By Andrew Hallam

A few weeks ago, Michael O’Higgins and I, along with our wives, left a popular restaurant. We had ordered water (tap, instead of the recommended Italian bottled) and planned to have dinner. But we lost our appetites when seeing the price of the steak: $171.

If you recall a 1989 book called Beating the Dow, then you might be familiar with O’Higgins. He popularized the Dogs of the Dow investment strategy, where investors choose five of the least popular stocks on the Dow, hold them for a year, and then trade them when they no longer meet the doggish requirement.

O’Higgins is a value hunter—whether he’s investing or dining out. And he isn’t afraid to step away from the crowd.

We left that restaurant, chuckling, and O’Higgins went on to describe his latest value investment strategy, something any couch potato investor could warm to. He coined the new strategy MOAR, for Michael O’Higgins Absolute Returns. And he plans, one day, to write a book about it.

It’s a diversified, indexed portfolio with a contrarian’s twist that would have averaged 14 percent returns since 1973. O’Higgins designed it for investors who want decent gains and a good night’s sleep. Over the past forty one years, it would have had only three losing periods:

• -5.07 percent in 1981
• -4.35 percent in 1990
• -0.71 percent in 2008

Back-testing investment methods (often known as data mining) can disappoint investors who expect future results to equal past success. O’Higgins’ latest strategy might not reap 14 percent annual returns over the next forty one years, but it’s tough to argue with the approach. Unlike the concentrated methods he described in Beating the Dow, and in his 1998 follow-up, Beating the Dow with Bonds, his latest strategy is diversified across asset classes, it’s low cost, and it’s similar to the couch potato portfolio hybrids that are gaining popularity among savvy investors.

Here’s what O’Higgins shared.

First, you’d find the worst-performing first world stock market indexes over the previous year. I won’t kid you. Value based platforms like this take plenty of guts. The first index you’d choose is Spain’s—a country with unemployment at 25 percent.

You’d choose four more of these dismal market indexes to add to your portfolio. Call them the dogs of the world. Forget your notion of promising markets; O’Higgins guides you to barrel scrapers.

Then you’d add 1/3 cup of the following ingredients: a gold or platinum index, a long term government bond index and an intermediate term government bond index.

Here’s how the portfolio would usually look:

• 25% Dogs of the world
• 25% Platinum or Gold
• 25% Long-term government bonds
• 25% Intermediate term government bonds

O’Higgins calls for an annual rebalancing, back to the original allocation—with one exception. If the dogs of the world show overall losses for the year, further assets are shifted to the stock indexes. Fifteen percent would be removed from the other asset classes in equal proportion: 5 percent from the gold/platinum; 5 percent from the long term bonds and 5 percent from the intermediate term bonds. The proceeds would be distributed equally among the dogs of the world.

Following this approach would have given this portfolio a 27 percent gain in 2009 and a 12 percent gain in 2010, after losing less than 1 percent in 2008. If the stocks dropped for a second year, and you really have the nerve for this, a further 15 percent would be removed from platinum/gold or bonds, and added to the faltering international stock indexes.

Following such a strategy would ensure that investors are always greedy when others are fearful and fearful when others are greedy.

In 2011, the MOAR strategy gained 8.6 percent. Most of the world’s stock market indexes had double digit losses that year, with the exception of the U.S, which recorded a small gain.

Because the stock portion of the strategy fell in 2011, the portfolio takes on a heavier weighting of the dismally performing international indexes for the beginning of 2012.

Here’s what the portfolio would look like in January, 2012, along with the respective ETFs.

• 40% Dogs of the world: 8% France (EWQ); Poland (EPOL); 8% Spain (EWP); 8% Russia (RSX) ; 8% Italy (EWI).
• 20% Platinum (PPLT)
• 20% Long term government bonds (TLT)
• 20% Intermediate term government bonds (IEF)

Passive investing strategies such as this one, according to O’Higgins, make plenty of sense. Few professional investors can beat the market after fees and bid-ask spreads. Toss in a contrarian’s nerve to step away from a popular table and you should have the elements of a solid portfolio.

By Andrew Hallam

Retiree Don Tetley grew tired of trying to keep up with the Joneses when he was working. “Now,” he chuckles, “I get to be Jones.” No, he didn’t win the lottery.. He lives comfortably on his Social Security check—after moving to Cha Am, Thailand in 2002.

A three course meal at one of Don’s favorite restaurants costs $5. And that includes beer. In his seaside town, you can rent a 3 bedroom home for $300 per month. You can pay much less than that if you wander further from the tourist’s hub.

On a tighter budget? No problem. You can rent simple two bedroom homes in the popular inland city of Chiang Mai, for just $230 per month. Or if you’d rather be the local lifestyle leader, you could frolic in the swimming pool of your large rented house for $1,600 per month. Maid service, pool service and property maintenance are part of the package. You’d never have to cook or clean again.

What’s the catch, you might ask? I’ll share a colorful one.

I visit Thailand half a dozen times each year. Beyond the obvious distance from home, the most unfortunate sob tales I’ve heard are those of retired single males who move to Thailand and discover that they’re suddenly Brad Pitt. Many lovely Thai women (even the men can be gorgeous) strive to win the hearts of westerners. They marry, put the newly purchased home, car and bank accounts in their names, then divorce their Prince Charmings to become the richest single women on the block. By Thai law, the assets belong entirely to the Thai citizen. Young expatriate workers have also been duped.

That said, con artists seeking sugar daddies are the exception, not the rule. Most Thais are incredibly honest, friendly, and the country is safe.

The capital city of Bangkok has had its share of recent political unrest, but violent crimes are as infrequent in Thailand as they are in the United States. You can forget what you watch on CSI; America (and Thailand) report some of the lowest per capita murder rates in the world.

If safety is your primary consideration, Thailand could be a good match. In contrast, the homicide rate in Ecuador (voted International Living’s number one retirement destination) is three times as high as it is in Thailand. My Ecuadorean friend, Patricio Frias, skypes me monthly with his personal reports of kidnappings and shootings in the capital city of Quito. Last week, his ex-wife was taken at gunpoint while driving (she’s now safe) and three of his friends have been shot (one killed) within the past 18 months. No, he’s not a mafia lord: just a friendly businessman with a couple of nice kids. The odds of finding anyone with similar Thai derived stories are next to none.

