Millionaire Teacher Invests $21,000 In U.S. Stock Index

 In my last post under the heading, Andrew’s Money, I explained why I was investing $20,000 in Canadian bonds at the beginning of September, 2012. 

My purchase decisions, as always, are dependent on my portfolio goal allocation.  That might sound complicated, but it’s highly likely that my portfolio (and my investment decisions) are far less complicated than yours are.

 And that’s a good thing, considering that I’m really not that smart.

In an IQ test, you’d probably beat me—so would most of my students.  This mental shortcoming, however, didn’t stop me from building a one million dollar investment portfolio while still in my 30s. 

Emotional intelligence (as it relates to fear and greed) is–as Warren Buffett suggests–far more important than an investor’s IQ. 

My goal is to have roughly 42% of my portfolio in bonds, with the remaining money split between the U.S. index and the International index.

As a 42 year old without a corporate or government pension to eventually look forward to, I want my bond allocation to match my age, and I increase it slightly each year.

That’s a textbook allocation, and nothing I personally made up.  

As mentioned, I’m really not that smart.  But I am smart enough to ignore stock market predictions by investment gurus.  Why?  Because they’re usually wrong.  History proves that, over and over.

As Kenneth Fisher wrote, in his excellent 2011 book, Markets Never Forget:

CXO Advisory Group measures so-called gurus—folks who make public market forecasts…And the average accuracy of this group, as measured by CXO?  As I write, it’s 47%

 Gurus earn a failing grade.  There are easier (and more profitable) ways to invest.

This is how my portfolio looked at the beginning of September, 2012:

  • 41.3%  Canadian bond index (as a Canadian, I have a home country bond bias)
  • 30.4%  International stock index
  • 28.3% U.S. stock index

The $20,000 I added to bonds in September brought my fixed income allocation close to 42% of my total.   The remainder of my money was split between the U.S. stock index and the International stock index.

Now take a look at how the prices of those indexes have changed since September 4, 2012 (the date my previous purchases cleared)

Exchange Traded Fund Ticker

September 4, 2012 Prices

October 26, 2012 Prices

Price Changes

VTI (U.S. Stock Market ETF)




VEA (First World International Stock ETF)




XSB.To (Canadian Short Term Bond ETF)




VSB.To (Vanguard Canadian Short Term Bond ETF)




(*Note:  the price of the index itself is no indication of how expensive it is)


You can see how the gap grew between my U.S. index (which gained 0.06%) and my international index (which gained 4.5%).  But despite the international market’s recent run-up, it wasn’t always a stellar performer.  Its poor returns to June 2012 was a primary reason I bought $29,000 of the international index in June.  You can read about it in in this June 2012 post, titled Millionaire Teacher Adds $29,000 to international stock index. 

Since that date, however, the International index has risen 18.86% including dividends. 

My international stock index has been running away from the rest of my portfolio.  Was it a “correct” market call on my part to add $29,000 to this index in June, 2012?  Of course not.  I don’t make market calls.  I was just adding to the lagging component of my portfolio—rebalancing back to my goal allocation by adding fresh money to the indexed asset class that was dragging its butt. 

And today, in an attempt to re-align an equal weighting between my U.S. stock and International stock indexes, I placed an order to buy $21,000 of my U.S. stock index. 

No, I didn’t sell anything to come up with the money.  I prefer to keep my transactions costs low, and I only sell to rebalance if my allocation shifts far from my goal allocation.  As mentioned, my goal allocation is 42% bonds, with the remainder split between the U.S. and International stock indexes.

Most people, unfortunately, chase rising asset classes.  They feel good about buying investment products that have recently risen in price. And they shun investments that have fallen. 

If that’s you, don’t be too hard on yourself. 

Most people (including most financial advisors) act similarly.  And this kills their returns. 

In the Boston-based Dalbar study on investor performance, it was shown that the average investor in U.S. stocks between 1990 and 2010 underperformed the market by 5.31% per year.  In 2011, they did even worse.  The average investor in U.S. stocks lost more than 5%, while the U.S. index gained 2.12%.

