When I wrote the first edition of my book, Millionaire Teacher, my publisher sent a copy to Financial Post writer, Jonathan Chevreau. He tossed it aside. He didn’t want to read it.
“From where I sit,” he later wrote, “any career teacher who makes it to age 65 is already a millionaire, since the rest of us would need $1 million of capital in order to spin out an annual $50,000 from it. So my initial impression was that the very phrase ‘Millionaire Teacher’ was redundant.”
Jonathan Chevreau was referring to the guaranteed income that many retired teachers get. Many school teachers and public sector workers still earn these rewards. But U.S. government Social Security reports suggest that defined benefit pensions are disappearing faster than giant sea turtles. The NEPC Defined Benefit Plan Trends Survey says 64 percent of corporate pension plans were either closed or frozen in 2011. By 2015, that number had climbed to 73 percent.
In 2003, I left my public school to teach at a private school. It didn’t offer a pension. My new colleagues had to be responsible for their own financial futures. But they bought horrible investments. Many invested in variable annuities. These are the kind of products described in The New York Times story, Think Your Retirement Plan Is Bad? Talk To A Teacher. Some of my colleagues sidestepped that mess. But those who did still bought actively managed mutual funds. They paid fees that were far too high.
One financial advisor practically lived at our school. She took a commission of 5.75 percent on every hard-earned dollar that my colleagues were saving. Let’s put that in perspective. If you paid 5.75 percent on every dollar you invested in 2017, you would have to make 6.1 percent over the next 12 months just to break even.
As a personal finance writer, I wanted to help. I visited Border’s Bookstore–which has sadly gone the way of so many corporate pensions. I bought 80 simple investment books. I chose 12 different titles. My favorites included John Bogle’s Little Book of Common Sense Investing and Dan Solin’s The Smartest Investment Book You’ll Ever Read.
I emailed the 400 teachers who worked at my school. “I bought 80 simple investment books,” I wrote. “I’ll leave them in my classroom. They’re free for you to take.” They were gobbled up faster than cookies in a staffroom.
I thought those books were easy to follow. But few financial writers (me included!) realize how little people understand about investing. It isn’t the public’s fault. When we were growing up, few schools (if any) taught stock and bond market basics. We didn’t learn that high investment fees could blow holes in our financial boats. We didn’t learn about diversification or the futility of market timing.
On the second page of John Bogle’s introduction he wrote, “Index funds eliminate the risks of individual stocks, market sectors and manager selection. Only stock market risk remains.” That’s Greek to the average person. How do I know? I asked the teachers who read that book.
We got together in large groups to share what they had learned. I peppered them with questions. That’s when they opened up. “Okay,” some of them asked, “What is a bond and how does it work?” Others asked, “What makes stocks rise?” One of my colleagues put up his hand, after reading a book about index funds. He said, “I read that book. But I still don’t really understand what an index fund is.”
I had chosen 12 of the simplest investment books I could find. But much of the content flew over the readers’ heads. If that’s how you feel when you read financial stuff, you have plenty of company.
I told Ian McGugan. At the time, he was my editor at MoneySense magazine. “Write your own book,” he said. “Use the teachers as a gauge.” That’s when I started to write Millionaire Teacher. For years, I had published stories in a finance magazine. I thought it would be easy to write a book that everyone could understand. But I was wrong.
I wrote the first three chapters. Then I asked different teachers (who had never read an investment book) if they could read what I had written. We got together in groups. I felt certain I was nailing it. I avoided jargon. I used stories to explain concepts. But I still missed the mark! Much of what I wrote still confused my readers. I asked a lot of questions and continued to make changes.
With help from my colleagues, I eventually got it right. That’s why Millionaire Teacher might be the world’s simplest investment book. In November 2011, it ranked #1 for the Personal Finance and Stock Market categories on Amazon.com. It was translated into multiple languages, including Korean, Chinese and Thai. Was it the world’s best mutual fund investment book? Probably not. Burton Malkiel’s A Random Walk Down Wall Street would probably get my vote. But I think Millionaire Teacher is easier to understand. Burton Malkiel said, “The newbie investor will not find a better guide than Millionaire Teacher.”
This week, I published Millionaire Teacher (2nd edition). I updated examples. I also explained how the investment landscape is starting to improve. People are learning more. They’re saying no to self-serving investment firms and expensive financial products. I provide a guide for DIY investors. I also lead readers towards low-cost investment firms. It’s a guide for American, Canadian, British, Australian and Singaporean investors.
Yes, this is a shameless plug. But as the book’s subtitle says, these really are the “nine rules of wealth you should have learned in school.”
Andrew Hallam is a Digital Nomad. He’s the author of the bestseller Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas