Since publishing my book, Millionaire Teacher, I’ve been bouncing around in front of Canadian, American, Singaporean and Malaysian audiences, expounding on efficient investing strategies that take less than an hour a year to implement—while whipping the majority of investment professionals in the process.
As a desk-jumping teacher who uses the room like a gymnasium, I’m probably not what most people expect.
But it’s not my energy that shocks people. It’s this:
“Raise your hands,” I ask, “if you had money invested ten years ago, in November 2001?”
Most of the hands go up.
The past ten years have given us one of history’s least profitable investment decades. Most people (painfully) realize this. But then I suggest that their investments have gained 47 percent over the last ten years, which would have turned $10,000 into $14,700 (from November 1, 2001 to November 18, 2011).
And I look into their faces.
Without words, many of them tell me that I’m wrong. They ask if I’ve been living in an Afghan cave for a decade.
Don’t I know that the financial crisis scuttled most people’s portfolios—and their money hasn’t fully recovered?
Don’t I know that the Canadian stock market has dropped 11 percent in 2011?
Don’t I know that the International stock markets have dropped 13 percent since January?
Don’t I know that the U.S. stock market has fallen 8 percent (in Canadian dollars) since our last New Year’s Eve party?
I do know it. But I repeat:
“The average Canadian’s investments made 47 percent over the past decade.”
Then I tell them this:
“If you all went home, dug out your investment statements over the past ten years, then brought them back to me, I could show you (as a group) that your investments have made roughly 47 percent over the past decade…..before fees. Some of your accounts would have made more than that, and some of your accounts would have made less than that. But as a group, your investments would have averaged 47 percent.”
The details, however, are in the words I’m choosing. There’s a distinction between what their investments would have made…and what they actually made, as investors. Most Canadian financial institutions that manage people’s investments end up robbing them blind. They charge hidden fees that dwarf the expenses paid by other investors, in other countries. As a result, most people unknowingly give far too much of their money to the fund companies they deal with.
The Canadian stock market has risen roughly 95 percent over the past decade, including reinvested dividends. If an investor’s portfolio were split four ways between the Canadian stock market, the U.S. stock market, the international stock market, and the Canadian bond market, they would have turned $10,000 into $14,700: a 47 percent gain between November 2001 and November 2011.
If an investor had their money in the Canadian stock market and the Canadian bond market—without international exposure—they would earned significantly more.
Most of the people I speak to admit that they have made very little (if anything at all) over the past decade of investing.
That’s when I expound on the merits of creating diversified, low cost accounts of index funds. I show everyone what the stock and bond markets have averaged over the past decade, and I explain why they didn’t earn their share of the cake.
That’s when I offer further reading material.
Currently, there are some great books available. I’d like to recommend Dan Bortolotti’s Guide To The Perfect Portfolio, published by MoneySense magazine.
You can buy it in bookstores, drug stores, supermarkets…anywhere they sell books or magazines. At $9.95, it’s probably the best value of any finance book on the market.
You don’t deserve to be shocked by the financial service industry.