Money Moves (Part 11)

Millionaire Teacher Rule 7: No, You Don’t Have to Invest on Your Own

Educators have a lot to handle on a daily basis. The amount of dedication and attention that we put into our jobs often eats a significant chunk of our personal time. As a result, we often forget or neglect to take time to do things that can improve our lives. One of the things we often ignore is money. Whether it’s understanding the differences between Tier IV and Tier VI, deciding whether to take out a QPP or TDA loan, trying to figure out how much to contribute to our TDA, or deciding how to invest our money, the majority of us are usually left wandering around in the dark desperately searching for a light switch.

I am not a financial expert by any means, but I have been reading books by people who seem to know a lot about the subject. In this series of articles, I will provide summaries of what I am reading in the hopes that it helps others when it comes to learning about and potentially improving their financial situations. Again, this does not come from me and I am not providing any financial advice. You can do with this information what you wish.

Today, we will be looking at Rule 7 from Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School by Andrew Hallam. As you may have gleaned from the book’s title, the next three parts in this series will be devoted to a different section of Millionaire Teacher..

Part 11: Millionaire Teacher Rule 7 - No. You Don’t Have to Invest on Your Own (pp. 161-188)

p.161: Vanguard was started by John Bogle in 1974. It’s set up like a nonprofit firm. If you buy its index funds, you’re an owner of the firm. No private investors own a piece of the company. Vanguard was created for the people.

Many investors feel uncomfortable dabbling in the stock market on their own. They prefer the guidance of a financial adviser firm.

p.162: Use robo-advisers (these are not run by robots). They’re internet-based intelligent investment firms that charge low fees to build and manage portfolios of index funds. Costs and services vary. Some provide comprehensive financial planning (investments, estate planning, tax advice, etc) and some just invest your money. Robo-advisers perform much better and cost much less than traditional investment firms who try to rope us into actively managed funds.

Americans should invest in a US stock index, an international stock index, and a US bond market index. Add money every month. Ignore investment forecasts. Rebalance once a year to maintain a constant allocation.

pp.164-165: If you can’t handle the stresses of the stock market, consider hiring an intelligent investment firm. They’ll also rebalance your portfolio once a year for you. Vanguard is low-cost and hassle free.

p.166: Vanguard’s Target Retirement Funds offer the cheapest all-in-one portfolios in the world. If you choose to invest in one, you don’t need anything else. Vanguard rebalances your portfolio once a year.

pp.166-167: As people get closer to retirement, they shouldn’t have a stock-heavy portfolio. Stocks perform better than bonds over the long haul, but they are riskier short-term. Over time, stocks beat bonds, but bonds are more stable. Young investors can afford to take higher risk for the possibility of higher returns. When stock markets fall, they have more time to recover. Older investors usually prefer stability.

p.170: Full-service financial advisers deal with more than just investments. They tell you how much you should be saving, what kind of investment accounts you should open to cover your children’s college costs, estate planning, how to legally reduce your taxes, etc. They help with everything. Most of the better financial advisers won’t take clients with accounts valued below $100,000.

pp.170-171: Recommended full-service financial advisers include Vanguard, RW Investment Strategies, PlanVision, AssetBuilder

p.187: Financial advisers are armed with a handful of arguments to keep us away from index funds.

Hopefully, this brief summary of Rule 7 from Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School has provided you with useful information. Rule 8: Peek Inside a Pilferer’s Playbook coming soon…