RetireJapan

I decided to buy the book Millionaire teacher.
I thought it was an excellent read, and I think it has some great points for anyone looking to do something with their money long term.

As I worked my way through the book, something tweaked a little neurone in my head, along with his own advice in the book, of having a healthy curiosity or even scepticism when someone is possibly getting something in return for pointing a customer in a certain direction.The reason I say this is because I started to see a constant name coming up.Namely vanguard! It cropped up so often i was beginning to take his own advice, and become a little sceptical. Hopefully in a healthy way.After all it is our money we are investing.

I am not saying the author Andrew Hallam is in anyway getting something from vanguard, but I took his advice, along with the voice from my nursing professor to always check your research for author Bias, because i was beginning to think maybe it was a Vanguard publication or some sort of collaboration.
Anyway, I wondered why vanguard constantly kept cropping up, as there are other passive funds which track the S&P 500 too.
So I decided to look at the book a bit deeper, maybe I missed something.( yep, that meant reading the boring bits ) and I noticed he gives credit to a person called John S Woerth who works at vanguard for providing the charts. So I typed his name into a search engine and he came up. His job responsibility is to lead the U.S. "Public Relations" and "Strategic Communications" section at Vanguard
Ofcourse I expect Andrew Hallem to do research, contact people, and give credit to others, reference his sources when doing a piece in the world of finance and thankfully he does that. He discloses the relationship with John S Woerth at vanguard in the acknowledgment section as a person who provided charts ( hopefully not cherry picked) but that's all.
So I have to question,A) was this a collaboration between the author with some sort of encouragement from vanguard or B) was this the authors work alone, and he subsequently confirmed his findings by reaching out to vanguard himself with no financial benefits?

Anyway I believe the authors advice is sound, he doesn't say we should join vanguard at all, but the name is constantly dropped in, and I think it shows, according to Andrew Hallam, just to be a bit wary of person who keeps dropping a certain group/brand/product.
Because non of the other groups are listed.
Fidelity ZERO Large Cap Index
SPDR S&P 500 ETF Trust
iShares Core S&P 500 ETF
Schwab S&P 500 Index Fund


I am certainly not in a position to know if vanguard is the best performer, compared to all the other funds there are, and maybe someone can confirm if they are. After all, he points out some groups will rise and some will fall.However I think it is certainly financially healthy to consider, if there is any possible conflict of interest, between the author, and reader that appears to drop a groups name in a publication more times than I care to mention.

Books/and financial papers don't have to go through the same rigorous peer review of say a scientific/medical publication or double blind research to offset any placebo/author, patient bias effect and declare if they have a conflict of interest.
I still liked the book, learnt some good things from it, and he does disclose the person who provided the charts works for vanguard, but as with any piece of research, always question who the author is, and consider if there is any "possible" author bias.

I enjoyed the book, easy to read, but it was interesting that this kept coming up in my mind, after all he didn't need to keep mentioning a brand per sae.

I think if you are American, they are a very good choice, especially because they are structured in a way that the owners of their funds own the company, removing conflict of interest, and they pioneered index funds and low fees. It doesn't mean their execs aren't raking it in though, and they have been pushing products such as actively-managed funds that stray quite a bit from their core philosophy since Bogle stepped down from the helm.

While Hallam's general advice is good, his specific advice is not so great for residents of Japan (I've not read Millionaire Teacher, but I have read the Global Expatriate's Guide to Investing). Vanguard products are available, but they come with Rakuten-flavoured strings attached. You can invest in Vangard funds directly buy buying their US ETFs on the stock market, but then you get exposed to currency risk and tax inefficiency. He also pushes Singapore-based accounts if I remember rightly. That excludes you from taking advantage NISA and iDeCo, and also the automatic tax-reporting that comes for free with Japanese brokerage accounts.

I think your scepticism is healthy, and in Japan there are plenty of competitive domestically produced mutual funds (投資信託) that may be a better choice than Vanguard. They don't beat Vanguard's US rates - but those rates are not available to residents of Japan without additional costs anyway.

Thanks for the tip about "Millionaire Teacher." Andrew Hallam has a long history of writing favorably about Vanguard but I wouldn't be too concerned about that for the kind of advice he gives. The TSP index funds run by Blackrock for US federal government employees (which covers a lot, everyone in the military, etc.) actually have a slightly better fee structure than Vanguard but I think when you get down to the last 10 basis points the debate loses its importance. I have US-based accounts with Fidelity, Schwab and Vanguard and my take on the zero-fund fee debate is this:

1) Unfortunately, the zero-fund mutual funds are not available to investors who do not have a US address. I've tried with both Fidelity and Schwab --after being a customer for 30-odd years with accounts that started as US-based-- and they both flatly refuse to sell any new mutual funds to me, including the zero-fee funds.

2) The zero-fee funds are also not available for (US) retirement 401K accounts. I don't know why, but this issue has come up several times on US investment forums like the White Coat Investor.

3) As Adamu mentions, the ownership structure of Vanguard is unique and we investors own the company. Vanguard employees (especially at the top) are compensated at (generous) industry standards but this structure still favors investors with some lowering of incentives to raise fees to compensate some other owner.

4) Vanguard has patented a way for their Index funds which have both mutual fund and ETF shares to avoid generating any capital gain distributions. The tax friction you avoid from that is probably more important than the difference between a 4-10 basis point and 0 basis point fee for mutual funds. In this way there is an advantage to holding the Vanguard mutual funds for the S&P 500 and (US) Total Market funds which can't be matched even by zero-fee funds from Fidelity or Schwab in a taxable account.

