Make Sure You Aren’t Falling Behind

Andrew Hallam -

If you had invested $200,000 in the world’s stock and bond markets on September, 11, 2006 (and didn’t add a penny to it) would you have made money?

You should have made $61,257.13, by May, 1, 2011.

How do I know?

That’s what the world’s stock and bond markets would have earned you, if you weren’t paying foolish fees or playing silly games with your money.

  •  You wouldn’t have needed to follow the economy.
  •  You wouldn’t have needed to watch stock market-based television.
  •  You wouldn’t have needed to trade.

Investing is painfully simple:

  1. Diversify your money across the world’s stock markets at the lowest possible cost (with indexes)
  2. Buy a bond representation (a bond index) at the lowest possible cost
  3. Rebalance your portfolio once a year (if you feel like it)

Your original $200,000 on September 11, 2006 would have grown to $261,257.13 by May 1, 2011—with no money added, if you had followed an ultra-simple strategy.

If you made less than that, then you wasted money.  Full stop.

Investment Seminar Accountability Check

On September 11, 2006, I held an investment seminar at Singapore American School.  I said that if an investor bought stock and bond index funds, they would likely beat more than 95 percent of professional investors, after all fees and taxes. 

That’s academically irrefutable. 

The Americans at my school have nearly all of their money in taxable accounts.  And indexes are far more tax efficient than the actively managed products sold by groups like Tie Care, Raymond James, or any other investment service company that sells actively managed mutual funds over indexes.

When I gave that seminar, in 2006, I entered a hypothetical $200,000 into a free online portfolio that would reveal the portfolio’s results.  

The portfolio was simple:

The $200,000 was split into thirds

  • 1/3rd into Vanguard’s International stock market index
  • 1/3rd into Vanguard’s U.S. stock market index
  • 1/3rd into Vanguard’s U.S. bond market index

(Vanguard is an American non-profit financial service company with the lowest fees in the industry)

You can create investment accounts, such as this one, by yourself. 

Or you can hire a fee-based advisor to create one for you.

One of the most important things is this:  if you can’t afford to give money away, then don’t.