Catching up with Millionaire Teacher and Expat – Andrew Hallam

Part of the joy that comes with running this blog is the opportunity to meet and share personal finance and investing perspectives with folks I wouldn’t have normally gotten to know.  Andrew Hallam is one of those individuals.

I’ve been a fan of Andrew’s for a long time.  I followed his blog (and continue to do so) long before my praise about Millionaire Teacher was published on my site.  This book in particular opened my eyes to the world of indexing and how following some simple financial rules can be your keys to financial freedom.

The Millionaire Teacher is also a Millionaire Expat and his most recent book provided guidance for global expatriates living and investing abroad.

I recently got a chance to catch up with Andrew to get his thoughts about the current state of the stock market, his current investment strategy, what he thinks about my investment approach, his advice to Gen X and Millennials, and much more.

Andrew, what can I say, thanks for doing this, great to chat catch up after a couple of years.

Thanks Mark!

It’s been some time since Millionaire Teacher – The Nine Rules of Wealth You Should Have Learned in School came out.  Any reflections on the book, the advice in it for today?

I’ve thought about doing an updated edition of Millionaire Teacher.  But so little in the world of finance actually changes.  That might surprise some people who figure that building wealth in the stock market is like walking some kind of suspension bridge-like balance beam in the wind.  You know, shifting your body weight to the left, then to the right.  Then making pre-emptive adjustments based on forecasts.  If building wealth were that hard, I’d be sitting on the sidelines.

There are only two things I would add to Millionaire Teacher, if I were updating it today.  When the book came out, Vanguard’s ETFs weren’t available.  So I would add those.  Plus, Canadians now have the option to buy ETFs that aren’t currency hedged.  Investing in a hedged ETF is a bit like rowing a boat with a tennis racket.  Better (non-hedged) products are now available.  They’re much more efficient, so I would add those in the book.

I remember Rule #4 from this book (Conquer the Enemy in the Mirror) really hit home with me.  Why do you think investors struggle so much with managing their own behavior when it comes to money?

Our ancestors developed instincts that were necessary for survival. Those who strongly inherited those traits went on to procreate and survive. It was much like natural selection.  Caveman Joe didn’t get up fast enough to run from charging giant crocodile.  So he got eaten.  And his brother scooped Joe’s wife.   They had babies.  And those babies were more genetically wired to anticipate danger and flee proactively.

In this capacity, humans are now honed like Olympians.  Such genetics were great for the jungle.  But they make us lousy investors.  In the world of investing, we need to embrace that charging crocodile.  Falling stock markets look like immediate dangers.  But they aren’t.  They’re like discounts at a supermarket.  But they wear a crocodile-like costume.  The media loves to report danger and fear.  So when stocks drop they report, “Investors lose as stocks fall again.”  In reality, they should be reporting, “Investors win, as stock get even cheaper!”  Anyone who won’t be selling their stocks within the next five years is categorically crazy if they want the markets to rise.  But that craziness has been bred straight into our DNA.

That’s why most people have a tough time managing their own money.  They think that rising markets are good for those who are adding money to the markets.  They think falling markets are bad for those who are adding money to the markets.  If they could flip those thoughts (and go against their DNA) most people would be much better money managers.

I know you still follow my site (thanks for that by the way) and I also remember Rule #9 from Millionaire Teacher (The 10% Stock-Picking Solution…If You Really Can’t Help Yourself).  Is my dividend investing strategy doomed?

Your strategy of picking strong dividend paying stocks is a good one.  It’s great for people who have smoked one or no cigarettes in their life, have only tossed their cookies once (or never) after drinking alcohol, who exercise at least 4 days a week and stay away from processed foods.  Such people are rare.  They have plenty of discipline.  The risk of hand-picking individual stocks is that it causes less disciplined people to switch stocks and question their strategy.  I’m guessing plenty of high dividend seeking investors have jumped out of their oil related stocks during the past year or so.  Big mistake.  I just don’t think most people are wired to stick to a disciplined individual stock picking strategy and beat the market in the process.