While you’re not likely to get shot in Thailand, you could still get sick. A variety of companies offer medical insurance to wealthy locals and expatriates. Although it’s a fraction of the U.S. medical insurance cost, Don Tetley claims there’s a cheaper option. Many, instead, choose to pay for expenses out of their own pockets. The country’s top medical facilities are beyond the price range of the average Thai citizen, but they’re cheap by American standards. First class Thai hospitals can charge less than $10,000 for a heart bypass, and just $5,000 for a hip replacement. You can get a MRI for $350.

Medical tourism is rapidly growing. Foreigners from Europe and North America are flying to Thailand for everything ranging from cancer treatment to sex changes. More than 350,000 international patients visit Bumrungrad International hospital each year. It’s not uncommon to find uber-wealthy middle- eastern oil moguls choosing Thailand for their medical treatment.

Newsweek correspondent Joe Cochrane visited the hospital and stated that Bumrungrad’s patients “get treatment redolent of a five-star hotel.” Attracted by “world-class medicine at developing world prices,” it’s “a magnet for medical tourists,” treating more foreign patients than any other hospital in the world.

But don’t take my word, or any magazine’s verdict, if you’re thinking of leaping to a foreign retirement destination. Take a three month vacation first. Rent a home in the country you’re curious about. Speak to the locals. Speak to expats. Then make your decision. Try the shoe on yourself. See if it fits.

By Andrew Hallam

The average Singaporean citizen earns $39,254 USD per year. Their median annual income, according to government reports, was just $26,000 in 2011. Yet according to the Guinness compilation of records, Singapore boasts the highest concentration of millionaires per capita in the world, at 8.5 percent of their population, measured in U.S. dollars. Can America learn from Singapore? Perhaps. But much of Singapore’s success remains somewhat mysterious.

According to Singaporean resident, Jim Rogers (the former U.S. hedge fund manager and author of Adventure Capitalist) Singaporeans save 40 percent of their income. But it’s forced. The citizens’ prolific savings rate is due to a government enforced savings program called The Central Provident Fund. Much like a 401(k) on steroids, Singaporean employees have 20 percent of their annual salaries deducted like a tax and placed in a government investment plan. It’s guaranteed to outperform inflation and every citizen earns the same return. Employers then top up the annual contributions, adding a further 15.5 percent, putting the combined annual savings at a minimum of 35.5 percent for each Singaporean worker

The money can be saved for individual retirement, or portions of it can go towards purchasing homes. According to a speech given last year by Singapore’s Prime Minister, the country has one of the highest rates of home ownership in the world— roughly 90 percent.

In comparison, the U.S. savings rate is zero. And home ownership is down to 66.4 percent—despite significantly cheaper homes in the U.S. Most Singaporeans live in government subsidized homes, but those apartments still cost twice the median value of the typical American home, running about $320,000 U.S. per apartment, compared to about $177,000 in the United States.

The Singaporean government, like its citizens, saves prolifically. Per capita, they own more U.S. debt than any foreign country, with the exception of Luxembourg, placing 12th overall in U.S. Treasuries ownership. And they save money in some surprising areas.

There’s no welfare in Singapore, nor Social Security. And their prison system is spartan enough to make the hardiest criminal cringe. If you want a degree (and access to a prison library) while doing time, you can forget it. Prisoners don’t even get beds. They sleep on concrete, in shared cells.

Singapore’s low incarceration spending would probably interest Laurence J. Kotlikoff, and my friend, Scott Burns. Authors of The Clash of Generations, they describe American prisons as an unfortunate growth industry, draining Federal resources. State prisons are costing, in many cases, more than educational spending.

The authors paint the U.S. government as a Ponzi scheme provider, robbing future generations of tax payers by overspending on prisons with trigger happy incarceration rates—while propping the rising standard of living for the elderly, who reap generous Social Security and Medicare benefits. They suggest that the current Federal deficit is larger than we think, based on financial commitments to the growing elderly demographic, with the bill falling on the shoulders of an ever-shrinking force of future taxpayers, who lack the ability to pay for it all.

Young Singaporeans have no such tax-based obligations to the elderly. But there are a few mysteries. According to World Bank data Singapore spends half of what America does on public education—relative to GDP. Singapore’s teachers are paid less than their American counterparts, and average class sizes, according to a 2002 Harvard study, are 28 percent higher in Singapore than they are in the United States. Based on comparative test results, however, the U.S. falls far behind its Asian counterpart. The country’s educational spending, it appears, has little to do with its student achievement scores.

So if it’s not educational spending, what’s the secret behind Singapore’s millionaires? Certainly, the high savings rate dictated by the government has something to do with it. Asians also tend to be less independent, which might be one of their strengths. There’s no shame in two—or even three—generations living under the same roof. Young Singaporean professionals often live with their parents and grandparents until they can afford a home of their own. And based on a culture of filial piety, they help each other in times of need. There is no government safety net.

Forced savings rates, prisons without beds, high class sizes, low teacher pay, no Social Security and no welfare—it seems like an odd recipe for success. Is this what it takes to create the largest concentration of millionaires in the world? You tell me. Comments are open.

By Andrew Hallam

My wife was named after the Hawaiian goddess of fire, Pele. Fortunately for me, only two things make Pele boil: when a driver cuts her off on the open road, and when she gets hoodwinked during a holiday.

Pele and I aren’t naive travellers. We’ve each ventured to roughly 30 different countries. But every time we visit a third world country for the first time we get hosed by somebody, usually on the first or second day.

Last week, we visited Sri Lanka. Shaped like an extracted tooth, it’s an island south-east of India, sharing many of India’s customs and beliefs. The beaches are picture-perfect, the mountain tea plantations are stunning, the temples are awe-inspiring, and the people are both wonderful and opportunistic. Many western travellers are walking ATMs, of course, and there’s no shortage of Sri Lankan entrepreneurs willing to separate you from your money. Over-charging tourists is a national past-time.

Entering a Tuk Tuk (a three wheeled taxi) driven by a man named Abhishek, Pele and I headed for a beach area a few kilometres south of Colombo, the capital city. We watched the taxi meter like a couple of day traders, but it didn’t matter. When the taxi stopped, the price jumped 80% with the press of a button. This wasn’t our first time in a Sri Lankan taxi, so we knew we were getting taken for a ride. Unfortunately, I handed Abhishek a bill that could cover the “extra” fare. I expected change, but it didn’t come.

For the record, I’m no hero. I’m afraid of needles, roller coasters and dentists. But that day, I saved Abhishek from my fiery American wife.

“Don’t people realize,” fumed Pele, a full hour later, “that when they rip off tourists, they won’t get as many visitors coming back to their country?” I wasn’t so sure. If most tourists don’t know when they’re getting ripped off, they won’t have anything negative to report to friends and family.

The fabulous private school in Singapore, United World College, serves as a similar example. With more than 3000 students, the school is stacked with smart teachers—but unlike public school educators, they won’t be receiving pensions. Unfortunately, nearly all of them are wrapped up in Abhishek’s taxi, paying investment costs on variable annuities that run 3-4 percent per year.

These products are sold indiscriminately to every teacher the local salesperson can collar, regardless of age, risk tolerance or their understanding of the products. And the teachers (who don’t fully understand what they’re buying) don’t complain. The administration recently brought me in for damage control, to speak to their teachers about low cost investing. The variable annuity purchases are heart-breaking.

U.S. based investors aren’t immune to these heavily marketed investments either, as variable annuity sales increased 28 percent in 2011.

If inflation runs 3 percent, and variable annuity investment costs run another 3.5 percent, then most of these products will fail to make an after inflation dime, unless the stock market rises by 6.5 percent or more. The insured component usually promises the investor the sum of their total deposits, without any adjustment for inflation, but only if the investor sticks with the plan for many years. Jumping out of the vehicle early can be painfully expensive, as the investor gets pounded with gargantuan redemption fees.

I understand that not all variable annuities are created equally. Those sold by Vanguard and TIAA Cref offer substantially lower costs, but the runaway sales success of the more expensive products baffle me. However, there’s light in the murky tunnel.

According to The Wall Street Journal’s Leslie Scism, a salesperson was recently ordered 90 days of jail time on a felony-theft conviction for selling a variable annuity to an 83 year old woman who was showing signs of dementia. The insurance rep didn’t really steal from the client; he just sold her a variable annuity, charging her the usual fees. But this warranted incarceration and it may cause more investors to take note of their investment products.

I can’t find a similar circumstance where someone was jailed for selling a balanced index fund or a government bond index.

If our Sri Lankan driver, Abhishek, could become a variable annuity salesman, he’d probably ditch the Tuk Tuk in a heartbeat. After all, he already possesses part of the required skill set.

By Andrew Hallam

Warren Buffett is often asked why his holding company, Berkshire Hathaway, doesn’t invest in real estate. His response: Why buy real estate when the stock market is so easy? The multi-billionaire, who many regard as the greatest investor of the 20th century, has given investors plenty of timely guidance over the past 50 years. Today, he’s changing his tune about real estate. He may or may not be buying it for Berkshire Hathaway, but recently, on CNBC, he suggested that it’s currently a tantalizing investment opportunity— for the handy.

Exactly how good has Buffett’s advice been, in the past, when making recommendations to the public? You be the judge.

• When equities were dirt cheap in the late 1970s, Buffett excitedly recommended stocks, describing himself as an oversexed man in a harem, while the media, led by BusinessWeek, was calling for the death of equities instead. Buffett was right, as the U.S. markets averaged more than 17 percent annually for the next 20 years.
• While Americans grew frothy over the delirium of the internet stock craze, Buffett used his 1999 Berkshire Hathaway annual report to warn that disparities between stock prices and business earnings would eventually result in massive losses for speculators. Once again, he was proven right when the Nasdaq stock exchange plummeted more than 70 percent from its high in 2000 to its low in 2002.
• At his 2005 Berkshire Hathaway annual meeting, Buffett again warned people—this time, of the excesses in the escalating housing market. Shortly after, home prices crashed.
• In October 2008, during the economic crisis, Buffett recommended that investors should buy stocks. Those heeding his advice have seen the S&P 500 gain 56% since then.

Yes, there is a reason he’s called The Oracle of Omaha. And now he’s suggesting that foreclosed real estate properties--if you’re handy enough to cover home maintenance and repairs—could be a fabulous opportunity.

The world’s most famous value investor sees American homes as exceedingly cheap. When compared to America’s national median household income, it’s easy to see why. The median home price, as reported by Kiplinger’s, is roughly $170,000. This is barely three times more than the current, median household income, which the Wall Street Journal pegs at roughly $50,000 a year.

For a neighbourly comparison, the typical Canadian home fetches $358,000 U.S. and Canadian households are paying more than five times their median incomes for homes.

I salivate at the thought of buying cheap American real estate. And why wouldn’t I? The 1,700 square foot apartment in Singapore (which I’m renting) has a market value that’s ten times greater than my household income. And I’m not the only foreigner attracted to what might be—comparatively—a free housing lunch. Worldwide, investors are already taking advantage of America’s deeply discounted homes.

According to The Guardian, British investors are chartering tours—not to the Grand Canyon or Disneyland, but to distressed U.S. home districts, looking for real estate bargains. And they’re not alone. Andy Katz, of WiseCat Realtors told Canada’s national paper, the Globe and Mail, that 90 percent of his sales in Miami Beach are flowing to foreign investors from Canada, Italy, Britain and Dubai.

Foreigners, however, aren’t the only people getting in on the action. Many Americans are recognizing the value that Warren Buffett sees as well. The young journalist and finance blogger, Paula Pant, recently scooped a three bedroom house for $21,000 in Georgia. She describes her purchase and total estimated costs, while taking her blog readers through a virtual tour of the home.

If you plan to follow Paula’s lead, you have an advantage over many foreign buyers. Your neighbourhood, after all, is your home turf. However, research any investment opportunities with a keen willingness to learn, and ensure that you can easily afford to pay significantly more than the basic mortgage requirements, with or without a tenant. Be safe and conservative.

Remember the three most important words that Buffett stresses before making any investment: “margin of safety.” Make sure that yours is built in.

By Andrew Hallam

“I’ll be working at Goldman Sachs,” gushed Sophia. She was one of my former high school students. I had never imagined her peddling products for an investment banking firm. Sophia, I figured, was different.

While growing up in Singapore, she often traveled to Cambodia, to build houses for the impoverished. She went to Soweto, South Africa after raising money for an after-school youth centre. She helped paint and decorate the modest African building while encouraging the centre’s young girls to stay in school, and not fall into the frighteningly common prostitution trade.

Was she laying altruistic roots....or was there another purpose?

I teach at an elite private school catering mostly to expatriate American families. For some, it’s viewed as a breeding ground for aspiring investment bankers. Most of my students strive towards America’s Ivy League colleges—perfect stepping stones for the massive pay-checks dished out by the premier investment banks.

