JL Collins: "The Simple Path to Wealth" | Talks at Google
Please. Welcome jl college. Thank. You. Welcome. So. My. First question for you the, title of your book is the. Simple path to wealth it is and, it's. A roadmap to financial, independence and, a rich free life so, what, does wealth, mean, to you and how is it tied to a free life. Well. I suppose we could look at that in two different directions so if, we think about the psychological, part. Of it to. Me personally what wealth represents. Is security. And freedom. So. Security, to protect you from the from. What the world can throw at you and and freedom to chart your own path in a way that you couldn't do without the resource, on. The financial, point of view I suppose. When. I think about what the benchmarks, are for, are you wealthy, or not have, you achieved financial. Independence or, not, what. Has come to be called the 4%, rule is a good guideline that. Comes out of thing called the Trinity study and. Without, belaboring that, point it simply suggests, that, if. You have enough assets. That. 4%, of, that amount, can, cover your annual expenses, you. Can consider, yourself financially independent. So. You can work at it from two different directions you could say well I have a million dollars, so. Four percent of that is 40 thousand dollars and. I live on forty thousand dollars a year or not and therein. Lies the answer to your question or you. Can look at it from the other direction you didn't say you know I need 40 thousand dollars to. Live on so, how much do I need to be financially, independent you. Multiply 40 thousand by as it happens 25, you. Get a million dollars and there's your answer so, it really depends, on what, your needs are. And. Why. Is it important, to keep the path simple, I think there are a lot of folks, tuning in or folks in the audience who have, read financial independence books, and maybe their, eyes roll back in their head because they just can't make sense of it all so why. Is it important to keep it simple well that's one good reason. But. The, reason that I prefer keeping it simple is simple is simply more powerful, simple. Is what gets you the best results. And in, this case when I talk about simplicity I'm talking, about index, funds and, specifically. Broad-based. Stock. And, then bond index, funds when you bring them into it there. Are a lot of reasons that simplicity, is an advantage it keeps your costs low it. Keeps your life simpler. It makes things when the time comes easier, on your heirs but. The most important, thing is it is the most powerful way, to reach. Financial independence. People, who come to my blog are always I get two kinds of readers, of my blog people, are really into this stuff and they. Always want to tinker and that's. Not who I'm really writing for I'm. Writing for people like my daughter who knows that it's important, but. She has other things that she'd rather do with her life than fixate, on finances. And investing. And so. When you have a simple path you can just get a couple of things right you know have a very powerful performance.
You Will outperform the vast majority of professionals. Out there and I, am fond of saying to those people who want to tinker if, I thought there, was a way to successfully. Tinker and do better then. That's what I would have written the book about and in fact I wasted, a couple, of decades trying to find that. So. You have a blog JL, Collins and H comm if, folks. Are interested in your. Content. Should they begin with your blog or your book. What. I would. Suggest that if you don't know anything about me or this concept, I would, go first to the blog and. I would go to there's, a button at the top called stock series, and the blog is best, known for my stock series of posts and. When. You click on that button that will take you to. An. Introduction, and in that introduction, is a link, to what. I think is the best review of my stock series that's, been done and that best, because it's most favorable, but in my view most accurate, so, you can click over to that and read that brief review, and after reading it you'll, know very clearly, whether this is gonna resonate, with you or not and whether it's worth your time so I'd start there and then, I would read a couple of the posts, and. Then if you like what you read you can consider going on to the book there, is nothing, in. The book that's not in the blog so. You can get all the information just, by staying on the blog the. Book is more concise it's. Better organized, because the, posts, in the blog came, organically, as they occurred to me or were suggested, and, the book has the advantage of being better organized, it's more concise and I. Spent. More time polishing. The writing so I hope that the writing is more polished, but I'll @uj you'll make it there's edge of that and. Thinking. Back to the early days of your own investment. History how. Did you learn all this stuff how did you learn to invest. Well. I did it the hard way I mean trial, and error. Yeah. I spent. As I alluded to earlier. Decades. Trying, trying to do things that were not was, it what's. What's. Seductive, about this is. That. They were, subpar. But. Not bad performance. I tell people that long before I discovered, or embraced index investing I had, reached financial, independence so, I reached financial. Independence by, picking stocks and picking. Mutual. Fund managers, active, managers, who. Could pick stocks or thought they could pick stocks so. It can be done the problem with it is it's more expensive it's more time-consuming it's, not as effective, as indexing, so, I would have been much better off if, I, discovered, indexing, earlier. The. Great irony, is the Jack Bogle who was the founder of Vanguard and the, inventor of the first index. Fund available to the public, launched. That fund in 1975. 1975. Was, the first year I started, investing, I'd. Never heard of Jack Bogle or Vanguard. Or index funds when I started, it. Was ten years before I heard, of them and then it, took me a disturbingly. Long time to, embrace it and. So, I. Wouldn't. As people say how do you know all this stuff and this well because I made just about if you can think of a mistake you could make in, investing.
I've Probably made it so. To the extent that I know anything it's from my mistakes, so. Speaking, of mistakes what, do you think was working in your favor versus, working against, you as you were trying to figure this out on your own well. I think the the main thing that was working against, me at the time and that is working against, everybody. Listening, to this is, there, is a, large. Industry, Wall Street whose, drumbeat. Is counter. To our best interests, in. That is based on making this as complex, as possible, putting. Out a siren. Song that, you too can be Warren Buffett, you. Too can pick stocks, you. Too can outperform the, indexes. Only. If you if you're only if you're willing to pay us for, the privilege and that's. A very seductive. Message because everybody, wants to think that they can be above average and, outperform. People. Well right. But. Maybe not an investing, okay. Now. The irony. Is if you invest, in index funds and of course the slam that active managers, put, against index investing is that, you will only get average, returns. That's. A little bit misleading because, yes. The index, gives you the return of the market overall, but. That return, is far. Above average, index, investing. Based. On the research that have been done. Outperforms. Depending. On on what numbers you look at 80, to 85, percent of, active managers, over. A 15, year, period of time if, you research out 30 years the. Number of active managers, who can outperform, the index is, less, than, 1%. That's. Statistically zero. So. When you invest in the index and you're, getting the average performance. Of the market, you're. Actually getting the best performance, that you can expect by a long shot. Gotcha. And so what. Was working in your favor I, think. What was working in my favor is is I. Continued. Being curious and I. Continued, trying different things that I continued, researching, and, indexing. Which was first put in front of me in 1985. By a good friend of mine there's. Something about it that is very counterintuitive, and, I think, particularly. For smart people like the people in this room and the people listening, because. You. Look at it and you say well indexing, says they buy every stock in the index and. Yet, if, I can only just not. By the obvious dog saw it perform. I mean outperforming, seems like it should be so simple but, the problem, with that or even if I just buy the top performers, and not, even buy the mediocre. The low performing, ones you know obviously, I'm gonna outperform and yet you look at that research that says, that, doesn't, happen and. Of course the reason it doesn't happen is today's dogs or sometimes, tomorrow's. Great turnaround success, stories and those. That are flying high, are. The stories of how they crash and burn so there, is no way to know what. Is gonna happen with with, specific, stocks and it is just way too easy to. Guess wrong. So. One thing that struck me about your blog and your book is how specific, the advice is so. In. Other books, are websites I've tried reading in the past the, advice was always really vague like, invest. In mutual funds and it would leave me thinking well, which one and how much so. Why. Do you think other authors. Advice, is not very specific. Well. I'm not sure I can answer that because I can't put myself in the heads of other people. Maybe. I can answer it by by telling you why my advice is what it is and that's. Because I didn't write. This blog to have the international, audience that I have today that it never. Occurred to me that that would happen I had, started, actually writing a series of letters to my, daughter about financial, things I wanted, - no and I, shared it was a business colleague of mine he said you know Jim this kind of interesting stuff, you. Might want to share with your friends and family and a blog would be a good way to do that and, this is in 2011, I, like. The idea of a blog because it occurred to me that would be a great way to archive the information. But. I didn't, have a plan, to create a. Blog. As a business, or as a successful, way to reach a broader, audience it was just to, archive the information, I wanted my daughter to know and, that was basically, what. Mistakes I've made what's, worked what's kicked me in the ass and what, I think, specifically. She should do and. So, I think that's why my advice is so specific these, are the things that I'm doing now these.