5) Jack Bogle actually left Vanguard in 1999 and had no operational role with the company (and no more ownership than you and I) ever since. There are rumors that he did oppose some of the company's moves to offering actively managed mutual funds while he was there, but in his own career both before and after starting Vanguard he also promoted actively managed funds

6) All that said, Vanguard's customer service is not great. Maybe not awful, but things which are easy to do at Fidelity or Schwab are hard and sometimes impossible to do at Vanguard.

Thank you for the replies.
I think your totally spot on about having a healthy skeptical view in regards to financial matters, as psychological research has shown how money influences people.It's a pity we weren't taught that in math at school. before the endowment, pension,PPI, etc etc.

I think your scepticism is healthy,

As you know we should be healthily skeptical of anything we read on the internet especially the nice big shiny ones. Type in a search engine best funds and they all pop up, without fail, its almost like a self fulfilling prophecy, and everyone obviously wishes to jump in due to the crowd mentality.Not so for the companies that are not performing as well. After all, Todays performance is no assurance of future performance.

So with a huge skeptical question mark over my head.......are we just following the crowd, like previous financial products, and if it was so easy, why bother with anything else?.

Anyway I have a fund with vanguard for about 10 years (ash) and I'm quite happy with it.So far!

As Adamu mentions, the ownership structure of Vanguard is unique and we investors own the company. Vanguard employees (especially at the top) are compensated at (generous) industry standards but this structure still favors investors with some lowering of incentives to raise fees to compensate some other owner.

This is an interesting company structure and reminds of the mutual companies eg standard life,/building societies eg Norther Rock et al that all decided to demutualise.
Giving someone their own money in cash/shares, only to claw it back in charges later on.Even though you'd have saved way more over the long term if it remained in the ownership of its members. I thought this was a slight of hand move by the carper baggers, as the account holders saw what they could get today, and not what they would Earn/loose over the long term.
Let hope they don't go down that road then.

https://www.theguardian.com/business/20 ... editcrunch

Bubblegun wrote: ↑Sat Jun 15, 2019 10:07 am I think it is certainly financially healthy to consider, if there is any possible conflict of interest, between the author, and reader that appears to drop a groups name in a publication more times than I care to mention.

Are you suggesting the RetireJapan community could possibly be affiliated with the eMaxis Slim range of products?!

Please tell me more about this affiliate program

Bushiman wrote: ↑Mon Jun 17, 2019 3:04 am

Bubblegun wrote: ↑Sat Jun 15, 2019 10:07 am I think it is certainly financially healthy to consider, if there is any possible conflict of interest, between the author, and reader that appears to drop a groups name in a publication more times than I care to mention.

Are you suggesting the RetireJapan community could possibly be affiliated with the eMaxis Slim range of products?!

Now that you say it......

TokyoWart wrote: ↑Sat Jun 15, 2019 12:05 pm...
1) Unfortunately, the zero-fund mutual funds are not available to investors who do not have a US address. I've tried with both Fidelity and Schwab --after being a customer for 30-odd years with accounts that started as US-based-- and they both flatly refuse to sell any new mutual funds to me, including the zero-fee funds.
...
6) All that said, Vanguard's customer service is not great. Maybe not awful, but things which are easy to do at Fidelity or Schwab are hard and sometimes impossible to do at Vanguard.

As for (1), I think that's due to a law that dates to about 1948 (I could be off a year or two). I believe that it was ignored back in the 90s, prior to the flood of ETFs (and 9/11).

(6) Schwab's customer service--online and on the phone--is superb (24/7/365). Well worth whatever minor differences there may be in terms of cost between them and Vanguard. And they have one of the best cards for overseas use--ATM fees are refunded, they don't charge a fee themselves, and good f/x rates to boot.

As others have mentioned, the main thing about Vanguard is that it is owned by its customers, which makes it extremely different from all the other competitors. People do not tout the vanguard funds as much as they praise the company structure which basically ensures that the decisions made by the company should mostly align with the interest of its customers, while other companies align with their shareholders' interests.

It's been a long time since I read Andrew's books, but I would make a distinction between a recommendation to go to Vanguard's funds (some other funds exist that are competitive and might work better for you, in particular for us in Japan) and a recommendation to become a client of Vanguard, the company (to this day the only broker owned by its clients as far as I know), which, if you happen to be in the US, still sounds like the safest/best choice as an index investor, as far as I can tell.

Adding to an old post here but....

As a beginning investor, I just finished reading Hallam's "Millionaire Teacher" book.
For people who haven't read it, his 9 Rules of Wealth are:

1. Spend like a millionaire or less if you want to become rich.
2. Start investing as early as possible (after paying off CC debt and high interest loans).
3. Invest in low cost index funds instead of actively managed funds.
4. Understand stock market history and psychology (don't fall victim to craziness).
5. Learn to build a complete balanced portfolio with stock & bond index funds that will beat the pros.
6. Create indexed accounts no matter where you live.
7. Learn to fight an advisor's sales rhetoric.
8. Avoid investment schemes and scams that tickle your greed button.
9. If you must buy common stocks, do it with a small percentage of your portfolio and pick a mentor (ex. Warren Buffet).

As Hallam states, "live long, prosper and pass on what you've learned".
Much of his points are probably common knowledge for many on this forum. It was enlightening for me to learn. He does quite favor Vanguard, however. Another Vanguard supporter (and good read) is JL Collins' "Simple Path to Wealth" book.

Any other good books people recommend reading?