I’ve been a fan of Andrew’s for a long time. I continue to follow his blog and his book Millionaire Teacher continues to shape how I invest. 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.
Part 1 of my interview of Andrew Hallam was here. This post concludes my interview with Andrew.
Back to you Andrew, how are you investing today?
My wife has a Vanguard Target Retirement Fund. It’s a blended portfolio of stock and bond market index funds that gets automatically rebalanced each year. It costs 0.17% per year. It might be the easiest portfolio in the world. Unfortunately, it’s just for Americans.
My portfolio didn’t used to have any Canadian equity content. I never knew where I would retire, so I kept a more global allocation. My equities were split between Vanguard’s Total U.S. stock market index (VTI) and Vanguard’s Developed Market Index (VEA), with about 40% in Canadian bonds (VSB). But I’ve been recently buying a Canadian stock index. Most of my earnings comes in U.S. dollars and Singapore dollars. The Canadian dollar is on sale and the Canadian markets are cheap.
I’ve since purchased Canadian domiciled ETF equivalents, instead of going with VEA and VTI, which trade on the U.S. market. I did that to avoid potential U.S. estate tax issues. Most Canadian residents don’t have to worry about that.
What are your predictions for the stock market? Will that change how you invest going-forward? Why or why not?
I like Warren Buffett’s quote on the matter: “Stock market forecasters exist to make fortune tellers look good.”
I rebalance my portfolio once a year. And I add fresh money to whichever of my index funds is lagging. I hope stocks crash today or tomorrow. But that’s the greedy side of me talking. When stocks crash, I rebalance. I sell some of my bonds (which usually rise when stocks crash) and I buy stock market index funds with the proceeds.
Retirees should hope that stocks rise. But young people should get down on the ground and pray that stocks crash. I’m still 20 years from a “normal” retirement age. I’m still earning money and adding to the markets. That’s why I want stocks to stagnate or fall, and stay down for many years. The longer they’re cheap, the better! When they rebound (and they always do) those who had the courage to load up on the sale will reap massive rewards.
Most of Gen X (my cohort) and Millennials are probably struggling with decisions like how to invest, where to invest and what to invest in to secure their financial future. What advice would you provide these folks?
I could try to answer this question in 1000 words, but it would leave too many rocks unturned.
Interest rates remain at rock-bottom and house prices seem to keep climbing in major cities across Canada. Do you think paying down your mortgage today makes any sense over investing?
As for paying down a mortgage, I think that’s important. In the United States, you can get a fixed rate 30 -year mortgage, charging about 3 percent per year. The interest is tax deductible. But in Canada, our mortgage rates aren’t guaranteed over the long term. If interest rates rise (when they rise!) homeowners will pay higher interest. I have a friend in B.C. with a 10-year mortgage. Every extra dollar that he puts on that mortgage earns him a guaranteed, post-tax return. I don’t think any financial instrument in the world today promises even a 3 percent guaranteed, after tax return. So I’m a big fan of paying off mortgages faster AND investing.
Your books Millionaire Teacher and The Global Expatriate’s Guide to Investing were major success stories. Any plans for another book?
I’ll probably write another book, perhaps a money/investment book for kids. But it would also be fun to try something different. Kerry Taylor (Squwakfox blogger and Globe and Mail writer) joked with me about writing a fitness and health book. I proposed that we should do it together. I’m going to quote her directly on this:
My first chapter; “Eat the darn cookie!” Your first chapter: “Put down the darn cookie!” This could work?
Lastly Andrew, if you had to give some words of wisdom to investors today, savers trying to scrimp their way to a secure retirement, what would that be?
I just read a book called Stuffocation by James Wallman. I think people should check it out. In a nutshell, it says that we spend too much money on junk. Things that we think are necessary for our happiness often detract from happiness. When we build this mindset, we can find money to invest. When we do so, we give ourselves plenty of options: Will I take a year off? Will I retire early? Will I travel around the world on my 30th birthday? Money (and not debt) gives us the options to do these things. Life is for living. I think it’s best that we control our money, instead of letting money (and debt!) control us.
Thanks for your wise words and time Andrew. Talk again soon.
Andrew Hallam is the author of Millionaire Teacher – The Nine Rules of Wealth You Should Have Learned In School and The Global Expatriate’s Guide to Investing. You can follow Andrew on Twitter @aphallam.
Readers, what do make of Andrew’s investing advice and suggestions? How would you answer my questions? Got any follow up questions for Andrew? Thanks for reading.