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Kindle Notes & Highlights
by
J.L. Collins
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June 15 - July 1, 2025
actively managed funds require expensive active managers.
In what stage of your investing life are you? The wealth accumulation stage or the wealth preservation stage? Or perhaps a blend of the two? 2. What level of risk do you find acceptable? 3. Is your investment horizon long-term or short-term?
There is no risk-free investment. Once you begin to accumulate wealth, risk is a fact of life. You can’t avoid it;
The wealth accumulation stage comes while you are working, saving, and adding money to your investments. The wealth preservation stage comes once your earned income slows or ends.
Remember that nothing money can buy is more important than your fiscal freedom. In this modern world of ours, no tool is more important.
Stocks: VTSAX (Vanguard Total Stock Market Index Fund). Stocks provide the best returns over time and serve as our inflation hedge. This is our core wealth-building tool. (See Chapter 17 for variants of this same fund.)
Bonds: VBTLX (Vanguard Total Bond Market Index Fund). Bonds provide income, tend to smooth out the rough ride of stocks, and serve as our deflation hedge.
Cash: Cash is good to have around to cover routine expenses and to meet emergencies. Cash is also king during times of deflation. The more p...
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Three simple tools. Two index mutual funds and a money market and/or bank account. A wealth-builder, an inflation hedge, a deflation hedge, and cash for daily needs and emergencies. As promised, the combination is low cost, effective, diversified, and simple.
The harsh truth is, I can’t pick winning individual stocks, and you can’t either. Nor can the vast majority who claim they can. It is extraordinarily difficult, expensive, and a fool’s errand. Having the humility to accept this will do wonders for your ability to accumulate wealth.
Today’s stars are tomorrow’s wrecks. Today’s fallen are tomorrow’s exciting turnarounds.
To buy the index is to accept the market’s “average” return.
investing is a long-term game.
I don’t favor indexing just because it is easier, although it is. Or because it is simpler, although it is that too. I favor it because it is more effective and more powerful in building wealth than the alternatives.
When you buy stock, you are buying a part ownership in a company. When you buy bonds, you are loaning money to a company or government agency.
As a buyer of bonds, the more risk you are willing to accept, the higher the interest you’ll receive.
Bills—Short-term bonds of 1–5-year terms Notes—Midterm bonds of 6–12-year terms Bonds—Long-term bonds of 12-plus-year terms
long-term bonds are seen as having higher risk and pay more.
when we get an inverted yield curve and short-term rates are higher than long-term rates, investors are anticipating low inflation or even deflation.
there are studies that indicate holding a 10%–25% position in bonds with 75%–90% stocks will actually very slightly outperform a position holding 100% stocks. It is also slightly less volatile.
~75% Stocks: VTSAX (Vanguard Total Stock Market Index Fund). Still our core holding for all the reasons we’ve discussed. ~20% Bonds: VBTLX (Vanguard Total Bond Market Index Fund). Bonds provide some income, tend to smooth out the rough ride of stocks, and are a deflation hedge. ~5% Cash: VMRXX (Vanguard Cash Reserves Federal Money Market Fund).
the most effective investing is also the simplest.
Complex and expensive investments are not only unnecessary; they also underperform. Fiddling with your investments almost always leads to worse results.
the basic 4% rule is a good guideline for deciding how much income your assets can reasonably be expected to provide over time.
VTSAX has a 0.04% expense ratio for rock-bottom costs. While cheaper than comparable funds, even low-cost Vanguard international funds have expense ratios at least twice that level.
there are two types of buckets: 1. Ordinary buckets 2. Tax-advantaged buckets
For anyone serious about achieving financial independence, taking full advantage of all your tax-deferred opportunities is a must. And doing so starts to get you into a respectable savings rate.
Managing other people’s money is a very big business and, for those who engage in it, a very lucrative one.
Advisors are expensive at best and will rob you at worst.
It’s your money, and no one will care for it better than you.
Well-intentioned but bad advice is endemic in this field.
Advisors are drawn not to the best investments but to those that pay the highest commissions and management fees.
a field that provides access to people’s life savings is a magnet for con men, thieves, and grifters.
The actively managed funds they tend to choose woefully underperform the index.
Jack Bogle founded the Vanguard Group in 1974. He is the creator of the modern low-cost index fund
Mr. Bogle came along and exposed industry stock picking and advice as worthless at best, harmful at worst,
The basic concept behind Vanguard is that an investment firm’s interests should be aligned with those of its investors.
In the Berkshire Hathaway 2013 annual shareholder letter, Buffett writes, “My advice . . . could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors—whether pension funds, institutions or individuals—who employ high-fee managers.”
cringe at the oft-made suggestion that an investor can read a few books on valuing stocks and go on to replicate Buffett’s results. Perhaps the best of these is The Intelligent Investor,
By dollar cost averaging, you are betting that the market will drop,
the market is about 82% more likely to rise, in which case you will have spared yourself some gain.
Rule 1: Everybody can be conned.
Rule 2: You are likely to be conned in an area of your expertise.
Rule 3: Con men (and women) don’t look like con men.
Successful con men look like the safest, most trustworthy, honest, stable, comforting people imaginable. You won’t see them coming.
Rule 4: Almost all of what they say will be true. The best, most effective lies are surrounded by truth.
Rule 5: If it looks too good to be true, it is. There is no free lunch. Not ever.
Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy.
never figured Social Security would be there for me. All my financial planning has been based on the idea that if it wasn’t, no problem.
In 1935, for men the average was around 65, for women about 68.
