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

by J.L. Collins

At $56 per share or at $52 per share, you still own the same 186.3238308 shares of VTSAX. That in turns means you own a piece of virtually every publicly traded company in the U.S.—roughly 3,700 the last time I checked.

It is simply not possible to time the market, regardless of all the heavily credentialed gurus on CNBC and the like who claim they can.

The market is the most powerful wealth-building tool of all time.

The market always goes up and it is always a wild and rocky ...

Since we can’t predict these swings, we need to toughen up mental...

I want my money working as hard as possible, as s...

Over the decades you’ll be investing, countless smaller corrections and pullbacks will occur as well. Learning to live with this reality is critical to successful investing over the long term.

And successful investing is by definition long term. Any investing done short term is by definition speculation.

For serious investors, however, all of this is useless and distracting noise. Worse, if you pay attention to it, it is positively dangerous to your wealth. And your sanity.

Market timing is an un-winnable game over time.

All you would have had to do was toughen up and let it ride. Take a moment and let that sink in.

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.

The market is the single best performing investment class over time, bar none.

This is a key point: the market is not stagnant.

But note, this only works with broad-based index funds. Once “professional management” starts trying to beat the system, all bets are off.

Here’s a sobering fact: The vast majority of investors in mutual funds actually manage to get worse returns from their funds than the funds themselves generate and report.

“Past results are not a guarantee of future performance.”

Delay is punished with higher prices later and action now is rewarded.

Simple is good. Simple is easier. Simple is more profitable.

the more complex an investment is, the less likely it is to be profitable.

Even modest inflation destroys the value of bonds over time and bonds can’t offer the compensating growth potential of stocks.

As Bogle says, performance comes and goes but expenses are always there, year after year. After year. Compounded over time the amount lost is breathtaking.

Letting an index work its magic over the years isn’t very exciting. It is only very profitable.

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.

Bonds are in our portfolio to provide a deflation hedge. Deflation is one of the two big macro risks to your money. Inflation is the other and we hedge against that with our stocks.

Put all your eggs into one large and diverse basket, add more whenever you can and forget about it. The more you add the faster you’ll get there. Job done.

I was finally understanding that the most effective investing is also the simplest.

Complex and expensive investments are not only unnecessary, they underperform.

Flexibility. How willing and able are you to adjust your spending? Can you tighten your belt if needed? Are you willing to move to a less expensive part of the country? Of the world? Are you able to return to work? Create additional sources of income? The more rigid your lifestyle requirements, the less risk you can handle.

“Rebalancing is a personal choice, not a choice that statistics can validate. There’s certainly nothing the matter with doing it (although I don’t do it myself), but also no reason to slavishly worry about small changes in the equity ratio.”

Unfortunately most advisors don’t get better results.

“Wisdom comes from experience. Experience is often a result of lack of wisdom.” —Terry Pratchett

You’ve avoided debt You’ve spent less than you’ve earned You’ve invested the surplus

How quickly you reach this point will have much to do with your savings rate and how much cash flow you require.

Or said another way, your assets now equal 25 times your annual spending.

Here’s what I would not do I would not set up a 4% annual withdrawal plan and forget about it.

Avoid debt. Nothing is worth paying interest to own. Avoid fiscally irresponsible people and certainly don’t marry one.

Spend the next decade or so working your ass off building your career and your professional reputation. This is not meant to suggest you must be some sort of office drone. Think of your career in the most expansive of terms. The possibilities are endless. Take those low-cost college living skills you’ve honed and use them to pursue any number of new adventures. Don’t get trapped by an expanding lifestyle or unwind it if you already are. Save and invest at least 50% of your income. Put this in VTSAX or one of the other options we’ve discussed in this book.

Save more than 50% and you’ll get there sooner. Save less and it will take a bit longer.

If you get lucky with the market you’ll get there sooner. If not, it will take a bit longer.

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

But never fall prey to thinking you (or anyone else) can anticipate...

Once 4% of your assets can cover your expenses, consider yourself financially independent.

Put another way, financial independence = 25x your annual expenses.

As you can see, being financially independent is every bit as much about controlling your needs as it is about building your assets.

Once you are financially independent, begin living on your investments.

At the point you become financially independent, you can decide if you are still having fun and want to continue ...

If you keep working, invest 100% of your earnings. You are living on your investments now. This will dramatically acc...

Once you decide you are done working, diversify into bonds. The more bonds you add, the smoother the ride but the lower the growth.

Once you’ve reached financial independence and are able to live on 4% of your holdings, should you so choose, now is the time: