Thanks to years of frugal living and disciplined investing, speaker and author Andrew Hallam is now helping you find your Balance.
Years ago, while working as a schoolteacher, Andrew published Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School, a guide to achieving financial independence. It remains (in our opinion), one of the best personal finance books published and a must-read for any Canadian investor.
You can check out that book and My Own Advisor’s interviews with Andrew at the end of this post.
Now, as someone who has found financial independence and then some, Andrew Hallam wants you to find your Balance including how to invest and spend your money to deliver a blend of happiness, health, and wealth.
Check out our Q&A with Andrew below, and our book giveaway as well.
Find your Balance with Andrew Hallam
Here at Cashflows & Portfolios, with one co-founder (Joe) semi-retired in his 40s already and the other guy (Mark) striving to get there in a few years, we often think about life satisfaction ourselves – given we’ve been working towards our own form of balance for years.
We recognize the huge role that balance provides for our relationships, our time, and our money. We’ve always believed the best things in life are usually not things.
In a previous interview with Andrew, on My Own Advisor, we’ll also link to below, Andrew shared what inspired him for the new book and how things have changed for him over the last few years.
For this site, with a more tactful approach to sharing investing knowledge from beginning to end and everything in between, we thought it would be good to ask Andrew his thoughts on asset decumulation, how he invests, if the 60/40 portfolio is as “dead’ as some experts proclaim and more to help you invest better now and for any retirement drawdown plan.
Andrew, welcome to our site and thanks for this!
A pleasure, Mark and Joe!
Andrew, so much has been written about asset accumulation and investing in low-cost products to help fund any sort of retirement. What’s your take on the asset decumulation puzzle? Do you think more should be covered in this area to help investors understand their options?
Mark and Joe, as I was washing my mud-soaked bicycle (in the dark) outside our condo in Victoria, B.C. in 2020, I struck up a conversation with a woman who had a place on the ground floor. She asked what I did for a living, and then basically posed the same question you did. She was an early retiree, and she was having a heck of a time figuring out how much she should sell from her portfolio each year and what she should sell. For several minutes, I was metaphorically speaking Swahili and she was listening in German. That’s my way of saying I was completely out of touch with what she needed.
I basically said, “Look at your portfolio value. Sell 4 percent of that portfolio this year, while maintaining your target asset allocation. Then next year, no matter how the portfolio fluctuates, give yourself a raise by withdrawing an amount that would cover inflation for that year. If you want to be more conservative, don’t give yourself an inflation-adjusted raise during years that the markets drop. This should allow your portfolio to last at least 30 years.”
For me (the metaphorical German speaker) this would be simplest for anyone with an all-in-one portfolio ETF because they would only need to sell one product. For someone with a handful of ETFs, it would be a bit tougher because they would need to sell in proportions that would allow them to maintain their goal allocation. For example, they should be trying to maintain the same percentage of Canadian stocks, US stocks, international stocks and bonds.
However, my neighbour had a hodge-podge of individual stocks, mutual funds and some ETFs. That’s the reality for most DIY investors, and it makes the decision of what they should sell far more difficult. Add that complexity to the question of RRSPS, TFSAs and taxable accounts, and yeah, there’s a huge market for help and education here.
Great stuff, Andrew. Can you share with our readers how you’ve constructed your portfolio to date?
If I rubbed a lamp and a genie came out saying, “I’m going to take you back to when you began investing, in 1989. But I am going to change the future. What would you buy?” Knowing the genie would change the future would destroy my hopes of loading up on Microsoft, Fastenal and Apple stock. So, I would bribe that genie with a bottle of whiskey (genie’s love whiskey) to make sure I could buy an all-in-one portfolio ETF. They didn’t exist in 1989, but with magical help, they would.
Because I began investing long before all-in-one portfolio ETFs were launched, I have a Canadian stock index, a US stock index, a developed international stock index, an emerging market index, a broad Canadian bond market index and a short-term Canadian bond market index. Don’t ask me the names and ticker symbols because I’m too lazy to look them up!
What low-cost funds do you own and why?
Oh man, you asked me!
When I first started investing, I always knew my stock and ETF ticker symbols. I looked at the portfolio values and knew how they were “performing.” I’ve had the same portfolio for years, and would have to either log in to my account or look up the symbols so I could tell you. And no, I’m not making this up. I don’t earn monthly income (my personal revenue stream is sporadic) so I don’t log in to my portfolio very often. In fact, I try to log in at least once every second month or so, just to make sure I remember the account passwords. And sometimes, when I log in, I look at the account’s value, but most of the time, I don’t care and don’t bother looking. I actually recommend that most people do the same.
