The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life

by J.L. Collins

Since money is the single most powerful tool we have for navigating this complex world we’ve created, understanding it is critical. If you choose to master it, money becomes a wonderful servant. If you don’t, it will surely master you.

Money can buy many things, but nothing more valuable than your freedom.

There are many things money can buy, but the most valuable of all is freedom. Freedom to do what you want and to work for whom you respect.

Stop thinking about what your money can buy. Start thinking about what your money can earn.

“Opportunity cost” is simply what you give up when you commit your money to one thing (like a car) over another (like an investment), and it’s easy to quantify.

We live in a complex world and the most useful and powerful tool for navigating it is money.

Everybody makes money when the market is rising. But what determines whether it will make you wealthy or leave you bleeding on the side of the road is what you do during the times it is collapsing.

When interest rates rise, bond prices fall. When interest rates fall, bond prices rise. In either case, if you hold a bond to the end of its term you will, barring default, get exactly what you paid for it.

Be sure that whatever global fund you choose includes the U.S. market. It is a huge chunk of the world economy and you can’t afford not to own a part of it. Many “international” funds—especially those offered by U.S.-based firms like Vanguard—are “ex-U.S. stocks,” meaning they do not include U.S. based stocks.

If you are a novice investor you have two choices: You can learn to pick an advisor. You can learn to pick your investments. Both require effort and time. But the second not only provides better results, it is the easier and less expensive path.

You are likely to be conned in an area of your expertise.

It is an inverted pyramid. He starts by selecting a very volatile stock and he sends out 1,000 letters. Half predict it will rise and half that it will fall. The 500 that got the correct prediction get letter #2 with a different volatile stock. The 250 that now have two correct predictions get letter #3 and so on. By letter #6 you have 15 or 16 marks who have gotten six letters in a row with your infallibly accurate predictions. Most will be begging by then to be taken.

Politicians rarely try to take anything away from a large population that votes.

During this accumulation phase, celebrate market drops. While you are in the wealth accumulation phase, these are gifts.

Houses are not investments, they are expensive indulgences. Buy one only when you can easily afford it and if it provides the lifestyle change you want.