The Canadian Investor - Episode 23 - Interview with the Millionaire Teacher, Andrew Hallam

Episode Date: April 18, 2020

In this episode of the Canadian Investor we interview Andrew Hallam. Andrew is the author of the Millionaire Teacher, The nine Rules of Wealth you Should Have Learned in School. Andrew provides insights on his investing strategy, personal finances and other investing topics.We hope you enjoy this interview with Andrew!--- Send in a voice message: https://anchor.fm/the-canadian-investor/messageSee omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. Hey, everyone, welcome back to the Canadian Investor. Before we get started with the interview that Brayden and I did about a month and a half ago with Andrew Howland, I just wanted to say that you'll notice that the audio is not as good as it usually is for the podcast. That's an issue that was on my end.

I had some issues with my microphone. However, there's just a few places where you'll hear some background noise. So I do encourage you to listen to the whole interview. Andrew was great, provided some great insight, and he is the author of The Millionaire Teacher. So enjoy the interview that's coming up. Live from the Great White North, this is The Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. What is going on, everyone? You're listening to The Canadian Investor,

and I am absolutely fired up this episode because we have the legendary Andrew Hallam joining Simon and I. And Andrew, you wrote the first book on finance and investing that I ever did read. I shared it with all my friends and family. Everyone has so much respect for this book. Everyone has said that it has made a huge difference in their finances. Welcome to the show. Thanks very much for inviting me. very much for inviting me. Yeah, I know. It's good to have you back. I actually had you on the show. We were trying to figure out 2017, way back when, which is just quite fun to come back around. And I can't think of better timing to have someone like you with a level-headed mindset and contrarian attitude when it comes to financial markets than right now of Tuesday, March 10th, 2020. So it's an interesting time. And we also got Simon.

What's going on, Simon? I'm doing well. I'm just enjoying the warm weather in Ottawa and very happy to have Andrew with us. Like you just mentioned, before we started recording, I just finished listening to his audiobook in the past two days, which was really good, even though i just find it was a little outdated but still really good well there's new there's new uh which revision are you on now uh as of as of today well i finished that like the second edition in 2017 and um yeah i'm toying with the idea of doing a third edition not because the fundamental principles have really changed in terms of the investing a few a few different products that

were available that weren't available in 2017 mostly the investment component is pretty timeless and uh and i think reasonably solid but what i find is missing in a lot of finance books is when you continue to ask people why they want more money, there's this component of you keep asking why, why, why, why. And beyond the basic needs, we find that we end up chasing something that when people are asked, why do you want that? They'll say, well, it'll enhance my lifestyle. And you ask, well, why do you want that? They'll say, well, to make me happy. And then I'll ask that question. Well, so money equals happiness. And they'll say, well, no, not exactly. And I think when we write specifically about money, we can end up channeling our thought processes

into just one thing. So with this third edition, I'm looking at the idea of bringing in studies and articles that I've put together over the past few years on happiness as it relates to money and as it doesn't relate to money. Because this really is the big, big picture here. Why do we want money in the first place keep asking why and you really come up with well once the basic needs are met what else is there so i like to explore that concept that makes a lot of sense because you know why people listen to this podcast why people invest their money is ultimately to grow their wealth and if they don't have a clear goal in mind or uh like what you're speaking to it makes it really hard for them

to stick to the course, especially a day like today. So Andrew, my question for you is, as this market correction is unfolding, whether you follow the news or not, a lot of people are very, very in tune to it these days. I'm wondering what kind of practicing what you preach on your stock allocation of your portfolio is happening right now. With bond yields being so incredibly low and stocks looking pretty attractive right now, in my opinion, what kinds of things are you doing right now for that ETF portion of your portfolio? Nothing.

