Which Is The Best Index Fund For You?


“Andrew, which is the BEST index fund for me?”

This is one of the most common questions I get asked.

And as I mention in my books, there’s no secret answer.

Just make sure you have global diversification, that your management fees are low, that you rebalance once a year and that you save like hell.

Unfortunately, as I explain in this story, too many choices make us bad investors.

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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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29 Responses

  1. alex says:


    Thanks for this article. This is very timely. As you say, it is having the right habits that is most important. If you are trying to lose weight, rather than spending hours researching which trainers are best, you are better off just buying pair as soon as possible and getting running. It isn’t the trainers that are going to burn the fat, it is you. Getting one pair over another is going to make next to no difference.

  2. BW says:

    I’d be interested to hear your thoughts on the following: I know you need to have a combination of stocks/bonds in your portfolio according to your age but I’ve read a few things this week saying the “bond bubble will burst soon/this year” and that bonds are a bad place to invest.

    Can you comment please as it has me a bit worried. It doesn’t help that the stock market is really high as well!

    • Hi BW,

      A short term bond market index cannot crash.

      First of all, when bonds “crash” people are looking at very insignificant price drops. If there were a bond price crash of 8%, that would be catastrophic, compared to bond price drops in the past. But that kind of drop simply won’t happen. Stocks, on the other hand, are the far more volatile of the two. Stocks could drop 20%, 30% or even 40% and that would fall into the normal range for a stock market crash.

      But back to bonds: In my books, I recommend short term or broad bond market indexes. These aren’t the same as individual bonds. If bond prices fall, new bonds get picked up and added into a bond market index, once the previous bonds expire. Such new bonds would have lower prices and higher interest yields (as a result of their lower prices). With a bond market index, when a one year bond expires, another one year bond gets purchased. When a 2 year bond expires, another 2 year bond gets purchased. As such, no matter what happens to bond prices, a short-term bond market index will never have issues. As for stock markets, at all-time highs, I hope this story helps: https://assetbuilder.com/knowledge-center/articles/stocks-might-crash-should-you-sell-or-stop-buying


  3. Josh says:

    HI Andrew – I follow your global nomad suggested portfolio (VWRD & IAAA), however recently come across AGGG (iShares Global Aggregate Bond UCITS ETF | AGGG). Any thoughts on this?

    • Hi Josh,

      As you probably know, there are a multitude of ETFs you could choose. Many of them are far too similar to sweat the differences. You already have a good portfolio. Now save like crazy and when the markets crash, keep a cool head.


  4. Miwo says:

    Hello Andrew,

    I have a son who wants to enter teaching in BC. He also has started index investing. But we see that you have retired from Canadian teaching already!

    I know you recommend index investing but would you not recommend teaching now? I was already thinking that if the job market was tight for teachers, he could go overseas or train as a financial planner. He already sees the benefits of index investing at 19 years old!!!

    • Hi Miwo,

      I think teaching is the best profession in the world. And I think financial advisory jobs are among the worst in the world….considering that most of the firms have massive conflicts of interest, especially Canadian firms, with their sky high mutual fund MERs.

      If he can get a teaching job in B.C. he’ll be able to get a pension. If he can’t find a job, he could try his luck overseas.


  5. Adeel says:

    Hi Andrew,

    Can you please advise which are the best available Sharia Compliant ETFs to invest in?


    • Hi Adeel,

      I don’t have my book with me right now. But I’ve mentioned Shariah Compliant investing in there. The portfolios I recommended for Muslims include a global stock market index that’s Shariah Compliant. But as a Muslim, you shouldn’t buy bonds because they pay interest. That’s against Shariah law, so you could replace the bond market ETF for a gold ETF to make sure your portfolio is diversified.

