Millionaire Teacher is a guide to achieving financial independence through smart investing, written by Andrew Hallam, a high school teacher who became a millionaire by following simple rules. The book teaches financial fundamentals and advocates for investing in index funds, avoiding scams and trends, and seeking the right kind of financial advisor when needed.
Here are my favorite twelve takeaways from the book.
Redefining Wealth
To be considered wealthy, you should have enough money to never have to work again if you choose, with investments, a pension, or trust fund providing twice your country’s median household income.
Frugality and Car Wisdom
Spend less than you earn and be satisfied with what you have to avoid the temptation to overspend. When buying a car, consider resale value and let someone else cover the initial depreciation.
The Parental Paradox
Receiving financial gifts from parents often leads to lower levels of wealth compared to those in the same income bracket who don’t receive such assistance. Earning your own money instills more responsible spending habits.
Track, Invest, Repeat
Track your monthly expenses and income to determine how much you can afford to invest. Invest this amount right away when you get paid to ensure you follow through.
Patience Pays Off
Invest for the long-term. Investors who buy and hold shares tend to make higher profits than those who trade frequently.
Buffett’s Two-Fund Solution
Warren Buffett recommends investing in low-cost index funds, specifically suggesting putting 90% in an S&P 500 index fund and 10% in short-term government bonds.
The Index Fund Advantage
Academic evidence suggests that buying index funds provides a higher statistical chance of success compared to actively managed mutual funds, which tend to underperform indexes over the long run.
Age-Appropriate Asset Allocation
A responsible portfolio allocates a certain percentage to stocks and bonds, with the bond allocation increasing as the investor ages. A rule of thumb is to have a bond allocation roughly equal to your age.
The Rebalancing Act
Rebalance your portfolio once a year to maintain your desired allocation. When stock markets drop significantly, take advantage by buying more.
Home and Away Strategy
Keep a portion of your portfolio in your home country’s stock index and the rest in an international index. Add new money to the index that has underperformed recently.
The Lazy Investor’s Portfolio
The “Couch Potato Portfolio” involves investing equal amounts in a total stock market index and total bond market index, rebalancing annually. This simple strategy has historically provided solid returns with lower risk than an all-stock portfolio.
KISS: Keep Investing Stupidly Simple
Investors should focus on broad index funds with low fees, add money consistently, ignore forecasts, and rebalance annually to maintain their target allocation. Trying to predict or time the market is generally unwise.
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