Are The things I wish I had. Done. In 1975. Or at least in 1985. When I became aware of indexing, these, are the things that I, want, her to do and that I've got her started doing so, that's maybe why my advice is is more. Specific. Than others okay. Yeah. I can't tell you how many times I've talked, with a friend about. How. I'm on this new track, where I'm investing, and they say well what are you doing and I just send them one. Sentence, of exactly what I'm doing in it that's what I read in your book and they're, like that's it and, I'm like that's it that's all I'm doing so aside. From telling, them to open their computer, it start it up and what, clicks to make to log into their account it's such simple advice you. Know I was a. Year. And a half two years ago I was. Interviewed, by faranoush. Torabi on. Her podcast and, I don't know if anybody's listen to her podcast but, at. The end of her interview, she likes to ask a question, that says if, you were suddenly given, a hundred million dollars what would you do and, the, typical kinds of answers she gets as wide by this that I give this money away I do that and and. Of course she's, interviewing, me we're talking about index fund investing, and specifically. VTS. Ax which is Vanguard, total stock market index, fund and, the, one I recommend the most and love the best and so, when she got to that question, Jim. What, would you do I'd put it in VTS ax and. She was ship really that's what you do. So. One, of my favorite posts on your blog is, called, why. Your house is a terrible, investment. And. I I, know you've got a lot of feedback from your readers about your feedbacks, one way to say yeah so. Why, do you think this post, is so controversial, why, dear, readers get, so excited. About this post, you. Know somebody not me but somebody said. Home. Ownership is the American, religion. And. You. Could go to, Daley. Plaza, in. Downtown Chicago. And you could set up your little soapbox and, you. Could climb up on it and pick any. Major. Religious. Leader and begin. To vilify that. Individual. Jesus, Christ Mohammed. Buddha. Who had ever just vilified, them in though in the. Most horrific terms, possible, and, people. Would just turn. Around and walk away I mean they'd ignore you you. Get up on that same box and suggest, that home ownership isn't, the perfect thing very ready to do and they, start gathering rocks. So. I think it's, polarizing, and, the people who love, their homes and love. The idea of owning a home. That. Gets that response and then there's another segment of people who. Don't, like owning homes and see value and renting, and, they. Muster, to the cause and, and that's what makes that post to. My surprise, because I kind of did it tongue-in-cheek. And I, by the way I'm not anti, homeownership, I have, owned homes most, of my life I. Am, anti, believing. The propaganda. That it is always or even commonly, a good financial decision, it. Can be a great lifestyle, decision, and that's why. I bought the houses I bought over the years but. I never once, bought them thinking I was doing something that was financially. Astute because. Unless you happen to get lucky with, a rising market and that does happen it's. Generally, not the best thing you can do with your money if financial. And depend your goal, and. So for the person who's at the point where they're considering. Buying their first home or condo, what. Considerations would. You advise them to make before, they do that why. Isn't the first thing along the lines with what I just said was to understand, that you. Are not, making, an, investment, you're. Making a lifestyle, decision, I in. My manifesto, on my blog one of the things that I say is something to the effect of. All. Of our decisions, don't have to be driven by, financial, considerations. But. You should always understand. The, financial. Dynamic. Of what you're choosing to do and I have a post about buy, vs. right and run the numbers, which.
Talks, You through how to do that so. I would suggest if, you're renting, now and you're thinking of going, into. A house or a condo that you first run the numbers and find. Out exactly what, it's going to mean financially. And it, might be that. It's going to be less expensive than, where you're renting that's possible, that does happen more. Commonly, you're gonna find that it's going to be more, expensive but. Then you know and just because it's more expensive, doesn't. Mean that you don't have to buy the house it. Just means that you understand, what, you're paying for the lifestyle, decision, that you're making. And. That was one, of the first conversations we, had at the Chautauqua, I. Wanted, to tell you a story about how I, frequently. Get asked like Rach are you gonna buy a place in Chicago and, I say well I read, JL Collins, book and cool. Renting, for now and, I told you a story about how my refrigerator. Broke right before I came to Ecuador. And just called my landlord and said need a new fridge see, you later I'm gonna go. So. Other. Than this post. Called. Why your house is a terrible investment is. There any other posts on your blog that's generated, a lot of feedback or controversy, from your readers well. That's the one that's generated, the most controversy. Because it's such a hot-button. Topic. Less. Controversial. But but, very popular. Probably, the two that are most popular is how, I failed my daughter and a simple path to wealth and that, was one of my earliest post that and, in that one post I kind of sum up the whole whole. Content. Of the blog in the book so, that's popular, why. You need a few money is probably. At. Least as popular. And. From the reaction the audience I gather, we have, people. Agree with that there's a famous video, on YouTube called the. Importance, of fu money. Haven't. Seen it write. It down, put your headphones on at your desk. Yeah. It's not suitable for work. So. I just. A quick. Aside on that, if I make, there's. A movie called the gambler which is not a particularly, good movie so I'm not recommending the movie but, there is a wonderful segment, it stars John Goodman, and it was a wonderful actor and there's. A wonderful segment. Little. Little piece in that movie, and you can, you, can google that and find, this, clip where, John Goodman, is talking, to Mark, Wahlberg and about. The importance, of having a few money and. When I saw that clip I thought I want, to do a version of that I want. To keep it as close to the original as I can but tweak it so it reflects, my. Values, he, talks about buying a house for instance and we've talked about that. But. My problem is I didn't know anybody. Who could who could make the film but, one of the wonderful things about Chautauqua. Which is where you and I met is that. You meet really cool interesting, people who come to Chautauqua, including. A couple of years ago a pair of film makers who were less. Than an hour from where we were living at the time and they came up and I give. You all this background because if you choose to watch this. It's. Filled with salty, language that I don't use everyday I'm acting, I'm I'm trying to channel John. Goodman and he uses the same language and if, you like it you think I do a good job in, it the, credit goes to my filmmakers. Joan. And. Terrible. Branagh drawing. A blank, on his name but. It's, if you go to my my blog and you to, the search function, you'll find it and and. You'll. See who they credit.
Is Given. So. We're, in the beginning of 2018 and this. Is a good time for folks who are trying to get their financial house in order to maybe come up with a 2018, plan 2018, and beyond and. The. Amount of investment options, is confusing, and overwhelming so. I know a lot of folks, who are, maxing. Out their 401k, because, that's very sound advice we get the full match they. Might also have an emergency savings fund but, beyond those two things they don't know what to do with what's left over and. They're. Just keeping their money and savings are checking or. Maybe. They're outsourcing, the management of their money to someone else so for. The folks who don't feel confident, investing. Beyond just, the 401k match and. They're. Just keeping their money maybe in savings or checking how. Should they begin to make sense of all these different options how. Would you advise them to get started well. The way the circles back to the advantage, of things being simple so. If. You think of maybe if you have a visual image let's, say of a. Long banquet, table. That. Is just groaning, under the weight of every, kind of food and preparation, and dish you can possibly, imagine. Think. Of that image as is what the financial, community is, and has laid out for us and that they want us to partake in the. Problem, is these are all very. Expensive. Things that. Are for the most part designed for the people who have created them and who sell them to enrich them, not. Necessarily what's, best for us that's. Bad news the good news is, you can put your arm down on, that table at one end except. For a tiny little corner and sweep. It all under the floor because. None, of that matters. Only. A very, small, sliver, of what out there really. Matters, for us and building our wealth that's. Index, funds and that's, very specifically. Broad-based. Stock. Index, funds and, broad-based. Bond, index, funds I mentioned. The one that I like the best is. VTS, ax which is Vanguard total stock market index, fund, more. Common, and the original, fund Jack Bogle created. Is the S&P 500, index. Fund that's.