Even when investing in bonds, most investors try timing their purchases and they pay for their overconfidence.  From 1990-2010 the average bond investor in the U.S. made 1.81% per year.  The bond markets, however, returned 6.89%.  

It’s human nature to think that you will do well if you buy the stock, fund or index that is “doing well right now” but if that’s the way you think, you’ll be disappointed with your long term investment results.  You’ll buy high, rather than dollar cost averaging, or rebalancing a diversified portfolio to ensure that you take advantage of asset class dips.  As billionaire Ken Fisher has said, it’s extraordinarily difficult, emotionally and psychologically, to equal the returns of a stock market index.  

I explain this philosophy in my book, Millionaire Teacher. If you would like to learn more, please check it out.

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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50 Responses

  1. Peter says:

    Hi Andrew, is your international index VEA? Does that mean that you do not have any Canadian stocks in your portfolio, only Canadian bonds?

    • That's right Peter. Having 40% of my portfolio in Canadian bonds is enough for me, considering that I don't live in Canada, and may never live in Canada again. For Canadians living on Canadian soil, however, I think they should have a home stock market bias and a home bond market bias–something similar to the portfolio model that I gave for the Globe and Mail here: .

  2. Barry says:

    Hi Andrew

    If you didn't sell anything, were the top up contributions today from savings and dividends?


    • Yes Barry, the money came from savings and dividends in this case. Currently, my dividends amount to roughly $40,000 per year, and my teaching and writing brings in the other income that allows me to deposit fairly large sums. It wasn't always like that, of course. When my portfolio was smaller and my income comprised of just my teaching salary, investment deposits were a heck of a lot smaller.

      • Barry says:

        Thanks Andrew

        With the comments..

        "Since that date, however, the International index has risen 18.86% including dividends."

        How are you tracking the increase including dividends (your trading platform does this, or you do it manually)?

        PS: Always a great read to see your investing movements and philosophy reinforced on these pages- Kudos


  3. I love these types of posts Andrew.

    Awesome reinforcement for when the times get rough, buy more of the lagging index and you'll come out ahead in the longer-term.

    I was going to ask the same question Barry did. Dividends/distributions from your ETFs are $40,000 per year?

    Whoa, in a great way 🙂

    BTW – I would be curious to know how the "Biggest Losers" contest is going. Do you have any recent data on that one?

    Thanks again Andrew, keep up the great writing!


  4. Karim says:


    Great post…you are much smarter than the credit you give yourself.

    A question for you…I know you were not always an index buyer as you were buying indivudual stocks for many years so do you think you would have the same success if you started as an index investor? Have you gone back to validate you would have your current portofolio size if you always bought ETFs?



  5. Tyler Wolfe says:

    Hi Andrew,

    I currently have my funds in Vanguard "non-ETF" accounts (VBMFX, VTIAX, VTSAX). I noticed the account you invested in, VTI, is an ETF account. Do you suggest ETFs over standard index funds? I've tried to educate myself on the ETF, but I'm still not sure I totally understand it. My wife and I both invest monthly to fully fund our Roth IRAs. I'm considering changing our investment options to ETFs but was hoping you had an opinion. Thanks for any advice or information you might have!

    Tyler Wolfe

    • Hi Tyler,

      If I were an American and able to invest like you, I probably wouldn't be using ETFs. Those Vanguard indexes are amazing–dividends are reinvested automatically, purchases and sales are always done commission free, and the fees are rock bottom. Stay the course my friend.


      • Tyler Wolfe says:

        Andrew, Thanks so much for getting back to me so quickly and also for the advice! I think we'll keep our investment choices right where they are. Thanks again for writing your book, it's definitely changed my understanding and outlook on investing!


  6. Lee says:

    Hi Andrew,

    Regarding bond funds, is there such thing as an overvalued bond fund?

    We can tell if stocks are overvalued by looking at their P/E ratio etc, so just wondering if there is such a thing as an 'overvalued bond fund'.

    Because can't help noticing that some bond funds are selling at 10year sky high prices and was thinking if they could ever crash like stocks do.

    Would like to seek your opinion on this, thanks!

  7. LeeWK says:

    Hi Andrew,

    Regarding bond funds, is there such thing as an overvalued bond fund?

    We can tell if stocks are overvalued by looking at their P/E ratio etc, so just wondering if there is such a thing as an 'overvalued bond fund'.

    Because can't help noticing that some bond funds are selling at 10year sky high prices and was thinking if they could ever crash like stocks do.

    Would like to seek your opinion on this, thanks!

    • Hi LeeWK,

      I just responded to your question at length and sent it to my webmaster to post. I figured my response would be best served as a post because it involves some detail. Please let me know if that helps, after you read it. It should be up within the next day or so.



  8. Jinn says:

    Hi Andrew

    I really like the simplicity of the index investing approach, and can see how it works well as an investment strategy to increase net worth in the long-term. However I have also come to believe that the goal for retirement is not so much to accumulate net worth per se, but rather to have enough assets to provide ongoing cashflow that meets expenses, e.g. a stable of rental properties, or a portfolio of dividend stocks.

    Can you explain your strategy for accessing / utilizing the accumulated funds in retirement? It seems to me that the only thing to do is to gradually sell off the funds, but this runs the risk of running out of money before the end of one's life.

  9. Steve says:

    Hi Andrew,

    would the indexing strategy of VUS, VSB, VCE and VEF work for an account that you could not contribute to (i.e a LIRA acct). Would I reep the same results by just selling and buying the indexes to keep the allocations proportionate yearly without being able to make a contribution? Would you recommend a different approach for such a case.

    Thanks for your help


  10. Barry says:

    Our Aussie Portfolio is made up of the below

    STW (ASX 200 Index Fund)

    VEU (World Ex-US Index Fund)

    VGB (Aussie Bond Index Fund)

    VTS (US Index Fund)

    Today we conducted a re-balance and purchased additional VTS ourselves.

    STW was up about + 6.5% on purchase and VTS was down around -3.5%

  11. kulvir says:

    Thanks Andrew,

    I am a Canadian in Canada and I just read your book. Thanks! It was great. Love the ideas and about to get started for myself. My question is whether you would suggest buying hedged vs unhedged products- especially as Vangaurd has released both versions of the S&P 500 for the TSX.

    I also follow you on the Globe and Mail. My second related question is about your model portfolio there. Do you suggest Canadians simply buy VFV(unhedged) or VSP(hedged) vs VTI which trades on the US market. Of course you choose VTI and I am curios as to why.

    Love to hear your thoughts on both. thanks!


  12. Adam says:

    Hi Andrew

    Just finished your book while on a beach on holidays. Having zero previous financial knowledge, you have stimulated me to read many of your links and references. Thanks for the great book!

    I am a 24 y.o Australian, about to start first full-time job, and who previously has just had my money in a savings account.

    I have about $6k I’d like to invest, as well as ongoing monthly contributions from my income. I like the idea of managing my portfolio myself, but Vanguard Australia currently has minimum of $5k per fund, so I think my only initial option is one of the diversified Life Strategy funds you mention in the book.

    – My question is should I start in the 10/90 fund (as the next fund is an allocation of 30/70) until I have enough to move my money into 3 index funds that I will manage and balance myself?

    – Also, with such a small initial amount in an auto-balanced fund, how will I be able to take advantage of future major volatility as you describe in the book/online?

    – Lastly, if I add say 300 a month from my income, will the Vanguard LifeStrategy fund automatically buy the laggard to keep portfolio balanced?

    Thanks again for opening my mind to the possibilities of smart investing!

    I’ve already got many friends reading your book.


  13. nx says:

    Hi Andrew,

    Great book. I have a few questions regarding my own portfolio. I'm 31 years old with 2 kids (ages 1 and 4), with $19,000 invested in RRSP and about $5000 in RESP for a total of $24,000.