Absolutely nothing. I love it. So when I have money, I invest it. nothing. I love it. So when I have money, I invest it and I don't try to time the market because we all know if we've ever bothered really looking into studies on market timing. If you bother looking to that, you'll really see that economists and stock market forecasters and experts on CNBC, they're about as good at forecasting the market's direction as a chimpanzee. So there's really no point in trying to get in and out or out of the market based on what you think the markets will do during any given time. So the best strategy overall is when you have money, invest it into a diversified portfolio if the market drops

thank your lucky stars because that's just a discount that's wonderful you're buying the same units you were buying maybe a month ago or two months ago but now those units are cheaper so it's like uh you liken it to a supermarket sale most Most people don't get this part. They really don't understand it. If I, again, liken it to the supermarket sale, it's kind of like they walk into the supermarket. Let's say they buy bananas every week, and they notice that bananas are now five cents a pound,

and they're really freaking out. They're like, I'm not buying bananas, man. Bananas have dropped to five cents a pound. And you know what? There's projections that say they might drop to three cents a pound. I'm not buying bananas. Bananas are scaring me. Well, it's actually pretty crazy because we are collectors as we're our purchasers. We're not sellers. Sellers should hope for high prices. Sellers would be retirees. Retirees really should hope for a bull market. And anyone buying shouldn't hope for a bull market at all. We should be hoping for

down markets, nice, long, drawn out bear markets. That contrary attitude is exactly what I like to hear. Simon, I know you've got a couple of questions for Mr. Holland. Yeah, and I think those are great tips for everyone. And Brayden and I totally agree on that. We get really excited when there's some markets of volatility or markets go down. And I was wondering if you, I know you support an index fund strategy, but I was wondering, what are your thoughts on owning individual stocks? And actually, do you own any? And if not, do you think people are willing to put the time in that? Is it worthwhile to select some companies to actually supplement an index fund strategy? Well, I can only talk about it from

my perspective. So it's really hard for me to suggest what somebody else should do. But I'll just give you guys a bit of a background on my perspective. So when I started out, I had, as most people do, you just start getting into the investment game. So it would have been 1989. So I was 19 years old. So this is my 31st year of investing in the stock market. And I'm 49 now. So I started out with actively managed mutual funds. Before long, I realized those were expensive products. I read Random Walk Down Wall Street, which is a fabulous book, which came out in its first edition in 1975. I probably ended up reading the fifth edition of that book when I got my hands on it the first time. I realized, wow, I'm paying really high fees. So I'm going to go with an indexed portfolio. And then I started to read everything that I could on, well, I guess it was, you know what I did do actually, it was probably more like this. I went from actively managed funds

to individual shares. So I was really buying individual stocks. And so I was reading everything I could on how to invest in individual stocks, reading everything I could on any book that had been written about Warren Buffett. Many people think Warren Buffett's actually written books, but he hasn't. It's just his pictures on loads of different books. And he's fairly consistent in terms of his tenets. Lawrence Cunningham put together a really great compilation of the essays of Warren Buffett, which takes some really super thematic issues that he's put together through his shareholder letters over the years. And so read everything I could and purchase stocks as intelligently as I could. And then when ETFs came available, I started adding

ETFs as well. So I had a real mixed bag, probably up until maybe around 2011. I had a real mixed bag probably up until maybe around 2011. I had a lot of individual shares and I had a lot of money in a component of index funds as well. Eventually what ended up happening, again, this is just sort of for me, as a stock picker, I really did have quite a short term as a stock picker in terms of obviously I had a decent amount in those shares and I did well with them. But I recognize that it was just a really short period. So I only owned individual shares for probably 12 years. And 12 years is like a blip. It's nothing. Although I did well, for me personally, I noticed that there's a guy named Bill Miller,

who is an active fund manager. He ran this fund called the Legg Mason Value Trust. The guy was just so brilliant. I remember just listening to him and reading a lot of the things that he had to say. He beat the S&P 500 for 13 years in a row, which was just unheard of. Nobody had ever done that before. Then he had a bad year and not only did the index totally wallop him but he ended up giving up all the gains that he'd accumulated in excess of the S&P 500 over the previous 13 years and for me I for me it was kind of a moment where

I had to ask myself some really hard questions um i had to ask myself andrew you know are you smarter than bill miller um and i'd seen so many examples that anecdotally would tell me you know what i can pick individual shares and i can do just as well or maybe better than the market i would see anecdotal examples but then more and more when i would look at statistical evidence and when i had to just, for me personally, put that part of me aside, that ego aside, because I really believed I was a good stock picker even though I only had a 12-year track record. I had to say, you know, I don't think I'm smarter than Bill Miller, and he just got spanked. He just got spanked. So there was, for me, more and more evidence suggesting that I was personally a lot better off not buying individual shares.