Perfectly, Acceptable and the two are surprisingly. Close so, sometimes people get hung up on deciding, between the few, acts that have access to one and not the end other, go. For which, either one you have and then. There are total bond market funds that's, with those two, tools, that's. All you really need it, gets a little complex, with 401k, plans and, 403 B plans for people, are not in the private sector, because. They don't always offer, those. Particular, Vanguard, funds that I prefer. Most. Plans, offer, some, kind of broad-based. Stock. Index, usually. An equivalent. Of an S&P 500. It might, not come from Vanguard which, is my preferred company. But. An S&P 500. Index fund is pretty much the same no, matter who's. Providing. It fidelity. Or to you or price those are all fine options. And. So, if, someone, wanted to get started this year, and. They wanted to take a look at some index funds, but. They also know. That there are HSAs, 529. Plans. How. Would you recommend they. Get started like maybe, if 2018, was just gonna be a simple year, what, would your advice be if. They're feeling overwhelmed, by that all the different places they could put their money, well. I think. Manure. Really starting from ground zero, you you really do not have any base, of knowledge. On this and that's not a bad thing that could be an advantage because. At least it means you don't have bad. Knowledge, and there's a lot of bad information out. There so, if you're at that Ground Zero level, don't. Feel bad about it that's an advantage of some there's, nothing you have to unlearn. But. The risk of touting my own book in my own blog I would, go there and do, a little bit of reading and do a little bit of learning so, one thing in the way you phrase the question that. People need to be clear about and this, is something that I come across a lot as. I say well I want to invest in my 401, K or I want to invest in my IRA or I want to invest, in VTS ax. Well, you're, conflating. Investments. With what I come to call buckets so a, 401, K is not an investment, an IRA. Is not an investment, a TSP. Plan is not investment, those are buckets, and then in. Those buckets you hold your investments, investments are things like, mutual funds and stocks and, bonds so, those are the investments, that you choose to put in your bucket so. If you have a 401, K as you do at Google and. I have no idea what your 401 K looks like but you will have a list of selections. Of, investments. You can put in that 401, K bucket. If. My. Approach resonates, with you then you believe in broad-based. Index, fund, funds, are something you want to you want to go with you, can go down that list and maybe. Find, the, specific funds I'm talking about but, you certainly probably, find something, that, is a broad-based, index, fund the, easiest way to do that by the way is, to find the column, that shows the expense ratio and. You should have that you run, your finger down that and, when you find the very lowest expense, ratios, you have found the index funds and focus. On those and take a look at. And. Why, do you think some people choose, to manage their own investments, whereas others outsource, it to someone else. Well. I think the people who outsource it to someone else have been convinced, that this, just, too complex. For their pretty little head and. Moat. The vast majority of things on that banquet, table we talked about, our. Too complex, for anybody's. Pretty little head when. In. 2007. 2008, 2009, when, the economy, cratered, Wall. Street was selling, products, they didn't understand, so. If this stuff looks complex, to you it's because this stuff is complex, and in some cases intentionally. Complex but, we don't care about that because we don't need any of that and, once you understand, that you don't need that complex stuff, then. Doing, it yourself becomes. Much, more attainable, even. If you don't have any interest in financial. Stuff like, frankly my daughter. She. Doesn't she has better things to do with her life than fool around with this financial stuff that intrigues her dad and that's. Great I mean people, are bridges, to build and and you. Know ways. To make the world work the. Beauty of this is that if you get a couple of things right financially. You, can profoundly, change, your financial life without having to dwell on it and you, can get on with doing things that are more important to you and maybe more important to the world.
And. What, do you think are 2 to, 3 of the biggest mistakes, people can make when investing, or managing their money. Well. I think. Two, come to mind immediately one, is is. Thinking. That you can pick. Individual, stocks and. By, extension that you can pick, people. Who can pick individual, stocks that is people who run actively, managed mutual funds. One. Of the the, comments, that, makes my skin crawl. Is. When, I hear people say something, like well Warren. Buffett, became a billionaire picking. Individual, stocks I'll just do what Warren did, as. If. As. If there. Is a reason, that Warren Buffett is is, famous, because, Warren Buffett, has managed, to do something, that, is extraordinarily, difficult, to do the. Ability, to do it is extraordinarily, rare, and. The, hubris, to think oh I'll just go and do what Warren, has done is. To, me stunning, it's, just absolutely stunning, and the research indicates, that, what Warren has done it as we talked about you, go out thirty years and less than one percent of people trying, to do it who have survived that long have, accomplished, it so. I think. You need and this is I bring this one up first because this was my own stumbling, block, I just. Kept believing, that, I could pick people, who could pick stocks and I. Believe that I could pick stocks and because. Every now and again I get it right and. Maybe I got it right more often than I got it wrong that feeds, into that belief and. That's the thing that made me reluctant to pick up indexing, but. The truth is that the, few times I got it wrong dragged, down my performance. To. Worry and this is what happens to the vast majority people are trying to do it to, where I, would have been far better off with the index far better off so, trying to pick individual, stocks and managers, is number, one maybe not. Necessarily an order the, second thing is trying to time the market and. You. Can't turn on the financial, news or open up a financial, periodical. Without. Finding, somebody who's telling you definitively, where the stock market is going next. Nobody. Knows if, you could accurately do, that with any consistency, you'd. Be far, richer than Warren Buffett and far more lionized, it would be magic, dust. Nobody. Can tell you where the market is going you. Just can't. Predict, the market and trying to is. Is. A fool's, game, so.
Fidelity. Investments, did a little piece of research and, think about a year ago year and a half ago and they. Were curious as to what group of investors, in. Their funds did. Best, because. The research indicates that the people who invest, in a mutual, fund. Outperform. Her underperform. Rather the. Performance, of that fund. And. You say well how that possible, if they're investing, in the fund their, performance, should match the fund the. Reason they underperform. As they try to dance in and out they try to time the market, so, when fidelity, did, this research, they. Determined, that one group, of investors, did. Significantly better, than any, other group who. Own their funds and, that was dead people. The. Dead people outperform. How. Can you guess why, because. They didn't take her with their investment. The. Second, best performing, group were people who forgot that they owned the fund so. You, can't time the market and especially. When the market has been on has long a bull run as it has the. Media is filled with people telling you that they know what it's gonna do next at. Some, point the market will dive because. The market is volatile, it will that's, what markets do so, if you invest in the market you have to expect that you, actually have to expect the volatility, you, have to be willing to ride with it but. I don't know when that's going to do it and do that it could, be happening as we're sitting in this room together today I haven't, looked at the market, it. Might be 10 years from now I have no idea and nobody, else does the difference is I'm. Willing to say I don't know so. For, someone who may be interested in investing maybe when they go home today there they. Have some cash they want to start investing and, they. Say well the markets the highest it's ever been I'm going to wait for it to dip. What. Advice would you give to those to. Those folks who are waiting for the next dip well. If. We went back to March, of 2009. Which. Was when the market, bottomed and, its collapse. Almost. Every month since then you, could say it could have said the same thing I. Wrote. A post and I want to say 2014. Responding. To a reader who, was asking that exact, same question the market the S&P 500 was. 1600. And change and. This, reader was saying how could I possibly reinvest. How, can I possibly invest. It so nothing would go up for the last five years and, here, it is it's 1,600. And then bottom doubt it I want to say six hundred and something.