      Here’s a link to my book. http://amzn.to/2CyIxqG

  6. Jean says:

    Hi Andrew, I hope this is the right place to comment…

    I just finished your book(Millionaire Teacher) and I asked my wife to read it as well because I was telling her that I wanted to put all my money in index funds through my brokerage account with my bank instead of paying higher fees through active management. I am trying to convince her to do the same because last year we paid close to 30 000$ in fees and like you said they are not beating the index(not even close). My wife is reluctant because she is worried Vanguard could go bankrupt. My question might sound stupid but can it go bankrupt? I though we owned a part of the companies if we bought an index no ? If Vanguard could go bankrupt, should we buy Ishares as well to diversify? I was leaning towards Vanguard because I read the book The Bogleheads and I kind of liked the guy behind the company.

    thanks a lot

    • Hi Jean,

      Vanguard is a co-op, run much like a non-profit. Its expenses are low. They don’t borrow money (unlike banks) so its likely the safest financial institution that you could ever invest in. It’s also the biggest mutual fund company in the United States.


      • Jean says:

        Ok thanks Andrew. You just gave me the go ahead with my wife. I can’t thank you enough. I can’t wait to teach all of this to the kids at school. Like you said, these are rules we should have learned back then.


  7. Divesh Gupta says:

    Am reading your book – Millionaire Expat and am curious to know if the index funds approach applies to Hong Kong stock market as well. I see most of your examples come from the US/Canada markets. Do you see the HK stock and bond index to be a safe bet for investing in the medium to long term.

  8. Ale says:

    Hi Andrew
    I do have some questions regarding rebalancing & diversification. Just to give you some background I’m with TD eseries:
    TD CAD Bond 25%
    TD CAD Index 25%
    TD US Index 25%
    TD International Index 25%
    I don’t recall from which book I found, but a smart long-term investor will go with “Stocks goes down for quite a lot and stays there for many years” rather than “Stocks goes up for quite a lot and stays there for many years”. (Certainly the above doesn’t apply for those who are retired as their portfolio will diminish)
    Therefore, I will have to pray that the US/International/Canadian Index goes down so I can buy cheap and rebalance my portfolio back to my desired target 25/25/25/25.
    From the other side, let’s not forget what happened with Japanese stock in 1989 – for the following 19 years $1 invested fell in value to less than 60 cents even with dividend reinvested. Or the events from 1929-1932 where the stock fell down by 90%. Or St Petersburg – Russian most respected and active stock and bond market where in 1914 in fell and never reopened.
    Therefore, when enough is enough? When do you have to stop buying cheap because the index of that country might never returned back? For ex TD eseries International Index has 22.6% allocated to Japan; and if that stock is falling? I might be an extremist, but what if US might have the same finish as St Petersburg?

    • Ale,

      Nobody can see the future. But if your portfolio is globally diversified, no single country’s difficulties will drag you down. Relax. Keep adding money. Rebalance once a year.


  9. Ale says:

    Hello Andrew,
    I would like to have your opinion on this question which came by finishing reading your books and all the books recommended by you.
    Canadian Couch Potato is answering on this question here http://canadiancouchpotato.com/2012/05/22/ask-the-spud-does-home-bias-ever-make-sense/

    Form the other side based on Vanguard https://advisors.vanguard.com/web/c1/fas-investmentproducts/3141/portfolio

    –US markets is holding 51.7%
    –Canada … 3%

    You and Canadian Couch Potato recommends the same equal amount of the portfolio allocated between International, US and Canadian market – it might not be fare

    Although Canadian market has only a 3% exposure, you mentioned in one of your books as there is a need to have a majority of your portfolio in the currency of the country you will retire — my case, for example, 1/2 of my portfolio is in CAD (25% Canadian Bond+25% Canadian Index Fund).

    Certainly we have to be diversified, and I do agree with same equal allocation to International Index fund, nor for Canada – where the difference might be given to US market: let’s say having 10% (Canadian) vs 40% in favor for US market.
    There is a likelihood of a greater risk by compering
    US CAPE ration being inflated, but at the same time there are greater possibilities that we might miss.