    My question is, am I better off having two seperate portfolio's, one in each account? For example, 30% bond, 30% Cdn Index and 40% US index for RRSP,, and 30% Bond, 30% Cdn index and 40% US index?

    Or.. is it better to lump the $24000 into one portfolio?


  14. Cameron says:


    I've now been following your method for a few months using the three Vanguard funds. Is it good to let Vanguard automatically reinvest dividends for you? Looking at the past few months, it seems like the dividends were reinvested at share prices that were higher than I would have liked. Should I not turn off auto-reinvesting and reinvest the dividends myself when the share price is better?

    Thank you,


  15. Barry says:

    Hi Andrew

    Just touching base with regards to your money movements

    Are you currently stockpiling savings and waiting for higher highs, lower lows or that disparity between the indices to purchase again?

    This last purchase & rebalance in October 2012 would have seen a -6% fall mid November in VTI and now be seeing about a 6% increase in the same Index


    • Hi Barry,

      I'm not actually that strategic. I just invest my money every month, while ignoring any kind of speculation. If my stocks beat my bonds, I buy bonds. If my bonds beat my stocks, at the end of the month I buy my stocks (through indexes of course). Without fail, I invest money every single month.

      I don't sell to re-balance unless my allocation is way out.



  16. Young says:

    Hi Andrew,

    I loved reading your book.

    You said above that you don't sell to re-balance unless your allocation is way out.

    What % makes it 'Way out'? 10%? 15%?

    I think, in your book, you kinda mentioned between 10-15%.


    • Hi Young,

      If my goal allocation for bonds, for example, is 40% and I find myself with 50% in bonds or more, then I will generally rebalance. During volatile markets, doing so can be very profitable. During market rises, it can actually diminish returns a little bit…although it does smooth them out.

      I'm glad you found the book useful. Thanks for letting me know.



  17. Wo says:

    Hi Andrew

    first of all im really grateful stumbling upon this site. ive purchased your book yesterday and am halfway through. now im getting all geared up to start investing my small capital.

    just a quick question, im aware that you use DBS Vickers, any distinct advantage of that over ocbc securities? asking because i currently park all my savings to my ocbc account. i usually use my dbs for daily spending so as much as possible id like to keep it separated (ocbc for savings/investment) – or does it even matter?

    again, thank you.

  18. Mathew says:

    Hey Andrew,

    Always love reading the posts. The above particularly interests me as we have seen a real bull run on the markets, leading the S&P to its near record peak level. It's time to re-balance my portfolio – and that will be accomplished (largely) by adding new funds. Is it also time to move some funds over to bonds? Do you have any particular views on balancing/adding in the current environment? I know you're a fan of falling markets (at least at this point in your investing career…)

    Thanks in advance,


  19. Barry says:

    Hi Andrew

    With the disparity between bonds and stocks currently should we re-balance?

    Especially if we are carrying losses forward from prior poor investments, so no Cap Gains Tax


    • Hi Barry,

      I think that depends on how far out of your target allocation you have drifted. Are you more than 10% out?

      • Barry says:

        Hi Andrew

        I have 4 funds all at 25% each , they now sit at

        Australian Index 26$

        World Index 25%

        Bond Index 24%

        US Index 26%

        I think for a 10% move the 25% would need to go to 27.5%??


        • Barry says:

          Hi Andrew

          Looking at the last re-balance via injecting new funds though, I believe the funds roughly look like this

          US Index up 8.5%

          AU Index up 7.2%

          World Index up 5%

          AU Bonds down 2%


          • Hi Barry,

            Personally, I wouldn't re-balance based on those allocation differences. But of course, I don't have a crystal ball either.



          • Barry,

            If I had a set date annual date for re-balancing (once a year) and my account was out slightly (as yours is) I may re-balance it. But as far as a mid year re-balance goes, I prefer a much larger allocation gap than that. Of course, if you don't pay much in transaction fees, and if you won't pay taxable penalties, then by all means.