And. Where are we today now, I didn't know that at the time because. I didn't know where the market was gonna go but, you just don't know you can't, predict the market and by the way it's become fashionable to. Suggest. The p/e ratios, or Shiller B ratios, give, some insight into this in. That post in. Investors. Called investing, in a Raging Bull it's. In the stock series I just, put excuse, me I. Just. Put a link. To a post. I came across. Very. Well, done where the guy analyzes. Where. The the, various, p/e ratios, were at, the beginning of drops and there's, no predictive. No. Predictive, correlation. There to, be had so you just you just, can't. Know I, also, have a post called why don't like. Dollar. Cost averaging, and. In. Summary. Dollar. Cost averaging, is is the idea of putting in a little bit of money at a time over a period or a period of time the. Problem, with that is, that unless, the market conveniently. Goes down while you're doing it you will have been giving up gains rather than avoiding, losses and. The thing that really bothers me about it is at the end of your period investment. Period where you have finally deployed, all of your money, who's, to say the. Next day isn't, the day the market takes its big plunge, so. You have. $120,000. You wanted to play and you say I'm going to do it over the next 12 months and. I'm gonna put $10,000, a month in. And. I'm gonna avoid that risk you're, not avoiding the risk you're just delaying. The risk until you put that final 10,000, in now, if you get lucky in the market plungers you'll, pat yourself on the back but understand, that's only luck because nobody knows where. The market is going there's, a saying that the best time to have invested. Was. Yesterday. And. The second best time is today. It's. Time in the market is more powerful than tying, to time the market, time. In the market is more powerful, than trying, to time the market well. Said I like that. So. We, have one more question for Jim but for folks who, have live, questions, feel free to line up at the mic we, also have a Dory at go slash Jim, - dory, so. My. Last question before we turn it over to live questions, is there. May be folks in this room who have a new year's resolution to. Get their financial house in order and, they. May be one, of the folks who you. Know have a lot of cash. And checking, or savings or, they just are. So overwhelmed, by the stuff that they don't even know where to begin so what, would you say are the just the key takeaways, they should focus on when they leave this room. Well. Again. I would encourage anybody in that but if you're sitting on on that much cash and I'm assuming that that amount. Of cash represents. A large part of your not worth as, money is relative, but if, you're sitting on, $100,000. As an example and that is a large part of your net worth that. Indicates, that you're not comfortable investing and that's fine so the first thing you should do is educate, yourself and. You, can start with my blog or my book, and. See if that resonates and, go, from there if, you find it doesn't resonate then, there are a lot of other sources. Out there but, educate, yourself first, but. If you're prepared to. And some, of the posts that I referenced, are in the stock series. You, can read about investing, in a Raging, Bull you can read about dollar cost averaging. But. Once you decide to invest in stocks you have to accept the fact that, the market is volatile, the. Market, at some point the market will go down now, whether it goes down 10%, and continues going up 24. Who knows, nobody, knows but. The market, you can count on it being volatile, and at some point it will go down and you have to come to terms with that and you. Have to be absolutely. Sure that, when, that happens, not if but when you. Don't panic because. The only way you lose, is, if you panic and sell at the bottom. Now. Trust. Me when I tell you because I've lived through a few of them when. The market, is taking one of its dives it's, ugly it's, painful, it's scary, it's easy to sit here now and say well I'll stay the course but. It's not so easy to do it when it's happening so. The first thing you need to know is, her first thing you need to resolve it seems to me in your own mind in your own heart and your own gut is. That when, that happens, that. Selling. Is not an, option, it's, just simply, not an option, now. In my world I divide, the. Times, in our life between, wealth, accumulation. And wealth preservation stages. In. A more traditional point, in time that might have been well when you're young and you're working that's your wealth. Building. Stage and then, you get to 60. Or 65, and you retire wealth preservation but. These days people step, in and out of careers on a routine basis, so, you will go from wealth preservation to. Wealth building and back several, times I know I did in my career when.
You're Doing that there, are two ways you can mitigate the. Volatility, of the market and actually use it to your advantage when. You, were in the wealth building, stage. You. Have earned income and, if you're aiming, to be financially, independent a, large portion, a portion, of that income, is being diverted into investments, so. That means on a regular, basis, you are putting substantial. Amounts of your income into the market that, by. Extension, means when the market drops you're getting to buy things on sale now. You're not gonna try to time this because we know we can't do that well, what it does mean is that when the market drops you. Should celebrate. Because oh I'm. Getting to buy when I put that extra thousand, dollars or ten thousand or whatever it is in each month I'm getting. More shares, in, my VTS ax than, I would have gotten otherwise the. Volatility, works to your advantage in, that fashion so. You sleep easily at night because you don't care what mr. markets, gonna do now. When. You move to the wealth preservation stage. You, no longer have that income, stream to smooth the ride and that, in my world is when you add bonds, and. Bonds. Become like ballast, in your sailing ship where. Your where your flow, of income was before, now. You're gonna replace that with the ballast of bonds, and that. Means that, when the market, plunges, the stocks plunge, and. You reallocate. To stay, at whatever allocation. You've chosen you'll. Be selling bonds which you've gone up in as a percentage, of your portfolio, let's. Say as I do at the moment you have 30% bonds. 70%. Stocks. Well. When stocks plummet, that percentage, of bonds is gonna go up you, sell some of those bonds and you're buying those stocks at, lower prices, just. Like your. Cash flow was allowing you to do it before when. Stocks go back up again and suddenly. That percentage, of stocks starts. To our way or, you want it to be it gets above 70, you start selling some of those off to replenish your bonds with, those two strategies you, no longer have to care, whether. Market, is going up or down, because, you know that over time the, market is going to go up and you've, eliminated the, concerns with volatility, so. I would embrace those, two concepts. Understand. That you don't, ever, sell. In a panic just because it went down that, is simply not an option that you will ever consider, and then. Depending, on which stage you're in either. Use bonds, or use cash flow to smooth the right. We're. Ready to go to some, live questions. Thank. You for coming so. I just had two questions about the future so number one. You. You are addressing the wrong guest. Earlier. In, the talk you mentioned a very simple sentence what. Do you do with your money put, it in VTS, ax more. Similar fund so, that one sentence it seems like you can do that in a matter of a few, clicks, individual. So, my.
Question Is, you. Know about. The, financial advisors, system, the the kind of the larger system where you're calling, someone on the phone and having them essentially, do the exact same thing my. Question is how do you see that changing as, the, world becomes more financially, educated, and. Then as a corollary, to that. The. Broader, system. If everyone, kind, of buys. Into this indexing, idea, are. There, any systemic, risk to be you know the entire world investing. In an index. Okay. So. With. Financial, advisors. I. Think. In fairness to financial, advisors, they. Can be useful in a wide range of. Subjects. Other than making your investment, choices for you but. I have one, of the the chapters, in my book and one of the posts in the stock series is why I don't like investment, advisors because. If you embrace the simplicity, that. That. I suggest. Then. From. At least an investment, point of view, as. You well, point out why. Would you need an advisor to do what you can do in a handful, of clicks, and. When. I gave my talking, at Chautauqua, when I was preferring, that talk for last year I took. A little different approach than they had taken before, and I was, thinking about, the. Content of my book and the content, of my blog and they're trying to boil it down into, one line or, one phrase and really what I came up with is my, advice is by. VTS ax, buy, as much as you can by. Whenever buy it whenever you can and hold it forever and it's really that simple, and as you say it's, a matter of a handful, of clicks, the. Second question and this is this is one that's that's. In, the financial, community a fair amount is well, what if everybody embraces indexing. What's. That going to do to markets, and the, problem that suggested, is that, indexing. Simply buys every, stock where, stock pickers, whether they're individuals, or fund, managers. They're. The ones who are trying to evaluate companies. And thereby creating. A trading. Mechanism that, that, looks, as some sort of objective. Objective. Parameters and, comes, up with the values, and. Is. There a danger to that going away as everybody, embraces, indexing. I'm. Not concerned about it I don't know if there's a danger or not because it's hypothetical, I'm not concerned about it though because indexing. I think at the moment accounts. For. 20-25. Percent of the market. It. Is growing more, people are embracing the idea but. I think as it if, it continues, to grow what, I would. What. I think will happen is is, that sliver, of. Active, management becomes, narrower, and more and, more people are indexing, the, opportunity. To actually outperform. The index will start to increase. And. As that happens, you'll have some of those active managers. Posting. Success, stories, and that'll begin to tilt it the other direction, and. I think the other reason I'm not concerned about indexing, taking over the world is because. As I mentioned earlier. And and answering, one of your questions. It. Is counterintuitive. That. It is so powerful and, we. It's, part of human nature to. Want to think that you can out for its, it's. Part of human nature to want to best, of the benchmark, I still, have the disease every night, again I'm still trying to to, pick. Stocks so. I think that. Aspect, of human nature is is, also. Gonna keep it indexing. From ever taking over the world does that help it all yes, thank you my, pleasure thank you. Thank. You. But, do you see any. Advantage to trying to diversify away, from, the sp500. And think, about either. Like global markets or bonds, or commodities. Well. Well, bonds, as I mentioned I think you. Add bonds, depending, on who had what point in your life you are as ballast, for. Your investment, ship and I don't know than that I don't see, a role for bonds, what's. Interesting to me about that question, is, the S&P 500 as, the name suggests owns. Basically. The 500, largest American. Companies. VTS. Ax which is a total stock market index, fund owns, and it, varies but about thirty six hundred companies. When. I first started investing, and. It. Was before such things existed, or they were just coming on stream, the. Idea being diversified was. Because, you, were most the vast majority people were picking individual, stocks they. Had to because that was available there were some mutual funds out there, but. The advice given to individual, investors then was you know you want to pick. Seven. Eight nine maybe, ten industries, and, inside. Those industries, you want to pick two or three companies and, then. You have a diversified, portfolio, because. You really can't, physically. And, mentally. Follow, more, than 20 25, maybe the outside 30 companies, and that.