And there's a lot of evidence to suggest that people don't need individual shares to do well in the market. Often you get people that do well picking individual stocks, and then they end up getting spanked later an example could be uh the hedge fund bet that warren buffett had in 2008 where he bet protege partners and those guys had an amazing track record so the hedge funds that they picked people aren't familiar with it uh warren buffett bet these hedge fund managers that uh this hedge fund company they couldn't pick a collection of hedge funds that would beat the S&P 500 over the following 10 years. And so Buffett was betting on the S&P 500 and these hedge fund managers were betting on obviously their stock picking ability and potentially their ability to short the market if they saw opportunities. And these guys

had an awesome track record. I mean, they had spanked the market previously. That's why they were picked for this bet. And in the end, Warren Buffett ended up beating them soundly. And even when you deduct all fees, those guys could work for free, not charge any fees, and they still would have lost to the market. So again, I'm not going to be in a position where I'm going to say to people, oh, you shouldn't buy individual shares. But for me, just when I look at the statistical evidence, I'm like, huh, huh. Well, for me personally, maybe this is the way to go. So I don't own any individual shares. It makes a lot of sense. And knowing what I know about you with your life and how much you travel and how kind of free spirited you've been since you've retired as a

teacher, hence the name of the book, The Millionaire Teacher. It sounds to me like that 15 minutes a year of just updating your index allocation just sounds like a perfect gig for you, especially seeing as you're finding that the returns to be quite comparable to stock pickers are sometimes even better. My question for you around that index ETF investor strategy is do you recommend for Canadians a mix of US dollar listed ETFs and Canadian dollar ETFs or do you think you can just go full ETSX? Do you have any sort of

preference on that or a suggestion for people who have that kind of question? So to me, I think many of the people that are asking that kind of question are taking a hair and they're splitting it in half or thirds. And there are much better things to do in terms of their time. So I don't think it really matters a heck of a lot whether they choose the ETFs off the Toronto Stock Exchange or whether they choose them off the New York Stock Exchange. Overall, long term, not really a big deal. But what I think, what I do recommend is when people are asking me what ETFs to recommend, what ETFs I suggest people buy is the all-in-one ETFs, the all-in-one portfolio ETFs that Vanguard and iShares offer.

So these are fully indexed portfolios within single index funds. And I'll tell you why I like them. First of all, the iShares products cost about, at this point, 0.18% per year. So you can go cheaper if you buy your own individual ETFs. I think the Vanguard equivalents are something like 0.25%. Obviously, they're competitive. And so the expense ratios, they are coming down over time as they do with most ETFs as they get competitive within sort of firm to firm. But the thing that is most important is how well can the actual investor perform? So you have the product, but then you have the human emotions behind the investor.

And Morningstar did a really cool assessment on these type of indexed target date funds. And what they did was they analyzed the cash flow they did a cash flow analysis to see what kind of inflows were coming into those funds and what kind of outflows and at what points in time so what they were able to do is they were actually able to estimate what the average or how the average investor performed in a given fund over a period of time. Morningstar will allow you to do this with virtually any mutual fund as well. So if you get a subscription to Morningstar, you can actually end up getting an analysis on their estimate of how the investor performed and how the actual fund itself performed.

And they're not always the same thing, and that's what's really interesting. They found that, first of all, people that have target date really interesting um they found that first of all people that have target date retirement funds they end up uh just closing their eyes to the whole process they tend to be the people that don't know as much about investing so they tend to be the people that are um just setting it and forgetting it each one would be a diversified portfolio wrapped into one so the one i'm talking about with vanguard canada's all-in-one portfolios is you'd get a Canadian stock component, a US stock component, an international stock component, and a bond component.