Sophia never struck me as a “resume padder” doing charitable work for the sole purpose of Ivy League acceptance en route to a deep six or seven figure salary. Many of my former students have done that. Perhaps Greg Smith even knows some of them.

Smith, a former executive director at Goldman Sachs, recently wrote an OP-ED piece, published in The New York Times, describing why he was resigning from the company Sophia coveted. According to Smith, when he began working at Goldman Sachs less than a decade ago, the company “revolved around teamwork, integrity, a spirit of humility, and always doing right by our [their] clients.”

Maybe this is Sophia’s vision of Goldman Sachs. Greg Smith explained, however, that the culture had changed.

It “makes me ill how callously people talk about ripping their clients off...managing directors refer to their own clients as ‘muppets,’ sometimes over internal e-mail.”

Other than the obscene bonuses heaped on Goldman Sachs executives, most of us can’t accurately measure whether Greg Smith is right. But their investment products speak volumes about Goldman Sachs’ culture. In John Bogle’s latest book, Don’t Count On It! the Vanguard investment company founder compiled a list of the cheapest and most expensive mutual fund providers in the United States, while comparing their 10 year investment results.

The lowest cost firm was Vanguard, operating much like a non-profit organization.

Goldman Sachs was the Ying to Vanguard’s Yang. Smith claimed that it used to “always do right” by its clients, yet long before Smith arrived at the firm, the company was selling stock market mutual funds costing (on average) 1.59 percent a year. Add that to the company’s estimated fund trading costs, and Goldman Sachs haemorrhages its mutual fund clients by nearly 2 percent annually. Their funds cost roughly twelve times more than Vanguard’s index funds.

Using fund data between 1997 and 2007, Bogle also revealed that Goldman Sachs’ fund product performances fester near the bottom of the barrel. Expensive funds, after all, tend to perform poorly. Karin Anderson, a Morningstar fund analyst echoed the same sentiment for Richard Teitelbaum’s Bloomberg Markets Magazine:“With just a few exceptions, these [Goldman Sachs] funds are chronic underperformers.”

When people figure out they’re standing on a bee hive, they usually run. In a 2007 survey done by Cogent Research LLC, client loyalty was measured for various fund companies, and the large exodus of investors from Goldman Sachs’ funds demonstrated that stung investors don’t stick around. High fees are great for fund companies, but not for investors.

I was amused at Goldman Sachs’ online rebuttal to Greg Smith’s letter. I was expecting the company to suggest that clients were thrilled to be with the firm. But instead, Goldman Sachs countered with the company’s high level of employee satisfaction. But wouldn’t you be satisfied if you joined Goldman Sachs as an employee, purely for the money, and the company delivered? To rebut Mr. Smith’s argument, the company needed to prove that clients were satisfied, not employees. Low client loyalty scores indicate the opposite.

Goldman Sachs is in the game to make money, and they probably always have been.

I’m just hoping that—with some luck—my former student will do something wonderful with the buckets of money she’ll reap as a cog in the Goldman Sachs machine.

By Andrew Hallam

Just before my book, Millionaire Teacher, was released late last year my publisher, John Wiley & Sons, hired a reviewer to assess the manuscript. I was a first time author, and my contract suggested that if the book wasn’t worthy, the publisher had the right to terminate the contract. For some reason, I had a bad feeling about this anonymous reviewer. And I was right. He hated the book, suggesting that Wiley should ditch it.

Tail between my legs, I waited for the book burning phone call. But it never came. Fortunately, Nick Wallwork, my editor at Wiley, kept the book alive. It became an Amazon bestseller in the United States and Canada, while international store retail sales have continued to gather momentum each month.

So what upset this reviewer so much? I’ll never be sure, of course, but his critique grew feverish when I suggested that a stock investment club I was involved in wouldn’t buy Apple shares because we didn’t understand the company and we thought Apple would face stiff future competition. We weren’t suggesting that Apple was a bad company. We just didn’t understand the business thoroughly enough to warrant purchasing the stock. And the trickiest companies to assess can be tech stocks, based on their unpredictability of products and markets.

I certainly didn’t expect the reviewer to slap me with his blairing upper case response:

“DON’T YOU REALIZE HOW MUCH MONEY PEOPLE HAVE MADE ON APPLE STOCK!?”

Wow… I really upset him. From that point forward, his review was harsh. He was an Apple shareholder—and a recent one. At least, that was my guess.

I’d still be afraid of getting hurt if I ever met this guy face to face. But I’m going to hold to the original premise that my book expanded on: if you do want to dabble with individual stocks, it’s easier to succeed, long term, when buying businesses in predictable industries, rather than getting seduced by companies battling a daily research and development war that they must win to survive.

In my book, I gave an example of a stock our investment club did purchase, back in 2004. It’s called Fastenal. You probably haven’t heard of them because they’ve never had a publically charismatic leader and they don’t sell sexy products. They sell building fasteners—mostly nuts and bolts. Boring stuff.
But it’s portfolios of sleeper stocks that typically outperform portfolios of high growth trendy stocks. In his excellent book, The Future For Investors, Wharton professor Jeremy Siegel demonstrated that dull, solid, blue chip businesses (while reinvesting dividends) outperformed higher growth tech stocks between 1957 and 2003.

Many people also jump late onto a racing trend. In 2005, for example, when Apple shares traded at just $40 per share (they’re nudging $600 today) far fewer investors were piling in. The investment club tracking service at Bivio.com now shows Apple as the top stock holding among 33% of American investment clubs.

It’s never a bad idea to site the wisdom of Benjamin Graham when looking for gems of stock picking wisdom. As Buffett’s former Columbia University professor and friend, he suggested in The Intelligent Investor, that companies never continue exponential earnings growth forever. Businesses become mature, level out their profit levels, stabilize or revert downwards. Many times after Graham wrote that advice, stock market dreamers pointed to hopeful prospects and said, “This time it will be different.” But it never was. Whether we’re talking about Texas Instruments (a darling of the 50s), Microsoft (a darling of the 90s) or Apple (the darling of today) the growth rates eventually slow. Then the stock prices drag their feet or plummet when investors grow disillusioned by a present that doesn’t reflect the past. Most investors unfortunately, get drawn to these stocks when the companies already have a high profile. And many of them, who climb late on the train, don’t reap the rewards they hope to.

Apple, of course, could prove history wrong. But I don’t think it will.

As for that boring nuts and bolts business I mentioned, Fastenal, you won’t find its leader on the cover of People magazine. Nor will you see its 2013 trend-setting screws touted in the media. But according to Bloomberg, from 1987 until February 2012, Fastenal’s share price grew 37,178 percent, compared to Apple’s 5,542 percent.

