Notes

Millionaire Teacher SUMMARY
Be aware that most financial advisers are seeking commissions and may not always guide you to the best investments.
Don’t let your emotions torpedo your investment strategy
Consider geographically diversifying your portfolio by buying index funds or exchange traded funds in overseas markets.
To start, make a note of all your expenses for three months. At the end of that period, calculate how much it costs you to live every month. Make that the basis of your fiscal plan.
“Before we learn to invest to build wealth, we have to learn how to save.”
Some financial advisers won’t guide you to the right investments. Many just want to sell you products that make the most money for them. For example, instead of suggesting that you buy an index fund – “a single product that has thousands of stocks within it” and typically charges low fees – an adviser might recommend that you buy an actively managed mutual fund with multiple transactions and fees
you could make a serious mistake if you choose a mutual fund based on its past performance
Always remember that advisers make money when they sell you actively managed funds.
If you don’t want to live with the stock market’s gyrations, invest in an index fund over the course of 25 years, and add the same amount to it every month.
“A Chinese proverb [suggests] that wealth doesn’t last more than three generations.
People have sharply divergent views on the proportion of stocks to bonds you should own. You can use your age as a rough guide. Some experts suggest that you deduct 10 years or 20 years from your age and use that as a percentage for the proportion of bonds you need in your portfolio
Your advisers could suggest that active managers can liquidate their holdings before stock market crashes and buy shares back once markets become less volatile. Such ideas theoretically denote good opportunities, but they assume that managers can successfully time the market. Consider any manager’s fees before you make a decision
If you invested $1 in gold in 1801, by 2016 your investment would have been worth only $54
TAKE AWAYS
Take-Aways
Follow nine rules to manage your money and build wealth:
Spend carefully so you will have money left over to invest. Promise yourself to “do no harm” to your finances.
Remember that compound interest is your most reliable investment tool.
Advisers can help, but choose them wisely.
Be aware that most financial advisers are seeking commissions and may not always guide you to the best investments.
Don’t let your emotions torpedo your investment strategy.
Balance your holdings in a diverse portfolio.
Consider geographically diversifying your portfolio by buying index funds or exchange traded funds in overseas markets.
Advisers may counsel you against buying an index fund and offer alternatives; be wary if they claim they can “time the market.”
Always be on the lookout for scams and fads.