And Vanguard rebalances that. So they rebalance that with obviously the cash flows that come in. If they need to make a sale and then a purchase to come back to the original allocation, they'll do that. So you can end up getting a conservative one, a balanced one, an aggressive growth one that has very little in terms of stock allocation or bond allocations to it. But the studies have shown that people that end up buying these particular products end up, especially when the markets are volatile, they actually outperform the fund itself through just dollar cost averaging these things, not trying to speculate, not trying to get out of the markets because they're often people that don't even follow the markets. It's really fascinating when you're looking at the behavioral component because that's

the thing that so many people miss out on. They think that it's all about buying products, but really it's much more about once you refine the component of, hey, I'm going to be diversified, I'm going to have low fees. It's much more about human behavior. Human behavior is a fascinating component. Those all-in-one funds, they really have helped historically to harness human behavior. So when someone asks me, what should I buy? I'm an investor. I'm sort of looking for something balanced. I'll say, hey, something like VBAL. It's Vanguard's balanced all-in-one index fund. I can say, set it and forget it. That's your risk tolerance and you're good to go. Just keep adding money. I appreciate the simplicity you seek when it comes

to your investing portfolio because combating those human behaviors with simplicity seems like just a really easy way to get people stopping from jumping in and out of the market. One question I do have about VBAL is I believe it's like a 40% bond allocation. Now I get questions all the time from very, very eager 18-year-old, 19-year-olds who are really excited to get into the market which is amazing on its own. They're asking about what kind of bond allocation they should have. And I tell them that they shouldn't even be thinking about bonds at all at their age. Quick thoughts on that. If they can handle the volatility. So I spoke to a really fascinating,

I spoke to a financial columnist in the United States who's been, he'd been writing this financial column for 50 years. And I said to him, Hey, I'm going to call him Joe. I said, Hey Joe, you know, young people should be a hundred percent equities,

a hundred percent stocks. They've got all kinds of time. They're adding money to the markets. They can add every month. They have all kinds of time for markets to recover and for them to just keep adding in case there's a crash. And he said to me, yes and no. I'm like, well, Joe, what do you mean by the no? And he said, it all depends on the person. It depends on their behavior because you can get an 18 or 19 year old person who freaks out when the markets drop and they see that

all of a sudden their $2,000 portfolio is now down to $1,200 during a quick correction. If that ends up thwarting them to the point where they either sell, give up and decide that this whole investment scheme is not for them then then the higher allocation of equity that actually end up hurting them So again, I'd say statistically is so dependent on the individual and how they can actually tolerate the volatility So my niece for example, I've got a young niece and And I know for sure that there's no way she could handle that kind of volatility that you'd have in 100% equity portfolio. And, guys, it's funny because if I heard myself talking 10 years ago and I heard these words coming out of my mouth, I'd be saying, what are you talking about?

I mean, every young person should be able to handle that. Statistically, stocks beat bonds. Go stocks all the way until you get older. If you want to add in bonds, add in bonds. all the way till you get older if you want to add in bonds out in bonds but I see it a little bit differently now only based on just seeing thousands of people over more than a dozen years watching their behaviors during market volatility and I find volatility is a funny thing it's um volatility is a lot like cancer and let me explain that it sounds like

a strange analogy but if if i say to somebody can you handle volatility oh yeah hell yeah i can handle volatility so you can handle market drops oh yeah market drops are awesome i just keep on buying but then it actually happens to them and i say it's kind of like cancer because i can ask somebody well how are you going to respond if you had cancer? And unless somebody's had it, they can't answer that question. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual

RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit Questrade.com for details. That is Questrade.com for details. That is questrade.com. Here on the show, we talk about

companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's Airbnb. your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. And it's the same thing with a big market drop. So yeah, definitely there's that tendency of, yeah, more tendency for sure to have higher equity component when you're young, for sure. Statistically, it makes so much sense.

But man, we're knuckleheads as humans. We just – and we have to respect the fact that we're knuckleheads. Take this whole coronavirus toilet paper thing, guys. People are buying toilet paper like crazy. They're clearing out supermarkets for toilet paper so that what? They can sit in their home and not have any food? Like food – stockpile the freaking food right they can't make dinner but they have a ton of toilet paper which is just perfect yeah so humans humans aren't rational and and you know the older i get the

more i'm realizing that sometimes it's putting that mirror in front of myself too and seeing me irrational and all other kinds of things so uh yeah no humans are rational um i had a question on that and i'm really fascinated by the psychology behind investing and i totally agree with you it's easy to you know think you'll react well especially when you're in a historical bull market and right now we're seeing a lot of volatility um so given in 2020 where people are glued to their phones and instant information, whether it's Twitter, whether it's CNNBC, if you're turning on the TV, it's kind of hard to ignore any of the market volatility. So do you have a few tips for

