A friend of mine noticed I have been lame with blogging lately so he thought he could write a guest blog post to help out. He managed to write a post about investing money wisely while keeping the running theme going. Well done Andrew!
Andrew Hallam is the author of the book best-selling book, Millionaire Teacher. If you haven’t heard of the book, just google it and you’ll find countless rave reviews and endorsements from all the financial world big-hitters. As soon as you start reading, you’ll know why. Andrew’s fitness blog is pretty inspiring as well. His battle with cancer is chronicled here. He is also a very great athlete and runner so have a read and learn how to invest wisely.
Guest Post: By Andrew Hallam
Author of Millionaire Teacher
You’ve just met a shoe salesman trying to convince you to buy a pair of hiking boots for your next 10K race. HaileGebrselassie just wore a similar pair in a Prince George 10k, he claims: 29:34, breaking the local course record.
Do you go for it? Do you buy these boots for your next 10K?
Currently, you race in Saucony’s feather light Grid Fastwitch 5.
You know that a four pound pair of hiking boots is a dumb alternative. As convincing as the salesperson sounds, you’re not going to fall for it. And you shouldn’t.
There are a few things–when combined–that inarguably improve our racing times:
1. At least one reasonably long run in each week.
2. A weekly anaerobic threshold workout (15-20km race pace)
3. Aerobic power intervals (3-5km race pace)
4. A mindful posture/technique
5. A lightweight pair of shoes No slick talking salesman could really convince us to trade the lightweight racing flats for boots. We know better than that.
And no study that we could ever find would support a salesperson’s claim that a beefy set of boots will make us faster.
Simple enough, right?
But here’s something baffling
The average person who saves and invests money is like a runner in Arctic Tundras.
If we bothered to read a book about mutual fund investing, we would learn that the investment funds that get sold to us by Canadian banks and other financial institutions are weighed down: not by rubber and leather, but by hidden fees that the banks profit from.
Conspiracy theory? Nope. It’s as conspiratorial as the fact that heavy boots make you slow.
Pick up any book you want that compares actively managed mutual funds (which are sold by the average financial advisor) to another type of fund called an “Index Fund” and you’ll see, without a doubt, that the most efficient investment funds you can buy aren’t hyped by financial advisors.
They get compensated well if you buy the boots, not the racing flats.
The excess fees charged by Canada’s financial institutions amount to a cost of roughly 2.3 percent each year. That might sound like chicken feed, but it makes the difference between making, say, 7 percent on our money versus 9.3 percent on our money. Still sound like peanuts?
Check this out over a savings lifetime:
$10,000 invested at 7% per year over 40 years = $149,744
$10,000 invested at 9.3% per year over 40 years= $350,545
The bottom line is this. If you invested half your money in the Canadian stock market and half of it in the Canadian bond markets, ten years ago, you would have a profit of roughly 80 percent. If you invested $10,000 back in 2002, it would be worth roughly $18,000 today.
That’s what the Canadian stock market and Canadian bond markets dished out. There’s nothing fancy about that.
But you probably didn’t do that well. You probably didn’t get close to that.
The reason?
Investment fees.
Buy ANY BOOK YOU CAN FIND on actively managed mutual funds. Read the academic studies comparing actively managed funds with low cost index funds.
You won’t find a study suggesting that actively managed funds (what the banks sell you) give you a higher statistical chance of investment success, compared to index funds.
And you can’t run your PR in army boots either—no matter what a boot salesperson might try telling you.
For a series of books to choose from, you could start with the following list.
Be mindful with your running–and your money.