Was Considered, to be a well diversified, portfolio. So, when somebody says to me do I need to diversify beyond. Beyond, 500. Companies. Mm, yeah. I think you're there I think, you're there now the international, aspect, of it I'm a little at odds with the rest of the world or most of the rest of the world the. Advice that most people give is that in addition to buying the, S&P 500, or VTS ax which. Are US companies, you. Need to buy funds that that put you into, the. Rest of the world internationally. From other countries. Vanguard itself. Gives that advice I. Don't. Buy it at least not, yet the, u.s. is still very dominant, in the world economy it will continue, to be dominant for the foreseeable, future but more, importantly, those, companies, in, the index in the S&P. 500. Especially. In the the top 100, of those companies Google. Is an example. Our. International, companies by definition so. If you're investing in the S&P 500 and, of course the S&P 500 is. 80%. Of VTS, ax you. By definition are, invested. In the world. Before. We take our next live question, I want to go to the top voted questions on, the Dory so. The question is from, Stephanie here in Chicago, she said, a lot of Googlers receive a significant, portion of compensation. In Google stock, oftentimes. There are strong camps. Who never sell a share or those who. Sell it all and diversify, immediately, what, are your thoughts on holding, the Google shares since we're all extremely invested in the success of Google well. That's a politically, loaded question. Somehow. I think I should say old, Google. But. That's actually not my opinion and, then and that has nothing to do with by the way Google, stock or, or. What. I see is the future of Google, the. Problem. I have is is in, looking, at the question. When. She says we're all extremely invested in the SEC the success of Google that's a great thing. But. That's also an emotional thing and I, think you need to separate, your emotions from your investing. So. You, all want to see Google go, forward and succeed and prosper it, is your, career it. Rates, your paychecks, and. Therein, lies the problem because. When, you were also invested, in Google you have more and more eggs, in that one, basket. I. Don't. Know what the future of Google is and, nobody. Really does everybody, in this room presumably, and in the organization. Is striving, to make that, future. Wonderful. And, and, profitable, going. On indefinitely, and have done a wonderful job so, far but. The world is filled with people or trying to eat your lunch I. Think. Back to General Motors so when I was a kid. 1960s. General, Motors who, was, kind. Of had, a rough go of it in most, of your lifetimes, in the, 1960s. The federal government, was on the verge of breaking up General, Motors. Because. Nobody. Else could compete with them General. Motors was so dominant, that. The government, was concerned that no, other car. Company, would be able to compete and they, would have to step in and they were specifically, talking. About splitting, off the chevrolet division, which was just, huge and dominant, well, of course history, tells us two things it tells us one the government chose not to do that and two. That. They didn't need to worry. Because. The world was filled with places with. Other. Companies, waiting. To eat General, Motors lunch, the moment, they, slipped up or. Simply. The moment the competitor, figured out a better way to do it so you, have to be very careful, in putting all of your eggs into, the same basket, where, you work. Going. Back to the question the gentleman asked earlier about the sp500, I would. Rather own the S&P 500.
Or. At least have the bulk of my my, net worth in the S&P 500 because, now I don't have to guess who's gonna win. Because. The losers, fall off. And the, winners go on prosper, one of the beautiful things about the index is what I call soft being it is self cleansing and by. That what I mean is that. If. You, look at any. Specific. Company, in that index. You. Can only lose a hundred percent of that company. But. Any other company, that index and Google is a wonderful example, of this over the last few decades can. Grow exponentially, there, is almost no limit to how far it can grow so. That's kind of a winning combination. The losers fall off and they don't actually go to a hundred percent before, they get delisted, but, the losers, drift away and you, are continually, getting new blood added to it as new companies, come up and. You get to benefit, from those who succeed, and all, those companies are filled with people who, are working hard to make sure that their company succeeds, this investor I don't have to figure out who the winner is gonna be because. I own the mob. And. We have time for one more question. So. I was gonna ask two but. I, think. They're quick the. Retirement, retirement, day funds thoughts, on those, target. Retirement date funds so, automatically, adjusting, allocations, as you're close to retirement, thoughts. On that or do you think you should just do allocation, yourself. Through the, ferries of bonds, and Vanguard. Funds on, your own and. Then the, second was just really about and what scenarios would you find, it helpful to use a financial advisor I find doing it on your own is great but at some point you want some kind of reassurance, you're doing it well enough, for investment, picking but you have to go to someone to get insurance. Okay. So a. Target, retirement fund - just, to kind of quickly explain, what that is there are mutual funds out there Vanguard. Has them which, are called target, date retirement, funds or target retirement, funds and the idea is, that. In. Its it's, what's. Called a fund of funds which means it is a mutual fund that, holds a bunch of other funds inside, it usually five, or six different funds. And. With a target retirement, fund you pick a retirement. Date and. You buy the fund and as, the gentleman just indicated, you can hold it forever and, automatically. The. Closer you get to that retirement, date the, more conservative. The, fund allocation, will become that, is to say typically. The more bonds, they will add so. The idea is you never have to adjust your allocation, as.
You Get to it, now. You can adjust so. Some people say well gee I might want to be more aggressive or, less aggressive, than the retirement. Fund. Well, you can adjust that by if you want to be more aggressive, just, pick one with. A retirement date that's actually further out than your own, anticipated. In retirement if, you want to be more conservative, you, can just bring that retirement date in closer. Than. You are actually planning to retire. And. The idea is that you never have to do anything again. It. Is not a bad approach you really want to invest in a way that is completely, hands-off, or you really never have to think about it this, is not a bad way to go and in fact I have a post on this and the stock series, and, I think it's a chapter in the book I'm not sure if I put it in the book or not but, there's a post in the stock series where I talk about these things it's not a bad way to go. What. I suggest, to people is that if you can read through my stock series, and you're, comfortable with what you read or you read my blog or. My book rather and you're comfortable with what you read it, is less expensive, to, simply. Do the allocation yourself. And it's. Not very hard it doesn't take much time and that's the way I would encourage. You to go but, on the other hand if you read through the stock series or, you start reading through and you say you know what I, just really, don't wanna. Just, this, is just not my thing. And. There are topics by the way in my life that, I would have that reaction to then, just skip down to the post about tired tired retirement. Funds and and you, can be done and you won't, it. Won't be a bad thing to do. And. The second thing real quickly in terms of financial, advisors. Again I don't think you need them if you follow an approach like mine which is simple. Investing, you, don't need them for that but. There are other aspects. Where where. They can be useful, the problem with financial advisors is while there are good ones. There are a lot we're not and they're not for a couple of reasons one. Is simply they're not that competent, or, the other a, little more insidious is that their.