listeners that they could use in terms of being able to stomach that even if they invested in index fund and they have a strategy similar to yours to not not panic like potentially your niece for example yeah that's a hard thing Simon isn't it mean aside from actually blocking certain news networks like anything related to the financial media which is most part what I'll call financial pornography. Really doesn't, really doesn't, that really doesn't actually do anybody any good. So other than blocking it and having the courage to block it, one thing that we can do with social media is I have noticed there are certain facebook groups that that i've seen people

join that tend to have a an ethos of stability and common sense and so something like uh like any kind of bogle heads group so a lot of these the fi movement people they're really in love with the whole vocal heads movement so you know john bogle created the index fund continued to just stay the course don't speculate so people that get into social media maybe dipping into these can give them a little bit of balance because when markets drop these are the same people that are going, this is awesome. Bye, bye, bye. So, yeah, maybe that will help, Simon. I don't know the actual answer for that.

Simon, they just listen to this podcast on repeat, of course. Listen to us. Yeah, I know. People think I'm crazy at work because I just get excited. Yeah, we're the most positive guys. We're the most positive guys. So your book, which I find really, really important because the first half is more of a personal finance. Let's figure out your finances first before we get into the investing scheme.

That's kind of how it flows from when I read it. And as a contrarian investor, someone who's deploying a ton of personal cash in my portfolio right now because markets are crashing quickly, I desperately want to deploy more and more cash during a bear market like this, of course, based on our mindset versus a lot of the financial news you see out there.

So from talking to people, what is a money-saving trick that you have found, like I think of as like an 80-20 rule, where everyone kind of has this leak in their funnel in terms of personal finance and is really easy in terms of you're going to get a huge reward for not particularly a lot of effort. Because I know for me, I'm trying to save as much cash as I can right now to inject into my self-directed account. Well, I mean, I think the way you started it off where we talked about that holistic component of,

all right, like Warren Buffett talks about with a company, he doesn't want to see a company start cutting costs when things are not going well for the business. He always says that's that's silly. The thing that's most important is that a company should be looking to cut costs always, always trying to maximize their potential for growth. So if there's an ability to cut costs and not hurt growth he's always for that and i think too when you're looking at it from the investment side of things and i'm sure you guys do this too um in terms of that you probably got pretty good lean household finances both you guys are probably eagerly investing as much money as you can and then

you get even crazier and more and more eager when markets drop, which is exactly as you should be, which is awesome. The thing that I find helps people is to do something simple, such as track what they spend. So when it comes down to the spending, what we'll find is most people can actually save a lot more money than they think they can. spending what we'll find is most people can actually save a lot more money than they think they can and if they track what they spend they end up spending less money they become you know they can have that phone they go to starbucks and they enter in the latte it just takes a second

you just have an expense app and you put it in whatever it costs you and press category you know coffee or dining out or whatever it is. But through that process of making yourself accountable for things you purchase, we actually end up, studies show that we actually end up spending less on them. We become accountable for them, and it harnesses us. It kind of holds us back without us really creating a budget. Budgets don't work. Budgets are like diets. You know, they'll just make somebody go hog wild crazy

at some point in time and i've got a friend who used to do that you know he'd have his budget he'd hold it to it he'd be super super pulling the reins in and then he'd go nuts and treat himself and the next thing you know he's you know everything's just hit the fan he's back where he was before and all kinds of debt but yeah tracking what we spend maximizes how much we can actually save and then just consistently putting that money away as consistently as possible for the whole working lifetime yeah yeah that's a great trick i actually recently did that with i used to buy coffee at work every day about a year year and a half ago i started like keeping track of. And now what I do is

I just brew a whole pot of coffee in the morning, bought a big termist, I bring it to work, and I'm saving, I calculate, about $20, $20.25 a week. For the whole year, it's over $1,000. So it's just a small thing for me, but it adds up, right? Well, it's so cool, Simon, because not only does it add up to, let's say, $1,000 a year, but when we compound that money over your lifetime, we're talking serious, serious cash. There's a presentation that I do. I started calling it like afford anything. Sort of you can afford anything, but not everything.

