Book Review – “Millionaire Teacher” by Andrew Hallam

I just finished reading “Millionaire Teacher” by Andrew Hallam yesterday. I read the book in record four days. It may not be a mean feat for the ardent Harry Potter fans but it is for me as I’m not exactly a fast reader.

I knew about this book during Invest Fair 2011 when I visited the MPH booth. There were posters put up in the booth pertaining to the launch of the book in the coming months. The author also gave a talk on that day but I couldn’t attend due to other commitments. I was keen to read this book as it was written by a school teacher who became a millionaire with a middle-class salary and I wanted to know how he did it. He is currently residing in Singapore.

I have to confess that I thoroughly enjoyed reading this book and it is one of the best investment books I have read so far this year. The cover has a testimonial by Burton G. Malkiel who is the author of “A Random Walk Down Walk Down Wall Street” and it says, “The newbie investor will not find a better guide than Millionaire Teacher”. I would say this is rather misleading as investors with all kinds of experience will benefit from reading this book. There might be some theories not heard elsewhere as they are from his personal experience or from his friends/colleagues.

This book is an easy read for beginners as it’s written in simple English, is funny and doesn’t have financial jargons. The advice given is also useful and some were new to me. Andrew also uses lots of statistics and references (found at the back of every chapter) to back up his investing methods. The emphasis of this book is how to make investment low-risk by investing in index and bond funds (known as exchange-traded funds or ETFs) and how to allocate the funds accordingly to one’s age. It also takes very little time to monitor the portfolio. Even though most of the passive investing methods he employ can be found in other books (can be seen from the references), he has collated all the theories and methods together into a single concise book. This makes it practical for readers to read this book.

Investing in bond funds was new to me as I hadn’t paid much attention to it previously. My focus was solely on stocks. I will certainly pay more attention to bonds from now on after reading this book. It’s my first time reading extensively on bond funds and how it helps to keep one’s portfolio from excessive risk that might emerge from the stock market.

Andrew places very little emphasis on individual stock-picking ala Warren Buffett style. He says if investors really want to pick stocks, they should reduce the exposure to less than 10%.  This is because he believes it’s hard to beat the market for the long-term consistently by buying individual stocks. So, he rather buy ETFs.

Even though the average return of the passive investing portfolio was around 10% annually, he still made it to be a millionaire by investing prudently. After having read this book, it has given me added confidence that if a teacher with middle-class salary can do it, why can’t I?

For a preview of his book, you can visit Google books. For recommended readings by Andrew Hallam, you can visit his blog here and here (towards the end of the post).


Follow this and you will have a sound financial life!

Multiple-choice Question:

Income – ____________ = _____________

(a) Savings, Expenses
(b) Expenses, Savings

The answer for prudent financial management is (a). However, many people follow option (b) in their daily lives as it’s “easier”. If one wants to take control of their financial life, one should always save part of their income first when you get it and spend the rest and not the other way around. This is called “paying yourself first” and is espoused by many self-made millionaires!

“Paying yourself first” works as such: You channel a certain percentage of your income to another bank account every month without fail and this money should not be used unless it’s for investment or emergency. This bank account should not have a credit card, ATM card or cheque book linked to it. This deters you from spending the money.  It’s wise to save 10% of your income every month. The more, the better (DUH!). If 10% is a lot for a start, you can start with 1% for 3 months, then raise it to 4% for the next 4 months, then 6% for the next 5 months and finally to 10% from there onwards.

Let’s say you earn $3,000 per month. You save $300 or 10% of your income. Your expenses should fall within the rest, which is $2,700. If your expenses are rising, you should look to curb it by cutting down on unnecessary spending. For example, you can always do without daily dose of Starbucks coffee. 3-in-1 coffee will do the same wonders since it’s all in the mind (reminds you of NS days, eh?). For added effect, you can always purchase a Starbucks mug and drink your 3-in-1 coffee out of it. It also helps if you keep track of your daily expenditures in an Excel spreadsheet or using an iphone app so that you can know where you can cut down your unnecessary expenditures on. Always spend within what you have left after savings.

If you need to buy something that will overshoot your budget, always think if you really need it. Can you do without the latest gadget? Delaying gratification can do wonders in the long run! I read a very informative article in Newsweek magazine two weeks ago about a new research on why people spend excessively and how to reduce this tendency. It’s a highly recommended read and fortunately for you readers, I found the full article online at the Daily Beast website. I also did a post on delaying gratification previously.

Thus, by “paying yourself first”, by cutting your unnecessary expenditures and by delaying gratification, you can at least sleep peacefully every night with a sound financial life!