Interests. Are not necessarily. Aligned with what's best for you so. If. You read my my post on why I don't like Investment, Advisers one of the conclusions, I come to is by the time you know enough to. Choose. An investment, advisor why'd wisely. Had. You invested that time learning in yourself you would know enough to do it on your own, thank. You thank. You we're out of time thanks for coming to Google Chicago, it's been a pleasure having it it's been a pleasure being here. You.
2018-02-28 02:53
Great talk. Thanks for sharing.
can some sum this up?
Do not try to pick individual stocks. Just pick a low cost S&P 500 Index fund like Vanguard's VTSAX.
Thank you, Jim! You have given us the best advice. Been following your blog for years. Have taken your advice and it works! Thank you!
One of the most intelligent people who doesn't have an agenda. This is the advice he wanted to give his own daughter (whom he wants nothing but the best for in life), and the message simply spread. The reason his message exploded into a world-wide audience is because it is true. He wasn't looking to gain anything out of it for himself, but such things turn out this way.
90% of his advice is excellent, but just cant get his logic in the rent vs buy.. long term as long as you buy sensibly and not buy something you cant afford... buying is always the best idea and im not from the US.. imagine having to pay rent in your old age and being kicked out because the landlord wants his family member in there instead? just dont get it - you also have an asset at the end of it all to pass on to your family or you can sell it and downsize if you wish... renting is expensive most the time and you get less house for your money... sorry just dont get that part
JE-You are missing the entire point. Put simply, your money is better invested in a low cost index fund than a house. Just read the articles and run your own numbers for your situation.
joe5700 who needs to replace a roof every 10 years ? Maybe if you bought a really old house maybe, and the equity comes from the value of the house rising... Equity on average is quite high in my country and at low interest rate debt at the moment it makes sense to buy The longer the time period the more sense it makes to buy...which contradicts his good stocks advice
JE-Most of your payment for the first 10 years goes into interest, taxes and insurance. Also, you have 10 years of maintenance. You can easily spend 2% of your home's value in annual maintenance. If you rent you don't have to replace the furnace, roof, water heater, remodel etc etc. Keep in mind I am a current home owner. Did you read those articles? If you did, you wouldn't have replied. :) Another good article: http://affordanything.com/2015/11/24/is-renting-better-than-buying-should-i-rent-or-buy/
joe5700 hi Joe, I don't see it, you gain equity over 10 year periods easily on property and after 10 years in renting you have nothing
JE, he stated that renting was better if you are on the path to financial independence. Buying a home sucks a lot of money out of your pocket with your down payment, closing costs etc. etc. Think how that money would grow in 20 years if you put it into an index fund and rented instead... Read his blog post: http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/ Better yet, read this: https://www.millennial-revolution.com/rent/renting-will-make-you-rich/ Now if you are lucky and find your actual forever home and will never, ever, ever move, then yes buying make 100% perfect sense.
Note - he admits, renting vs buying is a lifestyle decision, not an investment decision. As long as you acknowledge that buying may cost you more than renting over a period of time, but you definitely want the benefits (in your example not getting kicked out on the street by the landlord in your old age), then he is not against buying. This will allow one to go into home ownership with his/her eyes wide open, knowing this luxury of owning your home may very well cost you more than renting in the long run.
Bitcoin
I really want to compliment the moderator- absolutely fantastic job and fantastic questions.
I agree 100% with your view on home ownership. I actually have a theory that GOV and industry colluded on the invention of the 30-year mortgage. After all, when your home is on the line....you will show up to work, earn an income and pay taxes for the next 30-years.
Nice not to have to go to Chautauqua to hear you speak. Love the path.
Thank you! I thoroughly enjoyed this gift of knowledge and wisdom!
His method is the best way to invest and his book and blog are the best information on investing I've come across in my life.
It pretty good conservative advice, bit I have done a lot better with the data I have learned from Fool.com.
Richard Carey 9
To combine “Security” and “Freedom” is increasingly at odds... our tech-cultures[s] are investing power into so-called “Security” at the expense ... of “Freedom”...
So if he "wasted a couple of decades" trying to figure out to make more, and was unsuccessful, we all should believe that it is impossible? There are lots of data out there and several strategies are earning 18% per year (the past 10 years) while SP500 is averaging 7%. This advice is useless and suited the best for people who are incapable to efffectively manage their portfolio.
Wow, it was not my intention to provoke some emotional responses :-). I even see some attempts to insult me (Katie and ACR). The advice in this video was aimed at the general population and I should have been more sensitive commenting, my apology. I would like to answer Brad Wearthebie's questions. 1. I am getting the data from the AAII Journal, volume XL, No.1, January 2018 p.9. S&P 500 average annual price gain, 10 years 6%, S&P 500 growth (w/divs) 10.1%, S&P 500 value (w/divs) 6.6%. Data as of 11/30/2017. AAII's Stock Investor Pro/Thomson Reuters. 2. What are the strategies? O'Neal's CAN SLIM 17.3% (10 year average), 38.9% (5 year average) - I use mostly this Stock Market Winners 18% Top 30 Up 18.8% Driehouse 16.9% Est Rev: Top 30 Up 20.5% Price-to-Free-Cash Flow 18.1% 3. How much work? This is my hobby and I operate with the nice chunk of money. I spend about 4-5 hours a week which includes reading prospectus, charts, placing orders, etc. I enjoy this so I consider this to be a good use of my time. I have been trading for over 12 years. 4. Risk involved? Volatility Index 1.89, Draw-down 38.5% I trade on 3R with stops loss 7% in the clear uptrend market (for the longer term positions). For the swing trades, I do 2R and 3% stop loss. I do not short. My win rate is just under 50%. I will answer some Katie's questions. I am not a scammer. This YouTube video came as suggested; I am open minded and like to hear smart people. When it comes to 401K, I do not trade in that account for obvious reasons. Thank you for your time.
Jim; If you are an average person and not a stockbroker; It is hard to beat the game consistently over years. I have lost money trying to make money out of stocks and had more headaches. I have made more than 18 %, but also lost 50%. Jim was a stock trader for living he is speaking from experience to keep it simple.
Katie Kat He doesn’t know. It’s as simple as that. Stick with the S&P folks.
jimbush80528 please, please show me these “several” “strategies” (notice he does not call them investments) that are earning 18% year over year for the last 10 year.....lol. I am very sure that you do not know what you are talking about. And the fact that you called them “strategies” is scary in itself. If it sounds to good to be true it probably is. I am sure you are either extremely naive and will learn soon enough how dumb you are or you are running a scam. There is absolutely no strategies out there on the up and up guaranteeing you that much money. If you are not a scammer yourself then you really need to get out of whatever mess your got yourself into. Btw why are you watching this? Exactly!!!!!
Where are these several strategies that are earning 18% year over year? It’s very easy to see them after the year is already done with and they don’t go year after year so you would have to keep hopping and successfully guessing which fund was going to be the big winner that year. Also it is very expensive to hop in and out of these funds unless they are tied into a 401K. And if you are talking about a 401k then your fund choices are limited by what kind of deal your company made and an 18% might not even be an option. Secondly, this is not advice solely for retirement accounts in which transferring from fund to fund is affordable. If your managing your own accounts then your need more then just retirement accounts if you want to retire or be financially free prior to being old. Sounds like to me that you don’t know really what you are talking about Mr, Jimbush80528. You will learn the hard way.
he addressed that. after 30 years less than 1% are still averaging more than the s&p. never said impossible he just quote the data you're talking about.
