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Believe It: Cryptozoology is a Poor Investment Strategy

Some people believe in the Loch Ness monster and Bigfoot, while others cling to the notion that they can beat the market if they find just the right system for buying stocks and bonds.

I’m not going to refute the existence of cryptids like Nessie or a giant walking carpet, but I would like to suggest that, over a lifetime, most do-it-yourself stock pickers will under perform their benchmark indexes.

Read the rest of my Globe and Mail article.

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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4 Responses

  1. Tyler Wolfe says:

    Hi Andrew,

    After reading your book I decided to take a more hands on approach to my investing. I liquidated my Edward Jones Roth IRA and the money is currently being transferred to a Vanguard account in which I intend on making investments based on your balanced index investment approach. When the money gets there I will have to pick these accounts. I've chosen VBMFX (total bond), VTSAX (total US stock), and VTIAX (total Intl stock) for the index accounts.

    Unfortunately, all of these funds are currently at multi-year highs. Would it be wise to hold my funds in the default Vanguard fund, (Vanguard Prime Money Market Fund) in hopes that the markets take a slight downturn before investing in the individual index bonds, or would it be more prudent to purchase the different index funds now and hope my "time in the market" makes up for the current bull market prices? I plan on being in the market for several years. The total Roth rollover will be just over 50k. I'd hate to invest all 50k when the prices are high and then have the market pull way back leaving me in the dark. Any advice in this situation?

  2. Trevor says:

    Hi Andrew,

    I've just recently taken a hard look at my investments and have decided to go the indexing route and have read your globe articles about it. I noticed one of your comments was about giving to charity: specifically about wells in Cambodia. I was thinking an article I have never seen is 'ethical indexing' although it was touched upon on the candiancouchpotato.com website.

    I thought I would share my approach to 'ethical indexing'. I was comparing the ethical fund that my wife had chosen (based on past performance, flashy graphics etc) and it had a MER of 2.65. I looked under the hood and the fund was just made up of banks and government bonds! Hardly, what I think she thought would make up an 'ethical fund'. Anyway, I showed her the difference in costs associated with all of our 200K portfolio being in this fund compared to a variety of low cost ETFs I had put together (MER:0.27) and it was close to $5000 a year. I then suggested that rather investing in this ethical fund we could instead be in the same place by using index funds and give away more than $9000 a year to the charity of our choice (I reach this by donating the tax credit). Now I think this gets FAR more 'ethical bang for your buck' than an ethical fund sitting invested in banks.

    This assumes the charitable MF matches the index over time and that the 'evil' caused by investing in index funds is similar to the ethical fund.

    Anyway, I thought this would be a really great article to see in the globe and I thought you would be perfect to write it.

    Thanks for your contributions to educating the Canadian public about indexing. Cheers.

  3. Hi Tyler,

    My apologies for missing this comment. The only consolation is that you can tell me what you actually ended up doing, considering that you posted this question many months ago!

    Personally, I don't think anyone can time the markets. And on average, markets rise in 2 out of every 3 years. Sometimes they will rise for a few years in a row, sometimes they fall for a few years in a row. What I am trying to say (and I hope this is timeless) is that you should build a diversified portfolio when you have the money. Years from now, when you start selling your investments, you will look back on 2012 or 2013 and after making hundreds of percentage points on your overall portfolio (perhaps even a thousand) you will chuckle at the idea of speculating for an additional 5 percentage points in a single years…..knowing that those five percentage points (an arbitrary number, I know) could have swung in your favor, or against it.

    Let me know what you ended up doing. I'm curious.

    Again, sorry I didn't see and respond to your question earlier.


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