    Thank you

    Best Regards,


    • Hi Ale,

      What’s your question, specifically? I have a slow internet connection, here on a beach in Mexico, so I can’t go ahead and open the links you gave me. It doesn’t look like you have asked me a question. 🙂


      • Ale says:

        Hi Andrew,

        I guess my question is why do we overweight Canadian Stock in our portfolio?
        If you look on Total World Stock ETF (VT) Vanguard https://advisors.vanguard.com/web/c1/fas-investmentproducts/3141/portfolio
        –US has over 51% allocation
        –Europe 20.6%
        –Pacific 14.4%
        –Emerging Markets 10%
        –Where Canada has only 3% allocation

        In our case, is recommended to split equally the equity portion between US/International/Canada market. I do get that this way we have less currency risk, a better tax treatment for dividends, and might be cheaper to hold Canadian equity vs US/International; but let’s not forget that our bond allocation is in Canadian currency. A I mentioned above, Canadian Market has only 3% of total Global Market and don’t we miss some opportunities by allocating the same share as we allocate to US/International equity market?


        • Hi Ale,

          You don’t have to overweight Canadian stocks, if you don’t want to. When we overweight Canadian stocks (as Canadians) we reduce our currency risk. But we also increase our global capitalization risk. You decide what you want. There’s no “right” answer here.


  10. BW says:

    I’ve been reading that index funds have only done so well in the past and current environment because interest rates have been dropping for decades, is this true? Will index funds be a bad choice when interest rates rise in the future?

    • Hi BW,

      Actively managed funds will, on aggregate, earn the market’s returns after the fees charged. As such, a portfolio of index funds will always beat most portfolios of actively managed fund over any time period because it will represent the market’s return after a far smaller fee bite.


  11. Andy Parkin says:

    Hi Andrew,

    What are your thoughts on investments similar to Prestige Index Reserve Plans. Where you throw lump sums of cash in at the start and then further lump sums in maybe 5 years later.

    Having recently jumped ship on a Zurich Vista plan I need to grapple back and get back into the investment game. What your thoughts?

    I’m a teacher in Dubai 🙂

    • Hi Andy,

      I suggest you keep things as simple as possible. If you have a lump sum, build a diversified portfolio of index funds with that money now. If you don’t have any money, build the portfolio slowly, adding money every time you get paid. If you have a lump sum, and a job, invest right away and keep adding money every time you get paid.


  12. Yen Chia Huei says:

    Hi Andrew,
    Thank you for your books! I read Millionaire Teacher and now on Millionaire Expat. I have no investment experience.
    I’m Malaysian, I work in Singapore (Singapore PR).
    Now I would like to invest in Index Bonds, Home Country Index and International Index. And I intend to use the couch potato method.
    May I ask what options can I purchase for
    Index Bonds-
    Home Country Index – Bursa or STI or Hang Seng (but if Hang Seng, I might lose on conversion fees)
    International Index – I don’t think I will purchase any US Index due to the tax and legal. Therefore, what options can I consider?
    Thank you so much


    • Hi Yen,

      I’m glad you have a copy of Millionaire Expat. I believe it answers your questions. Please check out the chapter for Asians. When you are finished, if you still have questions, please ask.


  13. LH says:

    HI Andrew! I just blew through your book The Millionaire Teacher. As an educator at a great public school, is it better to go at it alone building your own total stock index and bond portfolio or align with the 403b provider that works with the district? I am thinking the former based on what you have read (I also like the idea of Vangaurd’s Target Retirement fund since I’m a bit nervous to rebalance myself at the end of each year). However, I want to get the most bang for my buck since I’m starting out a bit late. Don’t ask my age – it’s shameful! 🙂

    Thank you,

  14. Guy says:

    Hi Andrew, just finished Millionaire Expat and started Millionaire Teacher. Opened Saxo Capital account, wanting to follow the Australian Global Nomad portfolio. Unfortunately Saxo don’t have IWLD on their platform. They’ll let me know whether they can add it. If they’re not able, do you have a similar recommendation? Many thanks for your time.

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