Читать книгу Millionaire Expat - Andrew Hallam - Страница 26

An out‐of‐town visitor was being shown the wonders of the New York financial district. When the party arrived at the Battery, one of his guides indicated some handsome ships riding at anchor. He said,

“Look, those are the bankers' and brokers' yachts.”

“Where are the customers' yachts?” asked the naïve visitor.

—Fred Schwed, Where Are the Customers' Yachts?¹

If you've never read an investment book before, chances are you've never heard of index funds. Financial advisors rarely like to discuss them. Index funds are flies in caviar dishes for most financial advisors. From their perspective, selling them to clients makes little sense. If they sell index funds, they make less money for themselves. If they sell actively managed mutual funds, financial advisors make more. It really is that simple.

Most expats, however, should be interested in funding their own retirement, not somebody else's.

The term index refers to a collection of something. Think of a collection of key words at the back of a book, representing the book's content. An index fund is much the same: a collection of stocks representing the content in a given market.

For example, a total Australian stock market index is a collection of stocks compiled to represent the entire Australian market. If a single index fund consisted of every Australian stock, for example, and nobody traded those index fund shares back and forth (thus avoiding transaction costs), then the profits for investors in the index fund would perfectly match the return of the Australian stock market before fees. Stated another way, investors in a total Australian stock market index would earn roughly the same return as the average Australian stock.