So what do you make of my ‘hybrid’ approach listed here and here?

I think your approach is a good one.  But mine is easier 🙂  I’m disciplined with money, but I’m also lazy, and my lifestyle presents more financial risk.  I used to have a portfolio split between individual stocks and index funds.  It was about 50-50.  But once the portfolio topped about $1.5 million, I asked myself some good, tough questions.

Can you beat the market?

Are you smarter than all the portfolio managers who have trained to do this, full time?

Most of them lose to the market.  Those who beat the market over a 5, 10, or 20 year period usually revert to the mean eventually.  In other words, the market usually catches them.  It’s mentally easier to bet $5000, even $100,000 of hard-earned money to try to beat the market.  But I asked myself, “Do you want to be betting over a million dollars on that, knowing that you won’t likely get a stitch of money from a pension?”  That answer was a pretty swift no.

When I say that my life is “risky” this is what I mean:  I won’t be getting a defined benefit pension when I’m old.  I’m an expatriate (meaning that I don’t live or work in Canada) so I won’t be entitled to much of anything from Canada’s social retirement programs.  As such, I have to think like a financial academic.  The highest statistical odds of investment success are with a diversified portfolio of low cost index funds.  So that’s where my money sits.

Thanks for this Andrew, and I’m looking forward to sharing Part 2 of my interview with you soon!

Readers, what do you make of Andrew’s answers?  Agree?  Disagree?  What would your answers be to my questions?  I look forward to your comments.

55 Responses to "Catching up with Millionaire Teacher and Expat – Andrew Hallam"

  1. Couple comments:

    “But so little in the world of finance actually changes.”
    Correct, financial operations may not change (e.g. 1+1=2), however, the economics upon which finance operates does change. The bond bull (i.e. ever-decreasing interest rates) environment in which Andrew grew the bulk of his wealth is no longer, and that is a paradigm shift. Going forward, rate of saving will be the greater builder of wealth than rate of return, and that is the change in the world of finance. Old model of wealth: high debt+high return; new model of wealth: low debt+high saving.

    “When I say that my life is “risky” this is what I mean: I won’t be getting a defined benefit pension when I’m old.
    “Do you want to be betting over a million dollars on that [trying to beat the market], knowing that you won’t likely get a stitch of money from a pension?” That answer was a pretty swift no.”
    Refreshing to read a financial personality NOT refer to risk as volatility, but what it actually means to most of us — permenent loss of capital. He knows that all future income will originate only from his savings, therefore he’s addressing the two factors which have the highest impact: diversification and fees. Volatility be damned!

    Reply
    1. Thanks for your comments SST.

      I fully agree with this: new model of wealth = low debt+high savings rate. We’re working on this although we’re far from perfect. We are slowly killing debt and seeking to max out TFSAs and RRSPs. The former will be done soon.

      Andrew is a (very) bright guy. He got to where he is with an extremely frugal lifestyle when he was younger, as to optimize savings. Now he’s doing whatever he wants thanks to the fruits of his labour. His path was certainly not for everyone, he mentioned as much in his book, but I have a very high level of respect for someone that knows what he wants and is willing to have the discipline to see it through and achieve it. Again, pretty amazing guy. I look forward to his further comments and contributions here. 🙂

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    2. SST, your are absolutely right. I also scratch my head when people refer to volatility as risk. They act as though they will be liquidating their entire nest egg in a single transaction….this week, next week or the week after. Who does that? Risk is running out of money.

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      1. Thanks for the comment Andrew. Part of the risk I have is not saving enough to be able to live the life I want now (short-term fun without going into debt for it) and long-term, largely able to live off dividends, to fund our basic expenses and lifestyle in our 50s and 60s and beyond.

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  2. Very cool interview. I really enjoyed reading Andrew’s book a few years ago. Interesting to see what Andrew thinks about dividend and hybrid dividend + index investing. Can’t wait for part 2.

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  3. Interesting interview and perspectives from Andrew. Most certainly he has done well now with his strategy. I’m definitely in sync with what he is saying here. Mark, I’m looking forward to part 2.

    Lol, I met Andrew’s definition for discipline handily other than more than once tossing my cookies, but a number of those were from athletic endeavours.

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  4. SST,

    I’m not sure I follow your idea on old/new wealth.

    Are you talking about personal debt or levels of investment in debt since your previous sentence referred to that?

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    1. Both.

      Old model of wealth: high debt+high return

      The investment environment of the last 35 years was one of continuous falling interest rates. This had full effect on almost everything with a price tag. Both corps and households could take on more and more debt yet pay the same payment (record household debt, record market margin, etc.). There is a ton of leverage in the system which helped push returns and build wealth (e.g. real estate).

      New model of wealth: low debt+high saving

      With interest rates having almost no further downward capacity, they will either move up or sideways. This means either no new debt can be accumulated (payment ceiling), or debt reduction. Without debt providing a certain portion of previous market returns, future returns will be lower, thus to meet a specific funancial goal (e.g. $1MM retirement), saving rate has to increase, especially in a stagnant environment.

      Reply
  5. Thx for setting up this interview. I look forward to part 2.

    I like this quote: “They’re like discounts at a supermarket. But they wear a crocodile-like costume.” This works fine for me as I am in build up phaze. I just wonder how people with no income – people i the FIRE state – deal with this? They have no money to buy cheap. Maybe a question to ask?

    Index investing is my go-to approach for now. I will have market returns and most likely I will beat the average investor. It is a little dull. My interpretation of rule#9 play money! Works for me.

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  6. I recently read Andrew’s book. That is the time I started reading the personal finance blogs. The book is very inspiring to save and invest. I am following your suggestions and not bothered by the day to day ups and downs of the market. Since my husband lost his job recently, we are painfully frugal to keep out of debt.

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  7. I enjoyed this interview with Andrew Hallam. I agree with him that discipline is key to success in the markets. I also agree that buying and holding “forever” is the best way for ordinary investors to ensure they stand a chance in earning decent returns on their money in the stock or bond markets. I think that indexing and dividend investing is basically a very similar thing – you buy and hold diversified portfolios of stocks for years and have rock bottom costs. I am not sure why so many get riled up that DGI or Indexing is better than the other – many of the core concepts are strikingly similar.

    I believe many investors become indexers because they realize they lack discipline. If they stick to their allocation – that’s great. Yet, some indexers I observe tend to make huge shifts in their allocations – one sold 25% of their portfolio that was in REITs in an instant and bought a US Total Stock Market Index. If you truly lack discipline, I don’t know if indexing will save you from yourself. And this is a person who admits to have sold out of all stocks after the 1987 crash. Admittedly, some DGI investors end up being yield chasers – and their incomes and capitals suffer.

    One issue I have observed index fund only approach is that a lot of index investors seem to be oblivious to the concept of valuation – this could be costly down the road ( like in 1998 – 2000 when S&P 500 was selling at high valuaitons). Bogle knows this well, because he has talked about expected returns for a long time. Admittedly, some dividend investors end up chasing high growth stocks regardless of valuation – which sometimes works, and many times it doesn’t. Others buy stocks that look “cheap”, but end up being value traps.

    The other issue I have found is that picking the correct assets/asset allocation is very similar to picking individual companies. I have seen index portfolios that include 10 – 12 asset classes/symbols and require rebalancing. I have personally done roughly as well as in SPY/VTI since 2008 on my stock selections. But I have done better than most everyone else who had allocation to foreign stocks or bonds. So if you are an index investor who admits that you are not qualified to pick stocks, what makes you think you are qualified to pick asset classes?

    The last item i see is with popularity of indexing in general. When i started my site in 2008, and up until 2012, noone talked to me that I should be indexing. Some comments shared a story of how they invested in the S&P 500 index fund that went nowhere, or lost money for them. Yet, around 2014 and especially in 2015, I was getting questions from people almost daily, questioning why I am even wasting my time picking my own stocks. I find this interesting, because I got people questioning me intensely only after a 7 year bull market. It is quite possible that those investors are novices that have fallen for the narrative fallacy, or it is possible that they have done really well and now feel vindicated about their method of investing.

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    1. I happen to agree DGI: “If you truly lack discipline, I don’t know if indexing will save you from yourself.” Investing for the most part is not math, it’s behavourial science and psychology.

      Value traps are easy to become prey to.

      An indexed portfolio with more than 4-5 indexed ETFs may not be very well balanced IMO. That includes fixed income. Folks with dozens of indexed funds, or 10 – 12 asset classes/symbols, is not a good mix.

      Although they call index passive investing, there is still work involved and a great deal of it is training your investing brain.

      Thanks for the comments – good to hear from you. Stay tuned for part 2.

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      1. DGI, I think that what Andrew is saying that because it is extremely difficult to match or beat the market by choosing stocks, the vast majority of investors are better off indexing. This is what a huge body of research shows. This is irregardless of valuations – you rebalance when the market falls, thus buying low and selling high.

        With regard to your comment about doing well since 2008 compared to foreign stocks or bonds – US stocks have outperformed foreign stocks and bonds by a huge margin in this short time frame, so not surprising you did well using that measure. You need to compare apples to apples. The point about being globally diversified is that you own the global market so when foreign stocks outperform US stocks you rebalance into US stocks and vice versa.

        With indexing you do not pick asset classes like you do stocks, you own the global market which can be done with just two ETFs (eg VTI and VXUS for the US investor), and a bond fund if you want to reduce volatiltity. Investing does not need to be any more complicated than that.

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        1. I actually think that’s what dividend investing helps me with: buying low and well, never selling. I tend to stay the course due the psychological benefit that dividend investing provides – I can see the cash coming in.

          I suspect in Canada, you can own a fairly diversified portfolio (of CDN stocks) with about 30-40 holdings. There are simply just not that many big, blue-chip multinationals in Canada. Dividend investing outside of Canada is much tougher, which is where my hybrid approach comes in.

          I keep:
          -CDN stocks non-reg.
          -CDN stocks and REITs inside TFSA
          -U.S. assets like VTI inside RRSP.

          I just need to index invest more inside my RRSP, I still hold a few U.S. stocks.

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        2. Hi Grant,

          I don’t think you are understanding the point I am making about portfolio composition.

          The investment selections you make will impact your portfolio return going forward, no matter whether you index, pick stocks, buy rental properties etc. Since you do not know the future, you cannot say whether your picks will do better than my picks.

          And yes, deciding whether to own only VTI OR own both VTI and VXUS OR maybe VTI and individual government bonds OR the 100 dividend champions is an active decision in picking investments. Each of those selections will have different outcomes – neither of us knows which combination will will do better than the other. So you cannot say that indexing will be better than some other approach. I mean you can say it, but the reality is that you will be deceiving yourself.

          It is really funny to me that index investors fail to understand my point.

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          1. DGI, but I can say that a portfolio of individual stocks has a vanishingly small chance of matching or outperforming the market. That is what the evidence in the literature shows. So it doesn’t make sense to me to play those odds. So, yes, I can say, backed by the literature, that indexing has a very high chance of our performing a portfolio of individual stocks, when measured against the appropriate risk adjusted index.

    2. All very wisely stated. It’s true, especially, that even most index fund investors sabotage their investments. I recently published this, with some data on this issue: https://assetbuilder.com/knowledge-center/articles/why-most-stock-market-investors-could-have-a-really-bad-year

      I can fully understand why some people pay up to 1% for someone else to manage their money. By doing so, with a firm that doesn’t speculate, they will beat most DIY index fund investors.

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    3. @DGI: “Yet, around 2014 and especially in 2015, I was getting questions from people almost daily, questioning why I am even wasting my time picking my own stocks.”

      Really valid point because most or many of the Index funds have only been around for a few years. The other thing that bugs me is the term Stock Picking, making it sound like one is constantly having to Pick! Certainly one has to evaluate which stocks to buy and one may even make a bad choice, but essentially once your portfolio has been chosen, then it’s Hold and Monitor.

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      1. One quibble I have with indexing is every few years, there seems to be a “favourite” top indexing product to own. MoneySense magazine is guilty of this. They tout different and new ETFs every year. That’s not overly helpful to the average investor – the point is being missed I think – don’t obsess about low-costs alone, pick a few diversified, low-cost products and run with them.

        The way I see it, I’m going to take my chances that most Canadian banks, utilities and telcos will continue to reinvest in their business AND pay dividends to investors over time. Could I be wrong? Maybe. But that’s a risk I’m willing to take and so far, I’ve been rewarded for that risk.

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        1. Mark, I agree that is a problem, but it’s due to the industry trying to sell more stuff, not the strategy itself. All one really needs is 3 ETFs – Canadian equity, international and US equity, and bonds eg. the Canadian Couch Potato recommend VCN, VXC and VAB. There’s nothing wrong with adding REITs and/or small cap and value tilts, but I think most people are better off keeping it simple and sticking to the 3 fund portfolio. It’s very easy to manage and gives you a globally diversified portfolio of stocks and Canadian bonds that will outperform the vast majority of investors.

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        2. i’ve been a loyal subscriber to moneysense for years and that is my bugaboo. every year they tout the new and new favourites. what is an amateur investor to do, dump last year’s picks and buy the new crop? i’ll stick with my usa (6) and cdn(5) dgi stocks along with a few bond etf’s. it’s worked pretty good for the past 10 years — prior to that, bank mutual funds which where much worse.

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          1. Same Gary. More than happy with my stocks. Last time I checked, even with my oil and gas stocks tanking….XIU for the last 5-years was about 4% return over that period. My non-reg. portfolio is running about 6% over same period.

            Until CDN banks, telcos, pipelines and other companies ALL go bankrupt, then I will continue to own companies that pay me dividends and use more indexed products to continue to diversify over time. So far, so good.

            Most mutual funds? Inferior products long-term due to their higher fee structure and consequently, market under-performance. #ouch

  8. Whenever that lower part of my brain kicks in and I worry about a declining market, I just remember some of Andrew’s words to me about embracing a cheaper market, maybe even celebrating it! 😉 His ideas have had a big impact on me and I haven’t forgotten them.

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  9. @DGI — there are definitely so many things to think about in the investment world, it can get overwhelming very quickly.
    Perhaps the umbrella motto for the novice or know-nothing investor should be: Go broad or go home!

    Back to the Millionaire Teacher…I’m at odds with his Rule #9 — The 10% Stock-Picking Solution. If indexing is the prime directive, It doesn’t make sense to risk loss of capital just to appease an illogical ego: “All evidence points to stock-picking NOT beating the market so that’s why I’m indexing…except for this 10% which I’m sure will beat the market.”

    Stock-picking within an indexing strategy does one thing, it sends a message to your lizard brain that maybe indexing won’t or doesn’t work, and that’s why you are picking stocks…just in case. Then when a 1987 or 2008 or 2015 hit, you start second guessing your index strategy and maybe even selling.

    Besides, you would have to get a phenomenal return on that 10% in order to increase the total return of the portfolio enough that it’s worth the risk. The index godfather Bogle suggests only 5%, but that’s still an unnecessary 5%.

    Instead of using 5-10% of your portfolio to stock pick (i.e. satiate your want for control), use 100% of your portfolio to index pick; it’s the same mental mechanics to fool your brain, but now you’re buying a team of 50 or 500 or 5,000 instead of (maybe) a single all-star player. Think about it in different terms — every year one team always wins the Stanley Cup, but how many years did Gretzky or Lemieux et al NOT win the Cup? When you index, you wil the investment Cup every single year.

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  10. @SST: “Think about it in different terms — every year one team always wins the Stanley Cup, but how many years did Gretzky or Lemieux et al NOT win the Cup? When you index, you wil the investment Cup every single year.”
    I’d rather look at Indexing where you probably own more losers than winners, but Indexing is the new craze and may well be the best choice form many. I’ll stick to my DG stocks.

