristen says:

      Thank you, Andrew.

      I have my 401(k) and 401(k) Roth in Vanguard's Target Retirement 2040 Fund (thanks to reading your book – I moved them all the first opportunity I had). All my loose stocks are in Sharebuilder.

      WOW – today I'm down to being up just 22%, down from 33% when I wrote on April 27th. This is why I don't look at these things often!

      So, I have Apple, Amazon, ConocoPhillips, Ebay, Fossil, GE, Honeywell, Logitech, Netflix, Phillips 66, QQQ, Under Armour & Exxon. Everything is currently up except Logitech (down 27%) and Netflix (down 29%). Something crazy happened to Fossil, which dropped $47.25 just today. Hmmm. Between them all I don't have much – $16,287. That's the beauty of Sharebuilder: I could buy bits of stocks over time and not spend a fortune and just get one share of one company.

      I would be perfectly happy to move to the couch potato kind of financial arrangement, but I really have no clue when to sell what I have, or whether I should just hang onto these things and stop buying more and start buying the ETFs.

      Is that enough information to help you help me?

      Thank you again for sharing your knowledge (always the teacher!).

      • Hi Kristin,

        I used to have a portfolio comprised of individual stocks and indexes. Roughly half of my equity portion was indexed, with the other half spread between stocks. In total, I had about $1.4 million in stocks: $700,000 in stock indexes and $700,000 in individual stocks.

        I realized that rebalancing a portfolio of indexes was easier than trying to figure out which stocks to sell off. So I sold ALL of the individual stocks on the same day and immediately indexed my entire portfolio with the proceeds.

        And I'm sooo happy that I did. It might be tough to do, and I wouldn't recommend it if I hadn't done it myself.

        I wrote about it here:

        I hope this helps you somewhat.

        And if you have a couple of minutes, I’d be thrilled if you could write a brief review of my book on Amazon. Here’s the link, in case you have time!

        Thanks Kristin!


  6. Penny says:

    Hi Andrew,

    Does the Singapore portfolio profiles in your book on

    20% Singapore Bond Fund A35

    20% Singapore Stock Fund ES3

    20% Canada ST Bond Index XSB

    20% Canada Stock Index XIC

    20% World Stock Market Index VT

    is this percentage still valid for building a portfolio in current times?

    Do the above funds give out dividends as well?

  7. Hi Penny, that account would still be great. And yes, such funds do also pay dividends.

    • Penny says:

      Thanks Andrew,

      Going to give it a go but will be using the Singapore Fund, Bond Fund & World Stock Market fund instead.

      Great going, wonder why those investment gurus never mention this.

  8. Sean says:

    Hi Andrew,

    I just finished your book "The Millionaire Teacher" and I must say it is the best book on investing I've ever read for a normal person like me. It has me very excited to get started. My question is what do you recommend for someone who can only put away $200 a month to invest in stocks and bonds? The minimum investment for the total index stocks and bonds from Vanguard are $3000 each. Should I open a Vanguard account and place the money in low cost stocks until I have enough to switch over to a total index fund? Or should I save up the $6000 to open both the stock and bond total market index funds? Any advice would be deeply appreciated. I don't want to miss out on 2 years of compounding because I don't have enough to open the funds.


  9. Hi Sean,

    Many thanks for the kind words about my book. I'm glad it was so helpful.

    If you want, you could purchase a Vanguard Target retirement fund for just $1000. It will rebalance automatically for you, so you can get on with the more important things in life. If you prefer to rebalance yourself, you could start with a target retirement fund, and then sell it (should you choose) when you have more money to enter the individidual indexes. The target funds are amazing, however. They are combinations of indexes that will grow more conservative as you age. I highly recommend them.



  10. CY says:

    Hi Andrew,

    Vanguard Target retirement fund – is it an actively managed or passive fund? Since some balancing act will be done.

    Currently a 20-year old student with no income and having a saving of below $10K, how can i embark on the same path as you did 20 years ago?

    Will be graduating in 3 years later, 2015.

    Looking forward to your advice.


    • I wouldn't really call rebalancing "active investing". With indexes (such as the Vanguard Target retirement funds) it's a disciplined rebalance with passive indexes and because you don't do the rebalancing yourself, it's even better. It's what I do myself..but I have to drive the stick shift. As a non American, I can't buy this product. I would if I could.



      • CY says:

        Hi Andrew,

        Thanks for your quick reply.

        Any advice for a 20-year student with little saving?

        Perhaps i should save more and adopt capital accumulation strategy through stock investment before turning to index investment?

        Thanks Again!

  11. Jonathan says:

    The thing I dont like about commodities index like DBC is that first it's expensive at $0.85 and second is i don't think it gives any dividend and that's a bummer.

  12. April says:

    Hi Andrew, I just bought your book and am 1/3 through but can't hold the excitment of wanting to know more about index funds! You have made investment sounded alot easier than I ever thought. I read other books on investment before but they never triggered my investment interest as it seem only feasible for peopl with deep pockets but you have made it easy! Thank you ( only thing with the book is its written very much for American readers with interesting quotes/jokes which as a Singaporean, it may turn first time readers off cos they cant relate to it, asian readers like it straight forward and writings in books like who moved my cheese, peak and valley, e-myth are the kind of writing which uses context that makes it easy to relate ..just my personal comment which I thought I'd share 🙂

    Ok my question, I am 1/3 through but I can't help but wonder if you wrote about Nikkei, I flip to the back of the book to fast forward but I didn't see Nikkkei in your index reference, how do u view Nikkei 225? That's an index right? FYI before I read your book, I can never tell the difference and even though I attended short finance class in uni I didn't know what S&P, Dows, Nasdaq, Nikkei are and just 1/3 through your book, I kinda figured out these are the index funds you refer to…

    Nikkei is at one of the all time low if I am correct (got the info from yahoo finance),and I guess it focuses on Japan equities?(pardon we if I use wrong term) , Japan performance is weak for past years but over say a 5-10 yrs investment, how do u view it? Can't wait to hear from you!

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