Walking With God

Nine Rules of Wealth You Should Have Learned In School

Author: Andrew Hallam

Quick Summary

This book is written by a middle income private school teacher who became a millionaire doing nothing extraordinary.  He did not get a big break, did not gain a big inheritance, he just stuck to a simple, easy to follow investing strategy that anyone can do in about an hour a year.  The basic premise of the strategy is to by indexes.  Index of bonds, indexes of local stocks, indexes of international stocks in a balanced portfolio.  When they become unbalanced, sell those with too high a weight and buy those who are low.  In effect, you end up buying low and selling high.  The idea of uses indexes is so that you eliminate the risk of owning individual stocks.  The entire market would have to collapse in order to lose your money.  And even if that happens, that’s why you have the bonds.

Key Insights:

I’m just going to list of his 9 rules (basically the chapter titles)

1. Spend like you want to grow rich – Millionaires don’t spend a lot of money, that’s why they are millionaires. Learn to spend like them, and you’ll get a good start.
2. Use the greatest investment ally you have – Start early and keep investing.  Time is the greatest factor here when dealing with compound interest.
3. Small percentages pack big punches – instead of investing in high yield, high risk investments, invest in smaller yields, but with a history of growth.
4. Conquer the enemy in the mirror – people are stupid.  When investment prices are going down, people panic and start to sell.  Instead they should be buying when they are cheap.  When they are going up, people buy when they should be selling high.
5. Build mountains of money with a responsible portfolio – Use a combination of stock sand bonds to create growth with stability.
6. Sample a “Round-The-World” ticket to indexing – split your stocks between local (your country) indexes and international indexes.  This helps you diversify more as well as giving you another leg to reshuffle your portfolio with.
7. Peek inside the pilferer’s playbook – Learn how financial advisers make money.  Most are not here to help you, they’re here to help themselves.  Stay away from anything actively managed, especially mutual funds.
8. Avoid Seduction – don’t get suckered into high return rates and high risk
9. The 10% stock picking solution – If you must buy individual stocks, only use 10% of you portfolio to do so.

Personal Application

1. I’m going to invest in bonds.  Suggestions out there seem to be that the % should match either your age, or your age – 10.  I’m going to go with my age – 10 because I’m up for a little more risk and bond’s represent the low risk/low yield end of the spectrum.  So, I’m going to be investing in XBB – iShares Universe Bond Index Fund.  It’s basically just a huge basket of bonds, all from Canada.  Some Federal, Provincial, Municipal and Corporate mixed in.  It paid dividends around 3.57% last year, but it’s a little different than a corporation.  The dividends with go up and down with the fluctuation of bond yield rates instead of based on a board of directors allocations of profits.
2. I’m going to look more into this idea of using indexes instead of investing for dividends.  I think my goals and the authors are different.  He’s looking to amass a huge amount of money.  I’m looking to replace my income.  This, in the end, may amount to the same thing, but my end-game scenario looks different than his.  I don’t care if I become a millionaire, I just want to be financially independent.  If I can do that on less than $1,000,000, then that’s fantastic.
3. I’m selling my mutual funds.  I’m going to look into what my RRSP’s and TSFA’s are invested in currently and move them immediately if I find out they are in managed accounts.  The attrition rate is way too high.  I would much rather manage it myself for free that pay someone else who historically, as a profession, do no better than the market indexes.
4. I’m going to make sure I teach my kids about investing.  Not that I have the right way to do it, just make sure they understand things like how stocks, bonds, mutual funds, etc. all work.  How to look at a company financial sheet and know what it means.  I think this stuff should be taught in schools, but since we’re homeschooling, that just means I’ll have to make my own curriculum.  The homework will be investing their own money.