1. Where are you getting "SP500 is averaging 7%"? Are you rounding down & ignoring dividends? 2. For the last 10 years, the S&P 500 has returned 9.6% (CAGR w/ dividends reinvested) (https://dqydj.com/sp-500-return-calculator/) 3. What are these "strategies [that] are earning 18% per year (the past 10 years)"? How much extra work and/or risk do they involve, compared to using an S&P 500 index fund?
Thanks
Great man with a great message - and he looks like my Uncle. Thanks for all your work Jim.
It's nice to have a lot of money, but you know, you don't want to keep it around forever. I prefer buying things. Otherwise, it's a little like saving sex for your old age.
Financial Independence isn't about living 100% for tomorrow....in fact just the opposite. The premise would be to work hard, live frugal, save a huge (75%) of your income and invest in VTSAX (index fund). Do that for 10 or 15 years and and you can live for yourself the rest of your life....free from the need to maintain a 9-5 job (if you want). When you "buy things", you commit yourself to a lifetime of work in order to pay for those "things".
True, Carl.
It's also nice to have the freedom to live your life on your own terms. That's really what it's all about.
Great video...
After the first 2 minutes I like this guy already
interesting.
We're pooling (putting together lots of money) to get into private token sales/presales of the big new ones. Haven't seen much of them go down atm... This will be the year of blockchain technology mass-adoption, so fasten seatbelts :)
A high risk investment. Might go up, might go to zero. Maybe a basket of cryptos in order to reduce the risk?
Well Put, The Pig.
JE- man u must read barefoot invester.its abalabel on audible
if you pay off your home by retirement, you will not have the landlord raising your rent. that is a compelling reason to purchase.
Just want to give some feedback to the interviewer here. Hopefully she reads this or someone passes it on. No fingers pointed as its such a hard job with such an eloquent mind/communicator here. He was literally leaving her with hooks and openings at the end of each topic he discussed, almost begging her to follow up and to probe further. Yet she just stuck to that piece of paper and at a few different points during the conversation wasn't even listening to what he was REALLY trying to say.... Guys like this are gold mines of information and sometimes too smart to even realize how well they communicate.
Excellent talk.love it
Jim is the real deal!
Never ever go with one persons perspective on anything, 'read my blog', 'read my book', 'so simple'. Read many different opinions and then form your own based on what makes sense to you. Many of us watching this will live to be 100+ years old thanks to modern medicine and healthy lifestyles so we all have to have a long term view about money (which is different from fiat currency, if you don't know the difference you have much to learn). Normalcy bias (the stock market will continue to rise forever, faith in the U.S. dollar will continue on forever, this crypto stuff seems exciting) is very dangerous. Like Collins said the people in the audience and watching this have an above average intellect. Perhaps one reason one of us might want to pick their stocks is because they have a conscious about not financially supporting certain companies or countries for moral or ethical reasons -- for example I will never allow my money to invest in companies affiliated with apartheid israel as part of a boycott, divest, sanction campaign. For others they will want to make sure their money doesn't fund the gun industry, oil industry, fast food, companies with poor animal rights records, etc. And when JL heard the comment about people leaving large sums of money in checking and savings accounts that should have been a huge opportunity for him to discuss the harm caused by inflation and near zero interest rates for 7+ years (put that money to work or lock its value in real assets like physical precious metals for example).
Time in market without trading in and out is the way to go. ... July 8, 1932, DJIA was at 41 ..... today it is 24,884
Jim is the real deal! I wholeheartedly agree with everything Jim said except the part about Homeownership. If you can get a house below your means and stay there forever, you will make out at the end. The goal should be to pay off the mortgage by the time you retire. You can move and cash out at that point or stay in a paid for home. My net worth would be $500K less if I continued to rent.
The fact the most early retirees will be depending on Obamacare for their health care makes the entire rent vs own topic mute. You will need to have a paid off house in order to be successful at manipulating your income in order to game the system and get the most subsidies possible. If you don’t understand this yet, don’t worry, you will. ;)
Good luck with income manipulation to get subsidies for Obamacare if you don’t have a paid off house.
Not if you buy the right house. My net worth would be $500K less if I continued to rent. The key is to buy an affordable house if you can. Why make a Landlord rich.
stephen geraci It all depends on what is your definition of "easy." :-)
Oh sure it's so easy to beat the market! I have a bridge to sell you too!
just watch the movie fight club. that is all one needs
You need enough money to buy cat food for dinner in your old age.
"The Simple Path to Wealth" Save money, live simply and spend less that you earn.
Warren Buffett said, "You don't have to be very smart to pick extraordinarily Great Stocks. Just buy stocks within a very narrow frame of focus; and stick to that." 20 Well picked stocks is enough to change your life to the financial good.
A house isn't a terrible investment if you can get it heavily discounted. Buy a Tax Deed house from someone whose about to lose their home from a Tax Deed or Property Tax that they can't pay. You could get a house for $5,000.00 to $10,000.00 Dollars. Pay that plus the back taxes after you've done a Title Search for no more encumbrances on the house. And you're scott free with potentially with a ton of Equity.
no idea what theyre talking about but interesting
What happens to your money when the "losing" companies fall off the index fund? Do those shares get sold off and re-allocated?
On indexing, I interpret the strategy that one should own broad index funds, and NOT targeted indexes (such as sectors, factors, low vol, equal-weight, etc). I don't know a single person besides myself, who is in my network/friends/family, who takes hours out of each day to do research on businesses and invest on their own. I don't expect them to. I invest on my own, and have never lost money over time, because I don't "pick stocks," as they say. What I mean by that is that I don't buy flavor of the week businesses, take big risks, or trade in and out. I can count on one hand the amount of companies that I have ever sold my shares of. I have a some positions in the red on paper, but they are paying me dividends and the companies are doing very well. The rest have more than made up for it. The thing about benchmarking to the index fund is that you need to do an immense amount of work in order to figure how you compare. You need to create a mock-purchase of VOO (or spy or vti) for every single transaction you made in your own account, along with dividends reinvested, and compare those internal rates of return. Just because the 500 index returned 20% in 2017, doesn't mean your fund returned 20%, because you likely added to that account throughout the year, buying at higher and higher prices. Your return will be much lower. The only thing that really matters to me at the moment is that my portfolio produces $1,500 or so in dividends annually at today's dividend rates. I buy every month, so this figure will rise substantially. It's all that matters.
Who does he sound like ?
The short answer is yes. The fund simply rebalances itself daily to mirror the index. Once a company falls off, it is replaced with another. There are now a ton of indexes, and they are not all market-cap weighted, so I am not sure what sort of turnover system there is for those.
Excellent talk. Answered all questions in the Q&A with detail. Anyone looking for simple sound advice should listen to this. Great job JL Collins.
you van have both boof
Very good and wise advice. Warren Buffet did say that the best advice he gave to his kids was to invest in an index fund.
jimbush80528: Do the following returns include trading costs and taxes? "2. What are the strategies? O'Neal's CAN SLIM 17.3% (10 year average), 38.9% (5 year average) - I use mostly this Stock Market Winners 18% Top 30 Up 18.8% Driehouse 16.9% Est Rev: Top 30 Up 20.5% Price-to-Free-Cash Flow 18.1%"
I liked the interview - great questions, great answers, sound advice. On one thing I beg to differ: The index funds mentioned are not suited for an early retirement because they don't pay a dividend. No dividends mean no compounding, lots of time wasted during market downturns and that you have to touch your prinicipal when you want to withdraw your 4%. I also started to write a blog on this subject, which you can find here: http://www.jmc-coaching.info Thank you for the interfview!
7
Jeffrey Rollo 9
Particle Config. Chieng Coin. its the future
Traditionally the market outperforms professional fund managers so what hope do the rest of us have.
fat f*ck ... Vanguard pimp?