Why should investors rejoice when markets crash?

When the markets are crashing and when people are dumping stocks as if the stocks have caught rabies, think of this little quiz by Warren Buffett (taken from 1997 Berkshire Hathaway’s Shareholder Letter):

“If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves.

But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?”

Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the “hamburgers” they will soon be buying.

This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”

How to Stay Motivated No Matter What

There are times when we feel unmotivated to move towards our goals and feel like giving up. However, there are other times when we feel so motivated that we believe we can move the majestic Mount Everest. Why is this so? How do we stay motivated all the time to achieve our goals in life?

We lack the motivation to achieve our goals when we lose sight of our goals. For example, your aim might be to have $1,000,000 by a certain age. When you came up with the goal, you had a strong conviction that you could achieve this amount, no matter what. However, as days and weeks went past, you might have begun to feel that it’s alright if you didn’t achieve the $1,000,000 after all. The thinking of “It’s alright if I’m not a millionaire” came about due to a lack of purpose and reason why you wanted to get that $1 million in the first place. The “Why” (Purpose) is more important than the “What”. The “Why” must be strong enough to make you want to achieve the goal. Your “Why” might be to provide the best for your family, not to worry about money anymore, to have the money to travel around the world and invest in properties to make more money, etc. You have to find this “Why” within yourself and it must be strong enough to propel you towards your goal.

After finding your purpose of achieving your goal, imagine and visualise yourself having already achieved the goal. Napolean Hill once said, “Whatever the mind can conceive and believe, the mind can achieve”. It’s a dogma I live by everyday and it really works! Imagine your new lifestyle in full colour and splendour after achieving the goal. Imagine that you have already achieved the goal and you are enjoying the fruits of your labour. Imagine the unlimited possibilities in your life now. Do all that with conviction and believe! There should not be a slightest doubt in what you are visualising.

I, too, sometimes fall into the unmotivated camp and can stay there for days. The trick is to catch hold of the negative thoughts and feelings, acknowledge them and gently change them to positive ones. Remember, the mind cannot differentiate between negative and positive thoughts. So, by constantly feeding negative thoughts, guess what? You will materialise negativity. Remember, whatever the mind can conceive and believe, the mind can certainly achieve!

Lessons learnt from Aug – Oct 2011

The period from August 2011 to October 2011 was an eventful one for investors worldwide. US credit rating got downgraded, Europe was reeling into a recession (and still might be), talks of hard landing in China, among others, covered the financial pages of newspapers everywhere. The VIX index (measurement of volatility in the S&P 500 index), aka the fear gauge, peaked at around 47 during this period.

This same period was when I learnt a lot as an investor. I have not seen a huge plunge in global markets ever since I started investing in June 2009. STI went into bear market region after dropping 20% from the peak. It seemed like the financial crisis of 2007/2008 all over again.

In June 2011, I sold off some overvalued stocks such as Super. I also sold off some silver holdings. I was lucky to sell them off prior to the market correction. I also reduced my percentage holdings of some companies to lock in profits, even though the stocks were still undervalued. On hindsight, I should not have pared down on these holdings as the stocks are still undervalued. I wasn’t disciplined enough to stick to my plans and hurt my returns as a result. I should have just held on to these stocks to collect dividends while waiting for the crisis to end. If the stock price really drops (10% – 15% below my average price), I can average down excitedly if the company is fundamentally still intact. From this episode, I learnt not to time the market. The market and economy are so dynamic that no one can predict them with accuracy,  not even the top economists.

I managed to average down on my SSE 50 ETF which was down 23% at one point. I’m satisfied to have averaged down this ETF as I have a firm believe in China. I couldn’t average down on other stocks as the price didn’t come down as much, even though I wish they have. I was hoping Kingsmen will come down to around $0.50 again but it didn’t happen, sadly.

I was also looking to buy stocks such as ARA at around $0.80 but the price never came down that. I told myself to be patient as that’s a valuable trait of a value investor. It’s no point buying an overvalued asset. I will just wait for the another major correction/crisis or if this current Europe crisis gets worst, I will look into buying some stocks again. On average, a crisis usually happens once every 5 years. Meanwhile, I will just save up and sock up on cash. The patient one with cash can make a huge killing when the right time comes.

In summary, I have learnt not to time the market as it’s futile and to hold on to my holdings if they are still undervalued. I can average down with the cash I have and collect dividends meanwhile. My investing style is still evolving as I’m still learning from what Mr Market presents everyday. Experience is the best teacher as there’s only so much you can learn from reading books.