On September 11, 2006 I spoke to a group of teachers at Singapore American School about investing. 

I created a hypothetical account with $200,000, and I promised to track that account and report on its results.

With no money added, that $200,000 account would be worth $250,549.25 by Friday, January 20, 2012 – gaining $50,549.25.

I echoed, back in 2006, what uncontested academic research suggests:

If we diversify our investments with low cost index funds, we stand a far greater chance of success, compared to a commonly practiced alternative among international schoolteachers:

That alternative, unfortunately, is the act of falling for salesmanship (and high costs) of travelling financial salespeople who make the rounds at international schools, stockpiling clients and new accounts, in exchange for enormous commissions.


There are a few things that investors should never do:

  1. Never pay a sales commission to buy an investment product.  These go directly to the salespeople.  Some of my colleagues pay 5.75 percent of everything they invest.  To break even on that money the following year, they have to make 6.1 percent.  That’s not a good deal for investors, but it’s a great deal for the person selling the product.
  2. Never buy financial products that penalize you for selling them early.  I’m not talking about a tax penalty here; I’m referring to back end loads—costly fines delivered by your friendly financial company if you sell your funds before a given time period.  These funds are sold by immoral folk (or those who don’t know the damage they’re causing).  Don’t buy them.
  3. Never mix investing with insurance.  It’s universally accepted as a bad deal for you, and a great deal for the sales rep. 
  4. Never allow an investment advisor to charge you a wrap fee or advisor’s fee to stuff your account with actively managed mutual funds. 


Here are the Vanguard funds that I suggested, back in 2006, with the following allocations:

  • 1.  33% in the U.S. stock market index (VTSMX)
  • 2.  33% in the International stock market index (VGTSX)
  • 3.  33% in the U.S. bond market index (VBMFX)

The concept is quite simple:

Once a year, you check the portfolio’s alignment.  If the stock indexes are worth less than the bond index after one year, then you sell some of your bond index to top up your stock indexes, bringing the account back to the allocation above. I tracked this account using the portfolio tracker at www.smartmoney.com.

As mentioned, the hypothetical $200,000 investment that I used on September 11, 2006, would be worth $250,549.25 on Friday, January 20th, 2012.

That’s a $50,549.25 increase with no money added.

Even simpler, as I suggested in 2006, you could have plopped your money into Vanguard’s Target Retirement 2020 fund. It has a similar allocation as above:  roughly 35% bonds and 65% stocks. Its investment returns would have been very similar to what you see above.  You can check out a chart here.

And there’s a third option for Americans who want to wipe their hands clean of the investment process themselves, while paying a small fee to do it.

A company called Assetbuilder (which I also mentioned at my seminar) manages indexed portfolios for its clients.  And they charge a fraction of what most international financial planners charge.

Assetbuilder’s portfolio #10 has roughly 30% allocated to bonds, with the rest in stocks and REITs. If $200,000 were invested in this portfolio of funds in September, 2006, the gain would be slightly north of $49,000, with no money added.

There’s only one catch:

To open an account with Vanguard or Assetbuilder, you need to be American, and you need to present them with an American address. Assetbuilder has been increasing its number of American expat clients at a rapid pace. They’re easy to deal with, and they understand the challenges faced by American school teachers abroad.

For the record, I write for Assetbuilder, but I am not compensated for my articles, nor do I receive financial remuneration from the company.