So I borrowed the title from Paula Pan pant who had this really cool podcast slogan and i think i changed it to like uh ordinary people extraordinary wealth just so i wasn't ripping off paula's title but what i would do is i'd take something like like your coffee simon and i would say okay let's take simon and this was what simon was doing simon was you know spending money on coffee and then decided he wasn't going to do it anymore and his colleague was going to continue to do it. Well, let's look at the long-term opportunity cost of his colleague spending an extra $1,000 a year on coffee. When you compound that over 30 or 35 years at 8 or 9 or 10% a year, it's freaking unbelievable.

Then you take a couple of other things, just another small factor, so coffee might be one, there might be one or two others. And you look at the opportunity cost of some of those little expenditures and you're realizing at the end of the day, those three little decisions might be million dollar decisions. Definitely. So I had another question for you. In terms, your books is focused a lot on fees, reducing fees as much as you can. And I experienced that with my parents a few years ago. I asked them, oh, why don't you guys just send me your portfolio?

And I noticed they were paying upwards of 2.53% through mutual funds, which were recommended by their financial advisor, which was a, like, hair quotes, friend of the family for 25, 30 years. And when I tried to show my parents the numbers, my mom's actually an accountant, showed them the numbers and the effect it could have for them, took a lot of convincing, but they finally had the hard conversation and flushed a financial advisor. But it really wasn't easy for them because there was that sense of loyalty. I know it's still a problem for a lot of people, so do you have tips for people, whether it's for themselves or potential friends or family members, how they can go about to get rid of a financial advisor that is just eating away at their returns? Your strategy was awesome.

That's the best thing to do is to actually show somebody with a compound interest calculator how much they'd actually be giving up over time and not telling them, but let them do it. So you show them how to work the calculator and you go, OK, here's what you're paying in fees. And this is how much more you'd be making per year if you weren't paying that in fees. So let's say it's 2.2% more per year. So that's your premium. And people look at that and think, well, that's not a big deal, 2.2%. But then actually get them to do the math themselves. So if you did it yourself and you already knew the numbers,

it can have an impact, but it's far more impactful if you show them the calculator. Say, okay, put this in here. Now enter this. Now enter that. now press calculate there and they'll just go oh my god like it's something they've is there's something weird about this whole thing guys about there's a tangibility to someone actually putting in those numbers

themselves so my wife came up with this idea when i was giving presentations because i would show the difference up on a screen between here's the difference between paying 2.5% a year and here's the difference between, you know, here's paying 0.2% for essentially the same thing. And, you know, people would look at that and a couple of them might go, and eyebrows would raise a little bit. But that, my wife came up with the idea of getting them to do it themselves. So it's like, okay, everybody, take out your phone.

All right, I want you to go to this calculator at moneychimp.com. We're going to do a comparison. And I would put what I wanted them to do up on screen and make them do it or ask them politely to do it. And she was right. Like there's a certain amount of air, like 15% of the air just gets sucked out of the room because you can hear people go. And so like what you did was awesome.

And so I'd highly recommend anyone trying to convince someone else, get them to actually do the numbers themselves. Show them how to do it. I remember the first time I used that compound interest calculator. I think I was like 17 years old and I'm like, nope, I'm never going into mutual funds. And it's not surprising at all that you go onto the robo-advisor services that Questrade or Wealthsimple here in Canada offer. they show is that chart where at about year 20, it really starts to diverge aggressively with compound interest in terms of what you have versus what you could have had in that scenario. I find their commercials even, it's like go to Questrade.com forward slash calculator.

What you're talking about is actually really interesting because they're clearly finding that is conversion rate wise very important for people to make that realization. And if it's just them clicking that button up or not, that is like the leap of your entire personal finance career right there. It's just you can't get a better reward with less time than making that jump. Would you agree? Oh, 100%. And some people, what they'll do is obviously, okay, there's a relationship. They'll look at the, there's the emotional factor and that's the hardest part. It's like breaking up. You have to break up with a boyfriend or girlfriend. You're breaking up, right? And they have done their best to harness a relationship with you. That's how they keep you as a client.

And in part, that's strategy as well. They're great at sending you, if they're really good, sending you birthday cards and remembering your kids' names and forging a relationship so that even if you do see the numbers, you won't want to break up with them. But the numbers themselves are so powerful. And then when, Simon, you ask your parents that question, go, okay. Now, this guy is really your friend.

He'll continue to be your friend even if you don't use his services. And look at this. If you don't use his services, well, could end up saving you $300,000 or whatever it might be when you've done that calculation. What I find many people, too, they'll say, well, you know, it's too late for me now. Like I'm too old. I'm 50 already. I don't have that many years left. I might as well stay with the guy. And for those people, I say, okay, here we go. Life expectancy for most healthy adults is going to be mid 80s. Yeah. So if you're 50 years old, your investment duration is not as long as you are going to be working. Of course, your investment duration is always how long you are going to be living. So for a 50 year old, their investment duration is, well, if they live to 85, it's 35 more years.

So they will be adding to their investments until they retire, and then they will be selling off pieces of it after they retire, but only pieces of it. So a large amount still needs to maintain itself in the market so it can continue to grow to sustain them during retirement. So a 50-year-old has at least a 35-year duration typically. has at least a 35-year duration typically. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees.

They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit Questrade.com for details. That is Questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best

products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. That is airbnb.ca forward slash host.

That scope is really important to realize because I as well have family members, of course, they know that I do this. They know that I tell them, nope, you should be just doing ETFs. That is a huge win for you and your finances. But yeah, it is like a breakup. And what they do is they're smart to keep clients. They have baked in all of these fees to get out. And even though it still is worth it to pay them and get out, no one wants to take that kind of hit just because you want to pull out your portfolio. to hit just because you want to pull out your portfolio. And it's an awkward conversation. It's a very awkward conversation because you have to, yeah, we've been working together for maybe 30 years, but your incentives aren't aligned with mine. And what I found really interesting is that Globe and Mail article you pointed to me that you wrote one time of people who go into the banks looking to invest their portfolio and how the tellers and financial advisors were so incentivized to give off those high-fee mutual funds. Do you want to just speak

about the banking industry, especially here in Canada, and how they're incentivized to get you into those expensive mutual funds? Yeah, the banks, they make much more money when they get you into the expensive funds, when they get you into their actively managed products. So for the banks, their bottom line is really to the shareholders. So these are publicly traded companies. So they need to maximize profits. So when you go in there as somebody looking for advice on how to invest money for your RRSP, you have to understand that you're always going to be second, not first.

The bank is first and you are second. You're long debt. You're quite a ways down on that priority list. And you might end up with somebody at the bank who's really, really kind, really kind-hearted. They might not think like that, but they're not that well trained. So when you do go into the bank and you ask, say, at TD for their in-house index funds, if that's what you happen to do, most of the financial advisors at TDd from what i have found uh don't even really know what those are and so that right there it's one of those things where you you're dealing with

people that really know so little about about investing if you read a couple of books like common sense guide to investing by John Vogel and A Random Walk Down Wall Street, you'll know more about investing than about 99% of financial advisors out there. Couldn't agree more. Simon, I know you have a question that pertains to, we've been talking about Warren Buffett a lot already in this conversation, and the amount of cash sitting on Berkshire's books right now is astounding so I'll let you uh take over here Simon yeah I was just curious to just get your sense what you think about uh in terms of having cash whether it's uh low yielding cash

but available you know cash that's available to be deployed pretty much whenever you want and take advantage of corrections like it's potentially happening right now over bonds for example do you think there is more value in one or another i know what berkshire hathaway has i think last i checked around 100 billion in cash probably a bit more even when you factor in the liabilities for the insurance company. So just your thoughts on that, especially if you can get to 2.5% in high interest savings account or they are available in some places in Canada, CVIC insured. Yeah, it's, I mean, for Berkshire, for that company, for Buffett himself, he needs an elephant to move the needle because Berkshire is such a big company now. And back in the day, he could buy some small stocks and he could buy things that would have made an impact.

But for now, it's so much more challenging for Warren to have any kind of major influence on Berkshire Hathaway's bottom line just because the company has grown so big. And it's a challenge for Berkshire too because it's grown so big. For years, Buffett's been saying it's going to be harder and harder for them to outperform the market and uh and i wrote an article recently where i looked at the past three five ten and fifteen year periods where berkshire athwares actually underperformed the market over those three five ten and fifteen year periods so it's going to be more challenging but back back to your question um what i like to think of is when people talk about right now, that's the interesting thing. They'll say things like, well, interest rates are low right now.

What they're really implying is that they believe that whatever's happening right now will continue to happen in the future. And nobody can really see the future. So if many people are saying, suggesting, you know, we shouldn't buy bonds because the interest rates are low right now. Well, we don't know what the interest rates are going to be 10 months from now. So for me personally, I have a rotating bond market index, which I really like because then it has a series of bonds within it, within different maturities. And when global interest rates rise, let's say one of my bonds within the ETF expires. rates rise, let's say one of my bonds within the ETF expires, if it expires and global interest rates rise, then it purchases the money, purchase another bond at a higher interest rate if global interest rates have risen. So I like having that because it's always a perpetually rotating, there's always a

perpetually rotating element to it. rotating there's always a professionally rotating element to it and when we do look at longer periods of time a bond market index it outperforms cash in terms of the the interest rate that you're going to be getting at in a high interest savings account maybe not every month maybe not every year but when you're starting to look at five three to five year chunks that rotating bond market index will typically outperform cash. And I do like one of the things too, when you're talking about market corrections, market drops, I really like having that ETF component in bonds as well, because when the markets drop, and I then rebalance my portfolio, I'm allocating loads of what would be money in bonds into stocks to get back to my original allocation.

So if I had a stock market crash, if we got a market crash, I mean, a really good one. I mean, what we've had right now, I know people are pretty excited about it, but the markets today, they closed at about the same point they closed like 11 months ago. I don't see that as a really big deal. To me, that's not really a good discount. It's just that the market kind of fooled people because over the last 11 months, it went up so much so fast. So okay, it's back down to the point where it was at 11 months ago. I'm not getting too excited about that. Yeah, it's nice. It's a step in the right direction, for sure. I want it to, I'd love it for it to keep going but one thing

that i love is that you know the markets really took a nice bath and tomorrow they dropped tomorrow was wednesday they dropped 50 i'd be like wow that's awesome i could then take shoot about a million dollars or not quite but a very very very big chunk of my bond allocation and i could sink it into the markets just bringing me not forecasting not speculating just bring me back to my original allocation so just by rebalancing i get to be greedy when others are fearful fearful when others are greedy and i don't have to think about it. That systematic approach makes a lot of sense to me, and I think that everyone should do that. And that point you bring up about 11 months, the close today versus then, it did go up so fast. And the common saying of stocks take the stairs up and then the elevator down,

up and then the elevator down, the elevator only went to the 88th floor. So it's really not a huge drop in the grand scheme of things when you've had such a long run bull market. I think that stocks are very attractive still right now, even though it's been only 11 month drop, just because earnings in the economy has been so good. And when people have said, okay, well, stocks are at all-time high, I respond with, stocks deserve to be at all-time high when the world economy is doing very, very well. So that's just my take, and I think that your take is very similar. I got to say, thank you so much for

coming on the show andrew your opinions and hearing you talk uh is just always really really nice and we'll have to do this again sometime soon then yeah i enjoyed chatting with you guys anytime yeah thanks a lot andrew much appreciated yeah you. So where can we get the book? What's the best place? Is Amazon the play? Probably, yeah. Amazon. Get the second edition of Millionaire Teacher.

It's probably the one that would come up first if you had a look. And it is The Nine Rules of Wealth You Didn't Learn in School. Is that correct? Is that the name? Millionaire Teacher, The Nine Rules of Wealth You Should Have Learn have learned in school don't we all wish we learned them yeah no i i remember finishing your book because i think i was still in high school and thinking yep this is it i i have found exactly what i need to do so i gave it to my roommate he read it he gave it to his girlfriend like legitimately everyone is like,

wow, this is an absolute game changer. And what I find very interesting about what you've written is you don't have to know anything and you are just hooked on the content. And that the turnaround of action is very high, I have found. In that the fact that as soon as someone has read your book and currently has no portfolio or are currently in mutual funds, the turnaround time of them switching or getting started with an index portfolio is very quick. So I think that speaks to the amount of knowledge that you have and the way you're able to portray it as having a teaching background makes a lot of sense. So thank you so much for coming on the show, guys. We will see you all next week. The Canadian investor is not to be taken as investment advice.

Braden or Simone may own securities mentioned on this podcast. Always make sure to do your own research and due diligence before making investment decisions. Thanks for listening to this episode of The Canadian Investor. your own research and due diligence before making investment decisions.