Perhaps, if you are going to dabble with individual stocks and shoot for the moon, it’s better to stick to something dull, predictable, and far from the limelight.

By Andrew Hallam

Do you see the table below? These are the changing charges over the past four months for the privilege of driving the car my wife and I already own.

Yeah, it confuses me too.

Here’s the deal. We own a 2002 Mazda 3. It’s a great little car. But if we want to keep driving it, we have to pay the Singaporean government $57,009 SGD, or roughly $44,000 U.S. dollars before June.

COE
Category A Category B Open Category

The Singaporean government is a brilliant revenue generator. With such a great public transit system, the government recognizes that people don’t really need to drive cars.

And those who do want to drive will pay heavily for it.

The proceeds go into the government’s coffers. It’s no wonder Singapore has no long term debt.
When you buy a new car in Singapore, there are two costs associated with it: the cost of the car itself and the certificate of entitlement, giving you permission to drive the car for ten years.

After the ten years are up, as they will be with our car this June, you have to renew the COE. With a small car like ours, it’s just $44,000 U.S.

If it were a larger car, our fee would be a lot higher. Check this out:
COE
Category A Category B Open Category

To renew the COE of a larger car would cost $78,189 SGD.

In Singapore, it’s better to purchase something small.

And what about purchasing another car? If we bought a new car, we’d get the COE thrown in as a complimentary accessory. Is that a good deal? You tell me.

If we bought a 2012 Honda Civic, it would cost $126,900 SGD, roughly $100,000 U.S.

A 2012 Volkswagen Golf would set us back $205,300 SGD, roughly $160,000 USD.

A BMW M Series Sedan could cost $489,800 SGD or roughly $338,000 USD.

But if you’ve read my book, Millionaire Teacher, you’ll know that I’d never buy a new car. So what about used costs?

This is particularly distressing. If we don’t renew our car’s COE, we’ll receive a small sum for the car and it will then get shipped (likely) to Malaysia, where it should enjoy a second lease on life. It won’t be welcome on Singapore’s roads again.

The used car market doesn’t look as promising as we’d like.

A tiny 1.3 litre 2006 Honda Fit would cost $36,800 SGD, and we could only drive it for 4 more years before the CEO runs out. When it does, if we want to keep driving the car, we’d have to pay another $57,000 SGD to keep it on the road (and that’s if the CEO cost doesn’t increase).

With houses in Michigan state going for less than the cost of a new Singapore car, it certainly has me wondering.

According to the Detroit Free Press, the average home in Michigan sold for a paltry $95,882 in January.

You’ve probably heard the expression: you can live in your car, but not drive your house.

But what if you never really own that car?

By Andrew Hallam

Two weeks ago, I packed my car for a weekend road trip. I live in Singapore, an island city state in the South China Sea, measuring 26 miles by 15 miles. The drive was going to take me across the border, into the country of Malaysia, which is linked to Singapore by two bridges.

A friend of mine (she’s formerly from California) retired to a small Malaysian village last year, and I wanted to check it out. Before leaving Singapore, however, I had to ensure that my Mazda’s fuel tank was at least ¾ full. I pulled into a gas station, added $60 of fuel to the Mazda’s tank, bringing the gauge to the three quarter mark.

If I attempted to drive into Malaysia with less than three quarters of a tank, I might be stopped at the Singapore border and slapped with a $500 fine. Singapore doesn’t have any long term debt. And wishing to remain that way, the country heavily taxes its fuel, while discouraging cheaper cross border fuel shopping in Malaysia.

After driving for a few hours along Malaysia’s winding roads, I stopped at a gas station to top up the tank. And I was amazed how little I paid for the gas. Not since my last visit to the United States had I paid so little to fill a gas tank.

I can guess what you’re thinking:

This Hallam joker must be living in a time warp. If he saw our pump prices today, he’d be shocked.

Recently, I did check out American fuel prices online, and I was surprised.

But no, I wasn’t surprised at the expensiveness of U.S. fuel; I was surprised at its cheapness.

Right about now, you might be wishing I was across the room from you, so you could toss something sharp and heavy at me. Maybe I deserve it. But please read my defence first. American fuel prices are really cheap, and they haven’t risen as much, in recent years, as the fuel costs in most other countries.

On February 20th, 2012 fuel costs in the U.S. still averaged less than $4 a gallon—a bargain by most international standards.

Here’s a sample of average global fuel prices, converted to U.S. dollars and U.S. gallons:

• United States: $3.53 per gallon
• Canada: $4.72 per gallon
• Australia: $5.77 per gallon
• France: $7.58 per gallon
• England: $8.07 per gallon

Why is American fuel so cheap? And why hasn’t it increased as much as nearly everyone else’s fuel costs? Those are the questions that many non Americans are enviously asking.

The global fuel price discrepancy is gaining attention. In May, 2011, The Atlantic ran an article with some shocking international comparisons.

At the time, average U.S. fuel prices were reported to be $3.96 per gallon. Here’s a sampling of other countries’ fuel prices, per U.S. gallon, in mid 2011:

• Spain: $7.60
• Greece: $9.53
• Netherlands: $9.58
• Germany: $9.07
• France: $9.24
• Sweden: $9.13
• Canada: $4.70

Many Australians and Canadians argue that their countries’ cities and towns are far more spread out than they are in the U.S., so their fuel costs, they argue, should be cheaper than American pump prices, not more.

The difference in international fuel costs comes down to one major issue, however: taxation. The U.S. government doesn’t tax fuel as highly as most countries do. But what if it did?

Take Australia as a comparative example. If the U.S. taxed fuel to the same degree that the Australian government taxes at the pump, American gas would cost roughly $5.77 per gallon today.

With 125 million cars on American roads travelling an average of 15,000 miles per year, such a fuel tax increase could earn the government an extra $4 trillion of revenue in just two decades.

Applied to the national debt, this could have some long term benefits.

Of course, those who drive for a living would likely require some kind of subsidy, and every driver would get hit in the wallet. It would hurt, short term. But in the long run, it might be beneficial.

If you’re really keen to escape higher fuel prices, you could always move to Malaysia. Such a bold move, perhaps, would only suit the quirky. But it might be worth exploring in another article, don’t you think?