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    1. Of course indexing houses a lot of losers, that’s Pareto for you. What you could do, if so inclined, is buy the top chunk of every major index, the chunk which provides the majority of the returns.

      Indexing is only the “new craze” — 35 years in the making — because the retail investor now has so many low cost options available. Remember, the financial industry tried to kill indexing simply because it was so low cost. Yes, for many novice and know-nothing investors indexing is cheap and easy.

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    2. Cannew, it’s true with indexing you do own more losers than winners because you own the whole market where there are more losers than winners (about 2/3 of all stocks underperform the index). But the thing is picking those winners is so difficult that the vast majority of investors are better off just buying the index.

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      1. That’s the thing. You own the entire NHL when you index, all the duds and studs. If you select stocks, like Patrick Kane, you are hoping he a Sid Crosby will continue to perform for the next few years. Personally, I like a mixture of stocks and indexed ETFs, and with new money, adding more indexed assets over time. My plan is not without risk but I have confidence over next few years Patrick Kane will score more goals than Nazem Kadri.

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  11. SST, I believe it would be more accurate to include that indexing is also cheap and easy for know-something and experienced investors as well.

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    1. Of course, index traits are equally available to all investors. But remember, the man who urges know-nothing investors to buy index funds owns none himself (Buffett). Guess it all depends on what your knowledge and experience can deliver above and beyond index returns. As many have stated, the empirical evidence shows that most of us don’t have the right combination of knowledge and experience to beat the market.

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  12. @Grant @SST: I’m not sure what stage you are at, but I’m looking back at the investment choices I made, can identify what worked and what I should have done more of.

    The two biggest mistakes I made were: 1. Buying and Selling to build my portfolio. 2. Chasing Yield.
    The best decision I ever made: 1. Sticking with a select, small group of DG stocks with a long history of paying and growing their dividend.

    That last choice not only secured my retirement by providing more income than I need, but continues to grow to the point where I will never have to sell stocks unless I wish to do so.

    Would I be in the same position if I used Indexing, I doubt it. I know that sticking with the best stocks I’ve done much better than if I also held a bunch of mediocre as well. The past 15 years proves that.

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    1. Well, I hear you about chasing yield.

      I’ve stopped that. I have come to realize that yield and growth are two sides of a coin, you can’t really have both sustained for long.

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    2. “The best decision I ever made: 1. Sticking with a select, small group of DG stocks with a long history of paying and growing their dividend…The past 15 years proves that.”

      The next 15 years will not be like the previous 15, so if starting over today, it’s impossible to claim your #1 decision will still trump indexing (will your “best stocks” of 2000 still be the best stocks in 2030?). Can we say for certain dividend stocks will always beat the market? I like Mark’s hybrid approach, indexing, but willing to take on more risk (single stocks) in order to grow his net worth at an accelerated rate versus only indexing. I’m assuming accepting more risk because he still has time and income available to offset that risk.

      Seems this topic really stirs things up!

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      1. @SST: Of course your correct. Who knows which stocks will be the best 15 yrs from now, Most of the ones I own were good 15 yrs before I bought and added to them and they continue on the same course. In two months of this year 5 of my 19 have raised their dividend and that’s the on-going measurement I use. For me it’s simple, I just record the money as it comes in and when it increases.

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  13. I commented on your obvious omission of experienced or knowledgeable investors (or simply all investors) since you’ve associated “know nothings” and indexing on several occasions, and I thought it curious since we’re not even discussing results- just cheap and easy.

    What I remember is few if any DIY investors or professionals will have the knowledge, experience, resources, time, and opportunities Warren Buffet has. That Buffet recommends non professionals (including his own investors) and “know nothings”, and has his own trust set up to index, rather than be managed by another professional stock picker is telling.

