Andrew Hallam paid a second visit to the capital on Sunday, February 4th, in order to educate the Abu Dhabi audience about responsible investments.
Andrew is a personal finance writer and the author of Millionaire Teacher and Millionaire Expat. He was able to retire early from his teaching career thanks to investing wisely, and he’s now an active advocate of retirement planning by expats. He opposes the expensive fixed term, insurance-linked saving products sold widely to expats across the world, and encourages people to set up their own retirement solutions without paying excessive fees to so-called “experts”.
This talk built on his initial Abu Dhabi appearance last fall, and with the generous use of the Raha International School’s auditorium, the Common Sense Personal Finance and Investing (CSPFI) group was able to welcome more than 120 people.
Andrew began by taking the audience through the complex and somewhat incomprehensible world of fixed-term savings and investment plans. These plans are often promoted to expats in the UAE as a retirement solution. However, Andrew crunched the numbers and shared the hard facts with the audience: very few of these plans will leave their investors with any profit at all, after taking into account inflation. He showed the fine print from the plan’s documents, which showed fees of up to 9%. This may not sound like much, but over time these high fees can eat into any profits that the investor makes, leaving them, in some cases, with less money at the end of a 25-year fixed term plan than they had invested! This is not saving. Andrew explained that the only one to benefit from such a plan is the “financial adviser”, who often has a background in sales, not finance, and who receives their hefty commission upfront.
Instead, Andrew advocates the DIY approach to investment: building a portfolio of low-cost “index funds”. These funds track the market -- the stocks in these funds are not hand-picked (hence the low fees), rather, they are like a shrunken version of all of the stocks in a particular market or country. He showed the audience the evidence that over time, index funds nearly always beat actively managed funds. Even the leading investors, like the heads of US college endowments and even the uber-smart Warren Buffet, have testified to the value of investing in index funds. And the best part is, rather than the 9% fees charged by the fixed-term investment plans, the index fund fees are often less than 0.5%.
Although this approach is very simple to set up, Andrew also offered the names of a few fee-based financial advisers who are able to guide people through the process of starting to invest independently. Regardless of the approach used, Andrew’s overarching message was for expats to avoid the trap of fixed-term investment plans and begin to invest their money themselves to get the returns they deserve.
Slides of Andrew’s presentation are available here and his introduction here.
We have also live-streamed this talk on our Facebook page, follow this link to get to the life stream video (you need to be a member of the group to see the post):
At the conclusion of the presentation, the CSPFI group announced a new identity for the new year -- it will henceforth be known as SimplyFI - Simple Finance, Simple Investing. The group follows the same passive investment approach advocated by both Andrew Hallam and Jack Bogle, the founder of Vanguard and the Bogleheads investing philosophy. Those wanting to learn more about this simple way to invest should join our future Abu Dhabi meetups for further information and discussion. All meetups will be listed on our Facebook page, as well as the new website, SimplyFI.org.