Read Millionaire Teacher Online
Authors: Andrew Hallam
Generally, the fewer trades you make in your investment account, the more money you'll make. Whether you're a mutual fund manager or a personal stock picker, lower trades equate to lower costs and taxesâand generally higher returns.
Committing to stocks for a long period of time, however, requires that you know as much about your companies as possible. To ensure the highest odds of familiarity, you may want to choose simple, predictable businesses, while opting for those that are efficiently run and likely to stand the test of time. Also consider what a financial tsunami could do to your businesses. Low-debt levels can be solid foundationsâespecially during tough times.
When you have found a business that you want to buy, analyze its price as if you were buying the entire business. The return you make can be highly dependent on the price you pay. But even with the best stock-picking tools, the odds are high that eventually most stock pickers will lose to market-tracking indexes, especially after factoring in transaction costs and taxes. It's fun to fight the tide. But you should invest the bulk of your money intelligently with a diversified account of indexes.
Notes
1.
“Women Better Investors Than Men,” BBC News online, accessed April 16, 2011,
http://news.bbc.co.uk/2/hi/business/4606631.stm
.
2.
Jason Zweig, “How Women Invest Differently Than Men,”
The
Wall Street Journal
, May 12, 2009, accessed April 16, 2011,
http://finance.yahoo.com/focus-retirement/article/107064/How-Women-Invest-Differently-Than-Men?mod=fidelity-buildingwealth
.
3.
Andrew Hallam, “How We Beat the Market,”
MoneySense
, November 2008, 44â48.
4.
Paul Farrell, “Day-Traders Lose Big, Still Live in Denial: 77 percent of American Traders are âLosers' While 82 percent of Day-Traders in Taiwan-China Are Bigger âLosers,'”
Wall Street Warzone
, June 16, 2010, accessed November 13, 2010,
http://wallstreetwarzone.com/the-more-you-trade-the-less-you-earn/
.
5.
“The Greatest Investors: Peter Lynch,” Investopedia, accessed November 13, 2010,
http://www.investopedia.com/university/greatest/peterlynch.asp
.
6.
Timothy Vick,
How To Pick Stocks Like Warren Buffett
(New York: McGraw-Hill, 2001), 170â171.
7.
Yahoo! Finance: Price to earnings ratios as of January 2011.
8.
Jeremy Siegel,
The Future For Investors, Why The Tried And True Triumph Over The Bold and New
(New York: Random House, 2005), 7â9.
9.
Value Line Investment Survey: Coca-Cola, January 28, 2011, accessed April 16, 2011,
http://www3.valueline.com/dow30/f2084.pdf
.
10.
The Coca-Cola Company 2010 Annual Report, (
http://www.thecoca-colacompany.com/investors/pdfs/form_10K_2010.pdf
) 57.
11.
Value Line Investment Survey: Dell, April 8, 2011.
12.
Fastenal, historical price source, Yahoo! Finance, accessed April 16, 2011,
http://finance.yahoo.com/q/hp?s=FAST&a=09&b=1&c=2005&d=09&e=17&f=2010&g=d
.
13.
The Value Line Investment Survey: 2011 reports for Coca-Cola, Johnson & Johnson, Microsoft, Exxon Mobil, Starbucks, Abercrombie & Fitch, and Stryker.
14.
Philip A. Fisher,
Common Stocks and Uncommon Profits and Other Writings
(Hoboken, New Jersey: John Wiley & Sons, 2003), 45.
15.
Value Line Investment Survey: Johnson & Johnson, accessed April 16, 2011,
http://www3.valueline.com/dow30/f4979.pdf
.
16.
Value Line Investment Survey: Schering Plough, 2008 Report.
17.
Ibid.
The Nine Rules of Wealth Checklist
You probably know a few people who are financial train wrecks waiting to happen. You, however, have a choice. You can pass them by as they smash themselves up, or you can teach them a few strategies to empower them to make good financial decisions. This isn't taught in schools, so most people spend far too much money on material things, invest inefficiently, and allow fear and greed to manipulate their wealth levels.
With luck, one day many of the principles outlined in this book will become part of a mandatory high school curriculum. Doing so would go a long way to ensure that people invest responsibly, which in turn will force the financial service industry to limit its gouging of individual investors.
No matter what your age and current level of wealth, you can build financial security by using the nine rules outlined in this book:
1.
Spend like a millionaire (or less) if you want to become rich.
2.
Start investing as early as possibleâafter paying off credit card debt and any other high-interest loans.
3.
Invest in low-cost index funds instead of actively managed funds. Nobody can consistently pick “winning” actively managed funds ahead of time.
4.
Understand stock market history and psychology so you don't fall victim to the craziness that infects every investing generation (often more than once).
5.
Learn to build a complete, balanced portfolio with stock and bond index funds that will easily beat most of the pros.
6.
Create indexed accounts no matter where you live.
7.
Learn to fight an adviser's sales rhetoric.
8.
Avoid investment schemes and scams that tickle your greed button.
9.
If you must buy common stocks, do it with a small percentage of your portfolio and pick a mentor such as Warren Buffett.
Live long, prosper, and pass on what you have learned.
