Establish a million dollar investment portfolio on a middle-class income. Reads like science fiction – but it’s not. Andrew Hallam believes we can do it. Welcome to the gold standard of personal finance reading – Millionaire Teacher – The Nine Rules of Wealth You Should Have Learned In School by Andrew Hallam.
I’ve been a long-time fan of Andrew’s. I enjoy reading his site and following his posts on AssetBuilder. His regular contributions to the Globe and Mail and MoneySense magazine are witty and insightful. I raved about the first edition of Millionaire Teacher so much so that I wrote an extensive three-part review of it a few years ago:
Part 1 of Millionaire Teacher is here.
Part 2 of Millionaire Teacher is here.
Part 3 of Millionaire Teacher is here.
In retrospect this book was a game-changer for me. The first edition solidified many things for my investment journey including these concepts:
Rule 1 – Spend Like You Want to Grow Rich
Andrew taught me to start thinking like a millionaire: “…before we learn to invest to build wealth, we have to learn how to save.”
Rule 2 – Use the Greatest Investment Ally You Have
Andrew told me: “starting early is the greatest gift you can give yourself.” I’ve learned staying invested in the market through thick and thin is a great investing friend.
Rule 3 – Small Percentages Pack Big Punches
Andrew taught me indexed products will help maximize my investing returns by keeping my money management fees as low.
Rule 4 – Conquer the Enemy in the Mirror
Andrew taught me to always think of the stock market as a huge grocery store filled with non-perishable items. When prices fall, it’s a good idea to stock up. This means I should always celebrate falling prices just like a sale.
Rule 5 – Build Mountains of Money with a Responsible Portfolio
I’ve learned from Andrew that bonds can be parachutes for an investors’ portfolio when stock markets crash.
Rule 6 – Sample a “Round-the-World” Ticket to Indexing
With indexing, Andrew confidently told me: “nobody is going to know how the stock and bond markets will perform over the next 5, 10, 20 or 30 years. But one thing is certain, if you build a diversified account of index funds, you’ll beat 90 percent of professional investors.”
Rule 7 – Peek Inside a Pilferer’s Playbook
Andrew taught me the entire financial industry is not rigged against me, just most of it. So index funds will statistically, put the highest odds of investment success in my favour. Ignore pretty much everything else.
Rule 8 – Avoid Seduction
Every investor makes mistakes, even great investors make mistakes. Just learn from them and move on.
Rule 9 – The 10% Stock-Picking Solution …If You Really Can’t Help Yourself
Andrew told if I was going to continue with my stock selection: “…buy, analyze its price as if you were buying the entire business.”
All sound advice back then and now.
But the investing landscape has changed since the first edition of Millionaire Teacher. There are more Exchange Traded Funds (ETFs) to choose from. There are robo advisors like ModernAdvisor and many other fintech services that aim to automate investors’ portfolios – for the better.
To address these updates and how best to navigate them, Andrew has released the second edition of Millionaire Teacher. Thanks to Andrew, he sent me a copy to giveaway to a lucky reader on my site. But first, a quick interview with Andrew.
Welcome back Andrew, nice to chat with you again. It’s been a year – time flies!
- Is the investing landscape slowly changing for the better?
I think so! People are getting smarter. More people are saying no to high cost, actively managed funds. That’s why there’s now a market for Robo Advisor firms. I think they’re going to radically change Canada’s investment landscape.
- What are the biggest challenges for the retail investor to succeed financially?
I think investment behaviour will always be the biggest challenge. Most investors underperform their funds. So if their fund makes 8 percent after fees over a 10-year period, we find that the typical investor in that fund earns about 6 percent per year. Most retail investors speculate a lot. They watch economic news. They might worry about Donald Trump or Brexit and base decisions on forecasts. In many cases, they try to guess the market’s direction.
The gap between how funds perform, compared to how investors perform, are broader with investors who use actively managed funds. That’s because investors in actively managed funds don’t accept market returns. They think they can find that special person who can somehow see the future. When their fund picks don’t work out, such investors usually jump ship. As a result, they end up chasing their own tails. The funds they leave often go on to perform well after they sell them. The funds they buy often underperform after they buy them.
But not all index fund investors accept market returns. Many choose factor-based or smart beta funds. As with actively managed funds, such investors might also be tempted to jump ship if their funds aren’t performing. That’s why investors’ biggest enemy is the person they face in the mirror each morning.
- How will Millionaire Teacher, second edition, help investors?
As with the first edition, it starts from ground zero. You don’t have to know anything about investing to understand it. The book shows how to build a diversified portfolio of index funds on your own. By doing so, you’re virtually guaranteed to outperform the vast majority of professional investors after fees. But not everybody wants to DIY. I was happy to show some financial services companies that would build portfolios of index funds so the investor doesn’t have to do it on their own.
- How are you and Pele investing today? Maybe more importantly, how are you enjoying the freedoms that investing wisely has provided you? Do you think we can all “get there too”?
Our investment strategy is boring–but effective. Pele owns Vanguard’s Target Retirement 2020 fund. It’s a diversified portfolio of index funds that costs 0.14 percent per year. Vanguard rebalances it annually. She’s American, so she can invest directly in Vanguard. My portfolio is made up of different ETFs. I have a Canadian stock ETF, a U.S. stock ETF, a developed world international ETF, an emerging market ETF and a short term Canadian bond market ETF. We travel a lot. We love spending a few months at a time in low-cost locations. In any given year, we might spend a few months in Europe, a few months in Mexico. We’re addicted to Thailand, Vietnam and Bali. We’re currently in the Middle East. At the end of March, we’ll fly down to Tanzania. After that, we’ll get our Thailand fix. Sometimes, we take our tandem. We love cycling, camping, meeting other travelers and global nomads.
I think anyone could do this. In fact, living costs in much of the world as so much lower than they are in Canada. If you think you could retire at age 65 in Canada (for example) I think you could retire at age 55 if you spend most of the year in lower-cost locations like Mexico, Malaysia, Thailand, Ecuador and Vietnam. It wouldn’t be for everyone. But we love it.
I also think that any middle class wage earner could retire early in Canada if they track what they spend, invest from a young age, and use a low-cost investment vehicle, such as a portfolio of index funds.
- Finally, what nuggets of advice do you have for millennials starting their investing journey? Same goes for Gen X (my/our generation) on their investing journey? Any different words of wisdom for boomers nearing retirement?
I think the secret is tracking every penny you spend. Virtually nobody does that. But those who do end up spending less. It allows these people to invest a lot more money or pay off debts faster. Also, the earlier you start to invest, the better. I started when I was 19. Many of my friends will save a lot more money than me (over their investment lifetimes). But because I started so early, I had time to let compound interest work its magic. They’ll end up saving a lot more. But I’ll have a lot more money. It’s pretty unfair. Those who start when they’re young get a massive tailwind. Those who start to invest when they’re older have to work a lot harder to build any kind of wealth.
Thanks for this Andrew and take care, we’ll talk again soon.
Thanks so much Mark! Good luck with your investment journey. And I hope you enjoyed your trip to the tropics. Perhaps we’ll meet there one day!
My friend and fan of this site is Andrew Hallam, 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.
I’ll draw one name at random in a couple of weeks. Good luck!
a Rafflecopter giveaway
I’m retired and tired of giving money to a so-called Financial advisor who is not able to beat a simple market ETF. Maybe, Andrew can teach me a trick or two on how to do it with my own portfolio.
Andrew is a smart (and frugal) dude. Good luck Peter!
I’m in my mid-thirties now and trying to heed as much advise as possible on personal finance. Its certainly a struggle trying to juggle a young family, work and school, but this blog has really helped me. Thanks!
Thanks for reading George and good luck to you!
I read the first edition and am so excited to read the next one. Hope to win from the giveaway!
Good luck Cory!