By Andrew Hallam

Asia’s in love with America. I’ve asked English speaking kids on the streets of Shanghai, China; Bombay, India; Bangkok, Thailand and Singapore where they would love to go to college if cost weren’t a consideration. Without a moment’s hesitation, they say America. Among the young Koreans I’ve asked, the answer’s practically an involuntary reflex. Few things excite them more, it seems, than the land of stars and stripes.

Ask these young Asians what their favorite products and shops are and you’ll hear names like Starbucks, Coach, and Apple. Their favourite actors and singers? Mostly American. Favorite movies? Hollywood blockbusters. Bollywood films and a few Korean crooners are making a few ripples, but young Asians still covet—with unbridled enthusiasm– nearly everything American. I’m not a tourist who did a quick weekend survey. I’ve lived in Asia for a decade, I teach at a school in Singapore, and I question young people during every Southeast Asia vacation I take.

This is why, I believe, Americans shouldn’t toss large sums of money at Asian stock markets. The growth in the Far East economies could ignite the U.S. stock market, leaving the stocks of the emerging Tigers in the dust.

That might sound like a strange assumption, considering Asia’s rapid GDP growth compared to America’s. But economic growth and stock market profits don’t necessarily go hand in hand.

The World International Bank has data on Emerging Markets as early as 1985. Emerging market economic growth has run circles around America’s corporate fattening, but still, the data doesn’t lie. From 1985 until February 6th, 2012, the U.S. stock market returns have beaten the aggregate returns of the Emerging Markets. From 1988 to 2008, South East Asian countries increased their real GDP by 386 percent, compared to just 172 percent for the U.S. Yet America’s stock market produced higher profits for shareholders during this period.

Numbers from the World International Bank’s International Finance Corporation reveal that $100,000 invested in the Emerging Market Index 26 years ago (in countries like China, Brazil, Thailand, and Malaysia) would have been worth $1.08 million by 2006. The same $100,000 invested in the stock market of the slower growing U.S. economy would have exceeded $1.3 million. Since 2006, the gap has narrowed, but it hasn’t closed. The U.S. market has been less volatile over the short term, and more profitable over the long haul.

But there’s another reason to put faith in the U.S. markets. As Asians grow more prosperous, their appetite for America’s brands (especially high status brands) grows stronger. The U.S. based research firm, Harris Interactive, recently polled 9,222 adults in Asia, Europe and the U.S. to find that 74 percent of adults in India and 72 percent in China suggested that brands were important to them, versus just 26 percent in the U.S.

And many of these brands that Asians are so loyal towards are American. With a proclivity towards American (and other Western) brand names, Asian sales will drive U.S. corporate profits, benefitting American shareholders. Examining GDP data in South East Asia shows that 2011 growth is projected to run between seven and eight percent.

But those GDP growth figures pale compared to the escalating thirst for America’s products in Asia.

According to a recent Bloomberg news report, General Motors likely increased its unit sales in China (including a 2011 estimate) by 36 percent since 2010. Currently, the company has 17.9 percent of the country’s passenger car market, compared to just 5.92 percent for Toyota.

Coca Cola’s brand is strengthening on Asian demand, as its 4th quarter Chinese sales volume increased 10 percent.

Then there’s Apple. If you think their products are popular in the United States, take a look at Asia’s addiction in their latest 10K filing. Net sales increased 174 percent in 2011 to $14.3 billion, tripling the increase in American sales, which rose 56 percent.

Net profits drive long term stock prices, and the profit growth of America’s businesses in Asia are rising at startling rates. Starbucks’ latest quarterly report saw same store sales increase by 20 percent in the South East Asian region, more than doubling the comparable sales growth in the Americas.

Asians, it appears, love American products—especially the higher status items denoting wealth, and yes....America itself. And with such a devoted brand conscious group, they won’t likely be jumping as enthusiastically into non-Western products anytime soon.

Where’s the greatest stock market growth going to be during the next 20 years?

Perhaps, in your own back yard.

By Andrew Hallam

I was born in a foreign country where sports fans have infamous reputations for home-team loyalty. Their fanaticism has even caused deaths. In 1985, international authorities banned the country’s soccer teams from playing in mainland Europe after a sporting riot cost thirty-nine lives

Where were the fans from? Jolly old England.

Most British sports buffs aren’t thoughtless hooligans, however. And a few of my English friends enjoy supporting the occasional, plucky underdog, even if they’re opposing their own athletes.

Supporting a Jamaican bobsled team, a tiny African country in a World Cup soccer match, or an aging tennis player in the twilight of his Wimbledon career can even be fun. They’re the world’s Davids, challenging Goliath.

Perhaps my affinity for this kind of battle is the reason I scoured bookstores looking for an investment author claiming to defy the odds and achieve–what academics presume– is nearly impossible. I wanted to find someone (other than a mutual fund salesperson) suggesting that they could identify actively managed mutual funds that could beat the market index.

With so many smart money managers watching the economy and trading stocks, it’s sometimes tough to imagine that we can’t find a top money manager who can beat the markets for us. After all, some mechanics are better than others; some surgeons are better than others; and some teachers are better than others. Can’t we identify a few stellar money managers who can produce reliable market-beating returns?

Strangely, after reading more than 300 money books, I couldn’t find a single author claiming to know how to beat the market with mutual funds.

Fortunately, my luck changed in 2008. I discovered Louis Lowenstein’s book, The Investor’s Dilemma. He claimed that, with a few fund-seeking criteria, he could find market-beating funds.

No, I wasn’t going to bet money on his forecasting picks, but I still cheered him on.

I was intrigued by Lowenstein’s assertion that stellar mutual funds could be found. He asked Bob Goldfarb, the chief executive of the legendary Sequoia Fund, to list 10 champion Value funds. Lowenstein then sang their praises; these were among the top funds to buy, he suggested.

Coining them the Goldfarb 10, he then revealed a startling rear-view mirror revelation: each of them had crushed the stock market’s return.

“The ten funds showed positive average annual returns for those five years [1999-2003] of 10.80 percent, or about 11 percentage points per year better than the index...”

Many of Lowenstein’s readers, I figured, poured money into these funds in 2008, when his book was released. But could these actively managed Davids really beat the passively managed Goliaths? Could someone really choose ten mutual funds that, as an aggregate, would beat the returns of the market?

Since The Investor’s Dilemma was published, the U.S. stock market has plunged, then recovered. Overall, Vanguard’s total stock market index rose just one percent from January 2008 to January 25, 2012. This kind of investment climate, according to Lowenstein, is perfect for actively managed Value fund managers: “Value funds are likely to outperform the index when the market is falling, or even treading water…”

But David, unfortunately, got his butt kicked by Goliath. Of the ten super funds listed in Lowenstein’s book, seven of them underperformed Vanguard’s total stock market index since his book’s publication.