Index
A Random Walk Down Wall Street
Abercrombie & Fitch
accountants for tax advice
actively managed bond funds
actively managed mutual funds/units trusts
12B1 fees
expense ratios
futility of trying to pick top funds
global fund fee comparisons
Morningstar five-star funds
odds of beating indexes
percentage in taxable U.S. accounts
sales commissions
survivorship bias
tax inefficiency of
trading costs
advisers' sales rhetoric
Alfawicki, Dave
Ali, Muhammad
Amazon.com
American Express
Andrewhallam.com
Apple
AssetBuilder
Automobiles
BMW
car-purchasing strategies
cars purchased by millionaires
Jaguar
Mazda
Mercedes-Benz
Toyota
back-fill bias
backward view of the markets
Bacon, Kevin
balanced allocation
balanced funds
American Balanced Fund
BMO NB Balanced Fund
CIBC Balanced Fund
Fidelity Balanced Fund
RBC Select Balanced Portfolio Fund
Scotia Canadian Balanced Fund
T. Rowe Price Balanced Fund
TD Bank Balanced Fund
Berkshire Hathaway
Bhatt, Neerav
Blodgett, Henry
Bogle, John
bohemian millionaire
brokerage fees
brokers/advisers as salespeople
Buffett, Warren
building index accounts
in Australia
in Canada
in Singapore
in the U.S.
Burns, Scott
Canadian brokerage firms
certified financial planners
Chamberlain, Wilt
Chaucer, Geoffrey
cheap stocks
cheapskate confessions
Cisco Systems
Claritin
Coca-Cola
Common Sense on Mutual Funds
Common Stocks and Uncommon Profits
compound interest
Corning Inc.
corporate bonds
couch potato portfolio
Canadian couch potato
during market declines
global couch potato
cowboy investor
credit-card debt
Cyr, Gordon
Dallas Morning News
DBS Vickers
Dell
demand honesty
developed market returns
Dimensional Fund Advisors
dividends
dollar-cost averaging
e-Series index funds
earnings yields
The Economist
efficient businesses
Einstein, Albert
evolved investors
exchange traded funds (ETFs)
Exxon Mobil
Fastenal
Fidelity Magellan fund
financial planners
conflicts of interest with
fee only
Fisher, Kenneth
Fisher, Philip
Forbes
magazine
Fortune
magazine
fund “turnover” rates
Fundsupermart
Gates, Bill
General Motors
Gilder, George
Gilder Technology Report
global economic crisis
gold, poor long-term returns
Goldman Sachs
Google
government bonds
bond indexes
bond-trading market
percentage in bonds
prices rise
short term
greedy when others are fearful
growing market returns
Grubman, Jack
hedge fund returns
helping children
high-profile advisers
higher risk
homes
causing economic crisis
mortgages
purchased by millionaires
Hulbert Financial Digest
human emotions sabotage returns
index funds
Australian indexes
Canadian indexes
defined
hated by advisers
international indexes
Nobel Prize winners support indexes
S&P 500 index
Singapore indexes
total stock market index
U.S. indexes
Infinity Investment Series
inflation
Insta-Cash Loans
interest rates
Internet technology stock madness
invest less, make more
investing early
investment club
investment magazines
investment newsletter performances
IRA account
Iraq War
JDS Uniphase
Johnson & Johnson
Journal of Portfolio Management
Kahneman, Daniel
Klein, Daryl
Knee Knackering Mountain Race
Lake Chapala
Life Strategy Funds, Australia
Lin, Seng Su
The Little Book of Common Sense Investing
low debt levels
Lucent Technologies
Lynch, Peter
Madoff, Bernie
Malkiel, Burton
market timing
McGugan, Ian
Meeker, Mary
Merton, Robert
Microsoft
Miller, Merton
Moneysense
magazine
Morningstar
The New CoffeeHouse Investor
New York Times
Investment contest
Noah's Ark
Nortel Networks
Norton, Edward
Olson, Kris
Orman, Suze
P/E ratio
pension fund performances
Priceline.com
Princeton University
publically traded companies
Putnam Investments
Raymond James
rebalancing portfolios
reinvest dividends
return on total capital
risk
Rosenberg, Jonathan
sales theory
Samuelson, Paul
Schering Plough
Schultheis, Bill
Scuttlebutt
Sedgwick, Kyra
selling stock
set your stock price
Shakespeare, William
shareholders of companies
Sharpe, William F.
Siegel, Jeremy
simple businesses
Singapore American School
Singapore Bond Index
Singapore index funds
Singapore unit trusts
Aberdeen Singapore Equity Fund
DBS Shenton Thrift Fund
DWS Singapore Equity Fund
Lion Global Singapore Trust Fund
Schroder Singapore Trust CI A
SGAM Singapore Dividend Growth
UOB United Growth Fund
sinking stock market, benefits of
SmartMoney
magazine
Solin, Daniel
Spielberg, Steven
Stanley, Thomas
Starbucks
stock market, as a collection of businesses
stocks as dogs on leashes
Straits Times Index
Stryker
student loans
superannuation
Swensen, David
T. Rowe Price
Target Retirement Funds
tax efficient
teacher's salary
Twain, Mark
U.S. stock market
average returns of
indexes for U.S. stock market
Value Line Investment Survey
Vanguard
Vanguard Australia
Wakelin, Keith
Wal-Mart
Wall Street Journal
Whitehead, Bert
World Stock Index
WorldCom
wrap fees
Yahoo.com
Yale University
Yang, Fang
Zurich International
Zweig, Jason