Millionaire Teacher shamelessly borrows some of its caché from another investment guide, The Wealthy Barber, yet this title hints at more than improbable riches.
Andrew Hallum, the Singapore high school teacher who wrote Millionaire Teacher (John Wiley & Sons, Singapore, 2001, $14.50, 184 pgs.) hails from Kamloops.
“It started at No. 1 on Amazon U.S.A. in the personal investment and finance category and was No. 25 overall,” Hallum said on a visit home to B.C. “Then they ran out of books.”
Back in the late ’90s, Hallum formed an investment club with some of his fellow teachers. It was more than a casual project since the American private school where he works provides no pension plan. Despite a modest salary, he managed to cobble together an investment portfolio worth more than $1 million.
In the book, Hallum offers “nine rules of wealth you should have learned in school,” based on his firm belief that investors everywhere are often poorly informed, misled and bamboozled. Canadians are a case in point. They are charged far too much for their managed mutual funds.
“I’ve always wondered why Canadians pay more than anybody else, three times what the Dutch pay. I’m fascinated by that just from a cultural perspective. Other than with hockey, Canadians are a pretty passive bunch and I think that’s part of the issue. It comes down to education. If we feel we’re getting a raw deal, people will stand up.”
As these types of books go, The Millionaire Teacher is fairly light reading, a combination of investment strategies and good ol’ common sense that’s grown decidedly less common. Neophytes will find it particularly useful.
Hallum, who wrote a column for MoneySense magazine before he tackled the book, cuts through complexities and relates his own experiences for the layperson, as any good teacher would. This is not a get-rich-quick scheme. To the contrary, it’s a get rich slowly and methodically scheme. Yes, he’s a millionaire, and he is passionate about teaching others benefit from sage advice.
It’s not all about financial markets, either. Millionaires don’t achieve their wealth by being spendthrifts.
“I think my primary inspiration was working with the mechanic I mentioned. He was a huge inspiration.”
When he was younger, Hallum worked at a bus depot in Victoria, where the mechanic on the night shift offered pearls of wisdom about wheels.
“If you can go through life without losing money on cars, you’re going to have a huge advantage,” he was told. In other words, buy second-hand vehicles with low mileage that command high resale values. Eschew the installment plan. Plow the money saved into an investment portfolio.
“You’ve got to be frugal early on,” he said. “You’ve got to learn how not to be fleeced by the banks.”
He’s no fan of banks or those in the financial investment business who steer customers into actively managed mutual funds. He cites something called “survivorship bias.”
“Of funds that survive over a 15-year period, 85 per cent will under-perform the TSE index,” he noted. “There is no reliable method of determining ahead of time what will outperform.”
Despite this record, Canadians pay more than twice what Americans pay for these funds.
“The industry itself is normally a sales industry. It’s a two-week course and Bob’s your uncle. Off you go and you’re selling these funds,” he said. “They actually don’t talk about low-cost funds versus high-cost funds. It’s not in their interest. Education will make it more competitive, but right now things in Canada are outrageous.”
His advice: go with a diversified low-cost index fund instead.
“It’s a broad representation of everything in a given market. An index fund in a managed account is far more effective than an actively managed fund.”
He pointed out that there are advisers in Canada who don’t used expensive funds, who follow a similar approach to what he recommends in the book. The process, however, is simple enough for people to follow on their own.
“If people became educated and stopped buying their products, eventually the banks would realize they have to lower their products. It needs to be taught. The tough thing is, a lot of teachers aren’t educated on this, either.”
A private member’s bill, urging greater financial literacy, was recently introduced in the House of Commons. That suggests there is general awareness of the need for Canadians to take control of their own financial houses.
In January, Hallum returns to Singapore and and will teach a personal finance course there for adults.
“If I can teach the teachers, I can teach everybody. Then, hopefully, the next generation won’t be exploited like this one.”
In Canada, the David Chilton’s Wealthy Barber Returns is edging out Hallum’s new book, but the teacher is biding his time; he’s in it for the long haul: “A book lives and dies on promotion,” he observed.
NINE RULES OF WEALTH
Author Andrew Hallum’s tips for getting rich — slowly and methodically.
1. Spend like a millionaire (or less) if you want to become rich.
2. Start investing as early as possible after paying off credit card and other high-interest debt.
3. Invest in low-cost index funds.
4. Understand stock market history and psychology.
5. Learn to build a complete, balanced portfolio with stock and bond index funds.
6. Create indexed accounts.
7. Learn to fight an adviser’s sales rhetoric.
8. Avoid investment schemes and scams.
9. If you must buy common stocks, do it with a small percentage of your portfolio and pick a mentor such as Warren Buffett.