The underdog’s supporters are feeling that pain. As a group, the touted funds fell 6.1 percentage points behind the U.S. market.

Their performance also paled when compared to Vanguard’s balanced index fund, with the index beating the Goldfarb 10 by more than 15 percent since 2008.

You can see the funds and their results below, based on Morningstar’s data:

When Many Davids Fail To Beat Goliath

Perhaps one day, somebody will write another book suggesting how to find market-beating mutual funds.

But I wouldn’t put money on their predictions.

Supporting underdogs is one thing. Losing money, because of them, is an entirely different issue.

By Andrew Hallam

I’ll admit that I was pretty sceptical. I met two New Yorkers in Chiang Mai, a northern Thai city that’s becoming as famous for its dental clinics as it is for elephant rides and luxurious spas. The young women claimed that they weren’t primarily visiting Thailand for a vacation, but for dental work. The holiday, they said, was the bonus.

We sat on a giant, open air restaurant patio, surrounded by lush tropical greenery as they explained that dental work in Thailand was much cheaper than it is in the U.S. They had boarded an airplane, flew to Chiang Mai, had their teeth fixed, and would fly back to New York after a week of beachside R&R. Total cost, including dental work and the flight? Less than a visit to a New York dentist.

Medical and dental tourism are picking up steam because of the rapidly closing gap between the quality of care in the U.S., compared to places like Thailand and India. You might equate these countries with the third world, but there’s a wealthy elite in these exotic locales that could make a Beverly Hills socialite flush with envy. And these foreign rich folk want the very best—of everything.

In Thailand, for example, you can find some of the best medical and dental treatment available in the world. Their top dentists are trained in the U.S., Canada, and Great Britain, while their clientele extends beyond wealthy Thais to Americans looking for great dental work that won’t break the bank.

I live in Singapore, where there’s a plethora of world class dentists. Services are competitively priced, and the quality is first rate. Yet, many of my friends flee to Thailand when they need to see the dentist. Like the young New York couple I met, they swear that it’s financially worth it. Perhaps it is, from Singapore, where a two hour flight may cost less than a family dinner at Applebees. But from the U.S.?

After asking my American colleagues in Singapore, I found the name of an upscale clinic in Chiang Mai, and compared procedural prices to those in the U.S. The Bureau of Labor Statistics does monthly surveys of American dental prices. And the American Chamber of Commerce Researchers Association surveys quarterly price reports in 297 American cities.

Average costs in Houston, Texas appear to run close to the U.S. national average, so I’ve used their data to compare to that of Thailand’s Grace Dental Care Clinic, where many of my friends and colleagues get work done. Here are some price comparisons:

• Anterior tooth root canals average $555 in Houston, while costing $190 at Grace’s Dental.
• Molar tooth root canals average $850 in Houston, while setting you back $283 at Grace’s Dental.
• Full gold base crowns average $1,030 in Houston, but just $472 at Grace’s Dental.
• And composite fillings in Houston average $109, compared to $50 at Grace’s.

Flights to Thailand from most U.S. cities run about $1,400. If your estimated U.S. dental expenses are expected to run into the thousands, and you’d like a tropical holiday, you might consider Thailand.

But I wouldn’t look for the cheapest Thai options. An online search would reveal plenty of cheaper Thai dental clinics with corny names like Tooth Teeth, Big Smile Clinic and Chiang Mai Dental 4 You. They could still be great clinics, but you’ll want to do your research first.

Like the New York couple I met, a rising number of Americans are finding the benefits of Thailand’s top dental practices while fortifying the country’s already famous namesake as the Land of Smiles.

You might want to check it out.

http://www.bracesinfo.com/dentalcosts/

http://www.gracedentalclinic.com/pricelist-eng.html

By Andrew Hallam 

Two years ago I lay on a sofa, as a new age “hands on” healer stood over me. I was dying, she moaned, as if getting the word from some divine source in the couch. And my only salvation? To visit her as often as possible, for $175 a session.

She knew that I had bone cancer. I had told her when we first met. A friend of mine had hooked us up and I wanted to be polite, so I went.

Yes , this fortune telling healer filled me with fear. But it reminded me of the movie Man On The Moon. In the film, Jim Carrey (who played Andy Kaufman) laughed hysterically while watching the practicing techniques of a quack witchdoctor. Kaufman had cancer, and he hoped that he’d find an alternative cure. Like many people facing a desperate plight, he put his hope in a miracle—for a fee.

Whether we face cancer or have our financial back against a barbed wire fence, most of us do one of three things:

1. We give up
2. We put faith in evidence based studies or procedures
3. We take greater risks to seek a miracle

Before going any further, I want to add that I’m actually fine. Surgeons removed large chunks of three tumour-affected ribs, before cutting out the Chondrosarcoma surrounding my spine. The only good thing about getting cancer—if there is such a thing—is that I started to write my book, Millionaire Teacher, while stuck in the cancer ward of a Singapore hospital. Yes , the nurses thought I was crazy too. But it was a great distraction.

If you or a family member is facing cancer, putting faith in evidence-based studies (and faith itself) gives the highest statistical odds of success.

My favorite read on the subject is Anti-Cancer, A New Way of Life, by Dr. David Servan-Schreiber. He starts by suggesting that we’re all going to die. Not accepting that is crazy. As my oncologist says, if I were creeping around 200 years from now, I’d scare people.

After accepting that revelation, Servan-Schreiber suggests that we do the following:

1. Eliminate sugars and processed food from our diet. Cancer loves them.
2. Eat as many dark, green leafy vegetables as possible.
3. Eliminate red meat
4. Stay calm, and meditate if you can
5. Put faith in your medical team and your support network

Is it easy to abandon evidence-based methods in favor of something more “promising” when we’re feeling threatened? It is never easier.

Investors do it routinely. .

We all know people who realize that they haven’t saved enough. Some of them seek alternative investment strategies to make up for lost ground. Perhaps they buy a hedge fund, or they eliminate bonds in their portfolios. Brazilian forestry companies advertising guaranteed returns of 15 percent annually can look pretty tempting. And let’s not forget how easy currency trading is supposed to be. It says so in the online advertisements.

When facing a shortfall in your retirement portfolio, perhaps you could take lessons from those who lean towards evidence, rather than promises.