    Most knowledgeable and experienced investors (even professionals) will under perform with lower returns than the market index, as per the empirical evidence. The empirical evidence seems to be telling us even significant knowledge and experience is probably not enough.

    I’m certain you have read exactly what Buffet said related to indexing, but for the benefit of others to put it in better context here is an excerpt from one of his shareholder letters.

    “Most investors, of course, have not made the study of business prospects a priority in their lives. If wise,
    they will conclude that they do not know enough about specific businesses to predict their future earning power.
    I have good news for these non-professionals: The typical investor doesn’t need this skill. In aggregate,
    American business has done wonderfully over time and will continue to do so (though, most assuredly, in
    unpredictable fits and starts). In the 20th Century, the Dow Jones Industrials index advanced from 66 to 11,497,
    paying a rising stream of dividends to boot. The 21st Century will witness further gains, almost certain to be
    substantial. The goal of the non-professional should not be to pick winners – neither he nor his “helpers” can do
    that – but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost
    S&P 500 index fund will achieve this goal.
    That’s the “what” of investing for the non-professional. The “when” is also important. The main danger is
    that the timid or beginning investor will enter the market at a time of extreme exuberance and then become
    disillusioned when paper losses occur. (Remember the late Barton Biggs’ observation: “A bull market is like sex. It
    feels best just before it ends.”) The antidote to that kind of mistiming is for an investor to accumulate shares over a
    long period and never to sell when the news is bad and stocks are well off their highs. Following those rules, the
    “know-nothing” investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory
    results. Indeed, the unsophisticated investor who is realistic about his shortcomings is likely to obtain better longterm
    results than the knowledgeable professional who is blind to even a single weakness.
    My money, I should add, is where my mouth is: What I advise here is essentially identical to certain
    instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s
    benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to
    certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee
    could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P
    500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to
    those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee
    managers.”

    Reply
    1. Hey RBull,

      Is that directed to me? re: “I commented on your obvious omission of experienced or knowledgeable investors (or simply all investors) since you’ve associated “know nothings” and indexing on several occasions, and I thought it curious since we’re not even discussing results- just cheap and easy.”

      I totally agree with you man! “few if any DIY investors or professionals will have the knowledge, experience, resources, time, and opportunities Warren Buffet has.”

      I certainly never mentioned I was like Warren Buffett 🙂

      Thanks for the Buffett quote from one of his recent shareholder letters. I thought that was excellent and it’s a reminder of why I’m indexing more myself.

      Reply
      1. No Mark, sorry it was for SST.

        I had some trouble posting it – captcha again so it was very delayed.

        You’re welcome on the Buffet quote.

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        1. All good. Sorry for the Captcha headaches. Maybe I need to change my security settings if you and others are having issues – keep me posted please RBull!

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  14. Mark
    so what are the ticker symbols of these ETFs that aren’t currency hedged? in your book you recommend xic.to and xwd.to are these currency hedged products?
    thanks

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  15. If Andrew is still checking in to this comment section I would love to hear more about his comment about avoiding currency hedged ETF’s. I’ve been looking into possibly adding some Hedged etf’s from Vanguard (VI and VUS) to try to minimize the potential rise in the Canadian dollar which will negatively affect International ETF’s like VXC. I feel like a large reason VXC had such a good year in 2015 was the drop in the Canadian dollar but I worry the inverse will happen in time. What would be the negative aspect of this strategy? Why avoid hedged ETF’s?

    Reply
    1. Thanks for reading Davek. I think the knock against currency hedging is, for the extra fees, you’re not adding much if any value. It may also increase risk. “Negative correlation” is actually a good thing. You want this in your portfolio…when some currencies go down, you want others to go up; hedging doesn’t provide that. Negative correlation is good because this is exactly what diversification is!

      That’s just me.

      I would agree, many investors likely had inflated returns in 2015 (i.e., with VXC, VUS) due to tanking CDN dollar.

      I personally don’t invest in any hedged products and likely never will.

      Hope that helps?

      Andrew can likely provide a much better more sophisticated answer than I can 🙂

      Reply

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