My wife and I have two accounts. She’s American, and everything is invested in a Vanguard Target Retirement fund. It’s like an all-in-one ETF that includes a US stock index, an international stock index, a US bond index and a small allocation to an international bond market index.
My portfolio is similarly allocated, but because I’m not American, I can’t own the same product. The only allocation difference is that I have a Canadian stock component and a Canadian bond component.
We’re allocated roughly 60 percent stocks and 40 percent bonds.
Can you also share if you might change those funds as you continue to work on your own terms? Why or why not?
I believe (and there’s decent evidence to support this) that the less you tinker with your portfolio, the better you will perform over a lifetime. Some people might tinker and “come out ahead” over a brief period. I call 1 year, 5 years and ten-year periods brief….because they are. Your investment duration is your lifetime. I understand why some people might choose to alter their portfolio allocations as they age, to include more bonds, which would increase their portfolio’s stability. For the past 12 years, my portfolio has been allocated roughly 60% stocks and 40% bonds. And when I’m 98 years old, that allocation will remain the same…and I hope to go waterskiing on my 99th birthday.
We (Joe and I) happen to believe that inflation may be a real issue to combat in the coming years. What are you doing to combat inflation in your portfolio?
If you have built a diversified portfolio of stocks and you own a broad (or even better) short-term bond index, you won’t have to do anything to combat inflation. Over time, you will beat inflation. The less you tinker with your portfolio to adjust for inflation projections, political situations, market valuations, corporate earnings projections, Justin Bieber’s latest haircut, new nose hairs, etc., the further you will eventually fall behind someone as dull and boring as me.
Back to your portfolio Andrew, some experts have claimed any sort of 60/40 portfolio is essentially dead*. It doesn’t work for investors anymore. *Reference:
That’s short-term thinking. Such articles and sound bites attract plenty of attention, but acting on short-term thinking is hazardous to your wealth.
For example, in 1973, plenty of financial experts were calling for the death of equities because the markets hadn’t earned money for several years. That was short-term thinking. The Dow was at the same level in 1965 that it was in 1982. The S&P 500, including reinvested dividends, didn’t beat inflation for 17 years (1965-1982). That’s why experts said, “Stocks don’t make money. You probably shouldn’t own stocks.”
But what’s happening “now” whenever that “now” happens to be, is always a poor forecast for the future. That’s why I don’t agree with the death of the 60/40 allocation.
Consider bonds. Yields are low. As such, it’s easy to call for “the death of bonds” much as it was easy to call for the death of equities in 1973. But does anyone know what newly issued bonds will yield in 2026, 2032, and 2043?
Anyone who says they know is either mentally deluded or they have superpowers. If they have superpowers, they should stop wasting their time reading this and go out and save someone’s life.
I don’t recommend individual bonds because they can be eaten by inflation. But most of my bond money is in a short-term bond market ETF. When a bond within that index matures, the provider replaces that bond with a newly issued bond of the same maturity length. For example, a maturing one-year bond would be replaced by a new 1-year bond. A maturing 3-year bond would be replaced by a newly issued 3-year bond. As bond prices drop, I get a better deal. And as inflation rises, newly issued bonds (not old ones, only newly issued bonds) will reflect that with an increased interest rate.
More importantly, when stocks crash 40% or more, anyone with a short-term or broad bond index can rebalance their portfolio…essentially being greedy when others are fearful. And stocks will crash hard. When? Nobody knows. It could be this week or a decade from now. But it will happen. That might sound like a prediction. But it’s as predictive as saying, “Sometime next winter, it will snow in Quebec.”
Finally, we’ve written a few articles suggesting the RRSP should be exhausted before tapping any TFSA assets – meaning, it might be best to leave all TFSA investments until old age for the tax-free portfolio efficiency this account provides and transferring any estate benefits.
Finally, do you have a recommended portfolio drawdown order? If so, what is that?
I don’t have a recommended draw-down order, and to be honest, as a non-resident Canadian, I haven’t looked into this, so I recommend your readers look carefully and consider the articles you have written in the past.
Love it – thanks, Andrew!
Find your Balance with Andrew Hallam summary and giveaway
Readers, as you can appreciate, we are big fans of Andrew’s work, journey and messages.
We want to thank Andrew for his time and offering a copy of Balance to give away below. If you have questions for Andrew, please drop those in the comments section. Andrew will do his best to reply to all questions on the site!
If you haven’t already checked out Andrew’s previous work, see below:
Learn more from Millionaire Teacher and the 9 rules of wealth that should be taught in school.
It’s always fun to catch up with a successful digital nomad.
Enter below to win a chance to win a copy of Balance for one lucky reader!