1. Keep a diversified investment portfolio of stocks and bonds.
2. Small cap stocks have higher historical returns; you may want some in your portfolio. But just some.
3. Rebalance your portfolio to stay on track.
4. Stay calm when markets fluctuate.
5. Put faith in your investment strategy, and live below your means.
6. Remember that quick solutions aren’t. Stay calm, focus on evidence-based procedures, and have faith.

Above all, don’t put your life in the hands of a fortune teller.

By Andrew Hallam

When I was a kid, Tom Fitzgerald’s The Great Brain, was one of my favourite book series. The main character was a boy genius growing up in Utah during the late 1800s. He could solve nearly any problem. He once strategized how to find two boys lost in a cave network; another time, he taught a young, victimized Greek immigrant how to whip the schoolyard bully; and he wasn’t above using his powers of observation and psychology to occasionally seek profits.

If the Great Brain were around today, and if he were at least ten years from his retirement, I think he would rub his hands at the thought of the European debt crisis, hoping that it would cause a stock market drop (maybe a big one). The Great Brain, I think, would have had a firm grip on his stock market history. And he’d likely have Warren Buffett’s view on falling stock markets memorized:

“Only those who will be sellers of equities [stock market investments] in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”

As Buffett suggests, sinking or stagnating stock market levels are special treats for young investors; they’re opportunities to load up on discounted stock market assets. Like a collector, you don’t want to see the prices of your desired products increasing in value while you’re trying to collect a room full of them.

But stock markets rarely fall when the economic outlook is hunky dory. They fall or stagnate when there’s some kind of fiscal terror on the horizon. The Great Brain would probably recognize this, and he’d be rubbing his hands together with the bleak fiscal headlines pouring out of Greece, Italy, Ireland, Portugal and France.

With a sense of history, he might point out that the best 17 year period to invest money in the stock markets was between 1965 and 1982. During this lengthy period, the S&P 500 gyrated (sometimes wildly) but it didn’t make any net gains. It was a perfect time for people collecting stock market assets. But, as The Great Brain would point out, it was filled with terror.

1. The threat of a nuclear war was palpable
2. President Kennedy was assassinated
3. President Nixon was impeached
4. The markets crashed 45 percent from 1973-74
5. The Vietnam War ravaged the dollar’s value
6. Gold hit a historical peak as people feared the debasement of currencies
7. Inflation averaged 10.03 percent between 1980 and 1982
8. President Reagan was shot in 1981
9. U.S. unemployment hit 9.7 percent in 1982

Faced with such world uncertainty, paradoxically, the only consolation young investors may have had during that time was a stagnating stock market. Putting fear aside and regularly investing in the stock markets from 1965 to 1982 would have reaped nice rewards. While emotional speculators jumped in and out of the markets during this horror-filled 17 year period, long term investors would have “collected” stock market assets, year in and year out.

And by 1982, their assets would have taken off, averaging more than 17.5 percent for the next 18 years.

If the Great Brain invested from 1965 to 1982, he would have heard the chorus of “this time it’s different; the world isn’t going to recover.” Like a popular Top 40 remix, every new generation thinks it’s a brand new song.

As a young investor, the Great Brain (if he were among the 91 percent of employed Americans) would probably welcome the uncertainty of the European debt crisis. He would invest his money, hoping that the world’s stock markets would stagnate or fall. He’d keep his investment costs low, and dispassionately rebalance his portfolio annually between stocks and bonds.

Retirees wouldn’t welcome a falling market; there’s no doubt there. As sellers of stock market assets, they’d prefer rising markets instead.

But as they say in golf, every putt makes someone happy.

The European Union’s teetering could be one of those putts.

And if the Great Brain were at least 10 years from his retirement, I think he’d be trying to hide his smile.

By Andrew Hallam

My brother was a professional soccer player. Today, he’s grooming his fifteen year old to earn a soccer scholarship. That’s the first goal, and my brother is doing just about everything he can to give his son’s career a push in the right direction. If he helps him enough, his son might be as good as his father, or better. “With me in his corner,” says my brother, “Niklus could end up playing professionally.” But the competition is tougher than it used to be, he explains. His kid needs every break he can get.

Sometimes, when my nephew lines up to take a corner kick or a penalty, my brother steps in and takes the shot in his place. In his late 30s, and still a stud in his own right, my brother can drill the ball past virtually any 15 year old goalie. Nobody bats an eye and some of the other fathers do the same thing for their kids. “The game’s harder than it used to be,” they explain. Officially, Niklus gets credit for each assist or goal that’s scored by his dad.

The trouble is that the boy, who showed great promise as a younger player, is starting to blow far too many wide open opportunities when he has to take his own kick at the ball. The more my brother helps him out, the worse it gets. He plays half of each game looking at his dad, often begging my brother to steal the ball for a perfect break-away pass. We’re a family of high-achievers, yet my nephew’s confidence is waning, not to mention drive. He’s starting to rely on his dad as a crutch.

Of course, none of this story is true. But you’d probably agree that such friendly fire could eventually scuttle even the soundest vessels. Despite great intentions, however, many of us sink the next generation in much the same way when it comes to money,.

Like the soccer fable, maybe the game really is tougher than it used to be. I won’t argue against that. But Thomas Stanley, author of The Millionaire Next Door, has studied America’s wealthy for decades. And he finds that adult children who receive monetary aid from their parents tend to financially under-achieve those in the same vocations who don’t get handouts. Like a father throwing a kid’s touchdown pass, taking a penalty shot or eyeing down a Little League pitcher, Stanley has found that gifting assets (such as Christmas cash, a down-payment on a home, or passing down the family car) usually has detrimental financial consequences for the receiver.

Naturally, many people expect their kids to be the exception; a helpful hand at just the right time can put their tottering teens or twenty somethings squarely on their feet, they assume.

The Chinese have a proverb. They pass it down in hushed tones. It serves as a spooky sceptre to anyone daring to stuff their children’s nets with fish: Wealth doesn’t pass three generations. The first generation acquires the wealth, the second generation maintains it, and the third generation squanders it. The parents of the first generation, of course, want to make life easier for their children. But the age-old axiom prevails for the majority.
Studies and history seem to suggest that we can educate our children and train them to survive—even thrive—but financial handouts, forgiven loans and material gifts from one Jones generation to the next get wrapped up as prettily as Pandora’s box.

By all means, teach your children to fish. But don’t land anything (a soccer ball or a trout) in junior’s proverbial net. Doing so may cost more than you think.