SI #1: The 9 Rules of Wealth with Andrew Hallam, Author of Millionaire Teacher
Please allow up to 30 seconds for the podcast to begin upon clicking Play.
Andrew Hallam has joined us on the show to discuss his investing strategy, guide to wealth success, travel plan and indexing with ETFs. Andrew's easy to understand book, Millionaire Teacher, was the first book on money and investing that I ever picked up.
The book lays out the foundation to outperforming investment professionals who want to make money off high commissions and leave you in the dust. Although I invest in Canadian value stocks, I also use low cost index ETFs for international exposure in a significant portion of my portfolio.
The book’s most valuable lessons in my opinion all involve a mindset when it comes to both personal finance and investing for the long term with discipline and consistency.
Keep up with Andrew on his blog, AndrewHallam.com.
I have summarized the list in an easy to digest and actionable guide.
The Nine Rules of Wealthy You Should Have Learned in School
1) Spend Like You Want to Grow Rich
Spending money for the sole purpose of showing others your success is a loser’s game. I believe that in the world of social media, everyone wants to look higher class than their neighbour. Andrew explains how he biked to and from work long distances just to save car expenses. His colleagues believed that he was completely broke. Little did they know.
2) Time is the Greatest Advantage You Have
Most have heard how Einstein stated compound interest was a wonder of the world. If you continue to dollar cost average no matter what is happening in the market, you will have long term success investing in the stock market with index funds (explained later in the book). If you are new to index funds as a Canadian, you might find these 3 Simple Steps to Canadian Index Investing.
3) Active Investment Management Fees Cost A Lot (and Probably More Than You Think)
Index funds are the easiest way to get exposure to a large basket of stocks. Hundreds of stocks (companies) can be simply bought with a single index fund. I recommend buying index funds with ETFs on a discount brokerage service through Questrade.
4) Invest Like A Contrarian (Think Opposite)
When stocks are up, you will want to buy. When stocks are down, you will want to sell. Think generally the exact opposite of your emotions, and you will win more often than not.
Warren Buffett once said that as an investor, it is wise to be “Fearful when others are greedy and greedy when others are fearful.”
- Warren Buffett
5) A Portfolio of Index Funds Will Outperform Mutual Funds
Andrew suggests a rule-of-thumb of matching your age in index funds. I personally do not suggest bonds for investors with a long-term investing horizon in their future. The yield on the index is fairly similar to the fixed income from a government bond index. However, the bonds will provide some stability in the portfolio. If you are looking for model portfolios, Canadian Couch Potato is a great place to start.
The importance of geographical diversification is important when using an index fund portfolio. With one singular ETF, as explained in the podcast, you can own thousands of companies publicly traded from stock exchanges all across the world. The US index makes up the largest percentage of the global market, and should be treated as such.
6) Simple Index Investing
Index investing has never been easier for regular people across the world with the access to low cost index funds. Rebalancing can occur to match your desired allocation on a chosen timeline. You do not have to be rich to start investing with index funds, you can start with any amount. The key is that you start.
7) Outperform The Professionals
It has been proven time and time again that index fund investors beat mutual fund managers after fees. Warren Buffett knew of this phenomenon and bet 1 million dollars on it continuing to happen.
It might be hard to make the leap to managing your money on your own. Andrew’s book will ease your mind to stay the course and realize the simplicity of index investing.
8) Stay The Course
Once familiar with the market, you will be tempted to jump on the hottest trend in the market. For example, a hot stock tip that a cannabis stock is about to be the next big thing. Or, that a junior mining stock is about to find some gold.
Take these “whisper stocks” with a grain of salt.
9) The 10% Stock Picking Method
In the older version of the book, Andrew proposes a solution for if you really have an itch to pick individual stocks. Keep just 10% of your portfolio in individual companies and the rest of your portfolio indexed.
Here is How You Can Implement Andrew’s Book in Your Real Life
The Millionaire Teacher, The 9 Rules of Wealth You Should Have Learned in School is a must read book for people looking to invest their cash. I created a video course on how to implement index investing.
Below is the first chapter of the video course, How To Start Investing with $1000.