  20. Kevin says:

    Hi Andrew,

    Can you provide an example when you would sell to re-balance a portfolio. I am not sure what would be considered an allocation that is way out.

    • Hi Kevin,

      If your stock/bond ratio is more than 10% out, I would consider a re-balance. Personally, I have always done it when the allocation difference is greater, but an argument could easily be made for the 10% allocation discrepancy. In other words, if your goal allocation is 30% bonds and 70% stocks, and you find yourself with 40% bonds, 60% stocks, you may want to re-balance. Or….in a situation like that, you may just want to keep buying stocks every month until it gets re-aligned with your goal allocation. That's typically what I prefer to do…sometimes for many months at a time. If doing so doesn't help, then I would consider manually re-balancing.



  21. Hi Mathew,

    Rather than manually re-balancing, I have been adding to my laggards. But the markets haven't moved enough for me to personally make a manual re-balancing move.

    Transactions costs in Singapore aren't cheap, so I like to keep them low and make the move (to re-balance) when I can move somewhat large sums of money to do it.

    Smaller moves don't make as much sense for me. But if your account is tax friendly, and you pay very low commissions, you may want to go for it if your overall portfolio is misaligned by 10% or more.



  22. Barry says:

    Thanks Andrew

    The ASX is up, the DJIA is up, the World (ex US) is up and my bonds are tracking slightly lower than last re-balance by cash injection

    The temptation is to sell high, buy low

  23. Joe says:

    Hi Andrew, have you read about David Swensen at Yale? Have you read his book Unconventional Success? I haven't but I read an article here:

    My question: What do ytou think of adding other assets classes to your portfolio? Specifically I'm thinking of REIT's and/or Commodities. I remember you mentioned in one of your posts that you were looking at real estate. I think real estate is very cheap now, but I do not want to be a landlord. So, I'm thinking REIT. Apologies if you've already discussed this in an earlier thread.

    Cheers, Joe

    • HiJoe,

      Swensen's book is excellent. To reduce volatility, adding components like REIT indexes and commodities can be a great idea. Sometimes, having them in a portfolio will augment returns; sometimes it will lower them. But overall, it has proven to reduce volatility. Go for it. I don't own them myself, but that doesn't mean my method is any better or worse. I'm not too concerned about smoothing out the growth, as long as the growth exists between now, and 30 years from now.



  24. Ed says:

    I love your book.
    I live in Norway, wich is of course a small economy. Would you still recommend that I have part of my funds in a national (Norwegian) index?
    Also I might be moving to Spain to live in a couple of years- does this make a difference?

    Thank you.

  25. Ed says:

    Ok thank you,
    Would a good allocation then be?:

    20% Scandinavian stock ETF
    20% US stock ETF
    30% International stock ETF
    30% bond ETF

    But would it be best to have the bond ETF as a Scandinavian (if there are any) -bond ETF or for example US?
    I’m 31 and yes I am Norwegian.

  26. PhillyMamma says:

    I’m a teacher. I’m digging out of debt as fast as I can, while trying to help pay for two private school tuitions. I’ve only got an IRA left. I’m looking at moving it to a Vanguard Roth IRA, if possible. I’m relatively uninformed about strategies for saving for my retirement as I’ve got the currently pressing demands as noted.

    Would moving my 33K to a Vanguard Roth IRA be a better place to have it, in the long run, vs. VOYA? It was with an employer matching 401K but I no longer work at that firm, and the school where I work currently does not have such benefits. It was recently in ING’s care but is in process of moving to VOYA, but I’m not comfortable with that as it is a function of INGs changes, not my choice.

    Thanks in advance for any insight.



  27. If you could move it to a lower cost platform, such as Vanguard, it would most certainly be better.

  28. PhillyMamma says:

    THANKS! I really appreciate your rapid reply, as well.

  29. Joey Muggerigde says:

    Thanks for your life changing work Andrew. What do you think about the story of Ronald Read the Vermont gas station attendant/janitor who lived extremely frugally and left a $8M estate

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