I read the first edition and thought it was excellent with a lot of very clear-cut advice and perspectives. I would love to see the new copy. In light of today’s CBC expose on pressured sales at TD Bank branches, the section where he describes the pushback when he paid a group of Millennials to try to buy index funds would be quite timely.
Thanks Bart. TD is however not alone in their “push” of products and services. All big banks are doing it but maybe some more aggressively than others!
Millionaire Teacher taught me a lot and I recommend it often to other investors. I wish I had read it 40 years ago, but Andrew was probably still printing with crayons back then. I would love to have a copy of the 2nd edition of this book.
Great to hear. Good luck to you Bruce.
Sounds like a great read. I would love to have a copy.
Good luck Eddyo!
I have got my finances on track and this is the next step for me. I am quite interested in the robo advising section! While I love learning through financial blogs, I always feel as if I am dropped into the middle of the conversation, so would love a book that will help me start at the beginning of the conversation.
Another great book I would love to add to my library!
This is a classic and an excellent read for anyone starting out. I just wish I had stumbled across it a decade sooner…
Same. Andrew did a great job.
The first edition of this book is what got me started in the investing world. Now I want to see what’s new in the second edition. I also wish this book would get translated in French because I would probably be giving it for Christmas to a bunch of friends and relatives 🙂
Thanks for reading Jason. Good luck. I will pass along your translation suggestion to Andrew 🙂
It’s looks like I’m making a lot of the classic mistakes with my investing approach… So, it’s time to read up on making changes. Andrew’s book looks like the perfect place to start…if only I had a copy…?
Good luck for the giveaway!
Read the library copy of MT a few years ago and learned a lot. Began to follow finbloggers and found a download budget from CBB, which was a huge improvement on the pen, paper and calculator. Moved to a mostly index portfolio with dividend stocks in non-regd. Quite inspired by A. Hallam and several Canadian writers/bloggers (including Myown advisor, Boomer&Echo, , SPBrunner, CBB and a few others… j.Chevreau, J. Bender) still reading and learning. Thanks.
It’s a great book Carmen. Smart to go with indexed portfolio mostly, and CDN dividend stocks in non-reg – for the dividend tax credit. Well done 🙂
I’m still learning and reading as well.
Just last Friday my colleague was sharing some of the things he learned from reading Andrew’s book. It makes a lot of sense and that prompted me to read his first book over the weekend. Clearly, I need to read his new book too to stay current. This blog looks like a good place to stay current, too. Thanks for the interview and the book offer.
I hope you see you around the blog often David and feel free to ask any questions. I will do my best to answer them. Good luck to you!
Andrew really inspired me to take charge of my finances, I heard him on Paula Pants podcast Afford Anything.
Andrew is a popular dude and he knows what he’s talking about. Better still, he walks the walk. Thanks for being a fan Joyce – good luck!
would read again. thx!
Great to hear!
I HAVE to get my money in order. I need this book!
This was the book that really got my personal finance on track when i borrowed it from the library. I’d love to own it so when i recommend it to friends, I have a hardcopy to lend them.
Good on you to pay it forward. Good luck on this giveaway!
I bought this book when it first came out and gave it to my parents when I finished reading. It would be nice to read it again!
Andrew has done some great updates. Good luck Cassie!
I wish I had great advice like Andrew’s and yours when I was young. Too late for me but my 2 adult children could use this book. I’ll buy them each a copy in any case. “Invest early” is the best advice anyone can follow!
It’s a great book for many reasons Gary. Good luck to your offspring 😉 – thanks for being a fan of the site.
Share your position Gary,
In my case I didn’t listen to my father’s advice. What does he know – right! Well here I am many years later trying to share what I’ve learned through my mistakes with my own kids. Time is a great teacher and they are better listeners than I was. Reminds me of an old antidote that I once read. ‘We get too soon old, and too late smart.’
Thanks Jorge! I do share but as you say what do we know. Your antidote is very true; perhaps a t-shirt would be appropriate! (:
Yes it is. You’re doing well Gary. From what I know you hold a number of quality stocks and have now invested in a few lower-cost ETFs. Well done!