Wait a sec? If you can buy a house in cash wtf would you pay rent and not garner equity? Not everybody takes a mortgage. Buy a place to live with low property tax and utilities? I bought a home for myself at 42 K. A cheap apt. would be 450 per month plus utilities. My property tax and utilities are less than 3 K annually. Yeah, you're right, you'd be better off not working ... it's a conspiracy.
Not sure what is sarcasm in your response and what isn't, it doesn't come across clearly without voice inflection. However, what I agree with is his opinion that if your goal is financial independence (i.e. living off the "4% rule" from your investments and not being tied to a W2 job to afford your life), then home ownership is not the investment vehicle to get you there the quickest (if at all). As he mentioned, unless you get lucky and hit the market just right, most homes simply don't appreciate in value as much as other investments (i.e. VTSAX) over the same given time frame (30-years perhaps). In addition, home ownership has recurrent costs (maintenance and taxes), is illiquid and has high transaction cost (Realtor fees, transfer taxes, sales taxes). I am not against home ownership....in fact, I own a home, but it is purely a life-style choice for me and not an investment. I very much believe that in most areas of the country, homes are overpriced and it is primarily due to the GOV backed 30-year mortgages and low interest rates. Because people buy a house based on what the monthly payment will be (as opposed to the selling price), the terms (duration and interest) of the loan dictate the selling price based on the "affordability" of the monthly payment. If the GOV would get out of the mortgage game and stop holding interest rates so low, the price of homes would fall and return to a more reasonable level.
his voice is so smooth
He did say its a lifestyle choice not an investment.; and do the numbers he didn't say you shouldn't buy one. I wish I did that i wasted a lot of time and money myself indeed.(huge sigh)
I agree! I love her laid back style and asked great question and actually let him answer. Many moderator's don't have the skill she does. She did great!
So true Carl. I could care less about a fancy new car or a mansion, but freedom to quit a job I hate and working with people I don't like is what always kept me on this path and the only way that can be done is save as much as possible, so you can live off that money for the rest of your natural life.
JL..."The Simple Path to Health" - vegetables...just a recommendation.
index funds.... just do it.
https://www.youtube.com/watch?v=rJjKP8vYjpQ The FU position: "own your house, have a couple bucks in the bank, don't drink."
Oh, you right. My bad.
Who said VTSAX does not pay any dividends?? Look at the Dividends schedule here: https://personal.vanguard.com/us/funds/distributions?FundId=0585&FundIntExt=INT&funds_disable_redirect=true
I wonder why is everyone spreading the word like they know all the secrets to it.
Watcher505 he sounds a bit like Pacha (John Goodman) in emperor's new groove
This is true, but luck was on my side. In 1993 when I bought my home, the real estate market was really bad. A couple of years later, it really started to go up. My rent at the time was $600 and my mortgage was $725. I'm glad I own the place free and clear. I paid $145,000 in 1993, today I can easily get $500K.
That all depends on the math Stephen - in your case perhaps it's true ( if renting was cheaper than home ownership - and you invested the difference - your gap might not be $500,000 )
Jim are you telling me you have made 18% on your money compounding annually for the last 10 years?
With respect to owning a home or condo he is speaking from a non-cyclical market point of view. For people in Coastal California markets, infill Texas locations over this last cycle, Denver, Portland, and other growing tech economies, Florida and the Southeast today; the wealth created with average leverage has been and can be huge.
stephen geraci a moderator that has the ability to not interrupt someone is a very impressive skill.
I think that the secret to Warren Buffett is that he got in early and is very talented at predicting future trends .. even with that it took 30 years to build that portfolio . People starting out late in the game may have to do some speculating and know that 95% of the OTCs are going to fail . he just happened to pick a few that succeeded ..that took a lot of insite . and talent . just how it is .. the average person might be able to generate a modest retirement income through this method .. It is one pathway for sure ..
i could copy warren buffets portfolio today and it would do absolutely nothing for me
but i think that if i actively got into investing .. i would like to manage my own portfolio .. simply because i enjoy the learning experience .. not because i think i could ever beat Warren Buffet .. no way ..
Jay G Mr. Buffet also says the average investor should simply be in index funds.
I agree, not many can do it well.
The Pig Will Fly I agree and I wish I had the correct philosophy when I was younger. Now at 46 I have just enough time to make sure my retirement is secure.....I might be able to retire a few years earlier than normal but nothing like it would have been if I had started in my 20's. Luckily for me my 401K is a decent size for my age, but my personal savings (investments really) should be way higher than the pittance they are now.
If you want to retire early, I would look into it...
JE- Here's the point: -When you rent, you pay: 1) The landlord. If anything goes wrong, or if you move and the place sits empty--it's the landlord's problem, not yours. -When you buy a house, you pay: 1) property taxes 2) the expense (and time/trouble) of fixing or replacing anything that goes wrong 3) maintenance and upkeep, including something as simple as mowing the lawn, which costs time and gasoline, plus the cost of a mower 4) the cost of insurance against fire, flood, vandalism, etc., PLUS the risk that something will happen to your home that the insurance company will not pay 5) since many people cannot afford the entire cost of a home, they usually borrow money and pay interest on top of the cost of the house itself 6) paying the fees of the real estate agent, and/or closing costs 7) the risk that something out of your control will scuttle the value of your home (for example, if somebody builds an ugly cell phone tower next door, or a noisy highway is installed nearby, or a street gang moves into the neighborhood) 8) the opportunity cost of dropping everything and getting a higher-paying job in a different part of the country/world 9) the opportunity cost of having your money tied up in a house. Suppose I give you $500,000. You could do 2 things with that money: buy a $500,000 house, or allot $50,000 for 10 years' worth of rent and invest the remaining $450,000 in a low-cost index fund. Over 10 years, you can expect that $450,000 investment to double, to roughly $900,000. Do you expect the house to be worth $900,000 in 10 years? I bet it won't be... If this isn't clear, read this blog post, which spells out the entire argument pretty clearly: http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/ It doesn't mean buying a house is ALWAYS WRONG, but it means that there are limitations along with the benefits of owning a house.
+jimbush80528 "Past performance is no guarantee of future returns." While it's entirely possible that some strategies have taken advantage of particular market conditions to beat the S&P 500 over the past several years, the market gains since the 2009 crash have been absolutely incredible! The strategies you mentioned may do well when the market is rising at a nice clip. But what will happen when the market drops? I suspect the tradeoff for the good performance in the 2010s is catastrophic failure when--not IF, but WHEN--market conditions change. To use an analogy, such strategies are akin to a high-revving race car engine--it may make more power than its competitors, but also has a higher risk of blowing up as the track gets hotter. Moreover, the 18% returns you cite are UNBELIEVABLY high. If it were a) legitimate/legal, and b) sustainable indefinitely, the secret would come out and everybody would be doing it. If somebody beats the market by 0.5% consistently, it's reasonable to conclude that this manager is skilled at exploiting market inefficiencies. If somebody beats the market by 10% consistently, your guard should be up. The history of investing is littered with extraordinary returns that ended up being illegitimate (for example, see https://en.wikipedia.org/wiki/Charles_Ponzi). With what you're talking about here, I would stake a sizable wager that costs like management fees and capital gains taxes are not included, which would narrow the gap considerably vs. a buy-and-hold indexing approach. Nobody here is saying that beating the market is impossible. What Jim Collins is saying is that beating the market CONSISTENTLY over a LONG PERIOD OF TIME across DIFFERENT MARKET CONDITIONS is vanishingly difficult. Numerous studies by academics with no vested interests have shown that such consistent high performance is incredibly rare. INCREDIBLY rare. There is one key question that Bogleheads--like Jim Collins in this video--want to know about any strategy: "Is it sustainable?" One study by the S&P Dow Jones Indices (summarized by the New York Times at https://www.nytimes.com/2014/07/20/your-money/who-routinely-trounces-the-stock-market-try-2-out-of-2862-funds.html?_r=0) showed that 2 out of 2862 professionally-managed funds stayed in the top 25% of performers for 5 straight years from 2010-2014. That's ~0.07%. Not 7%, not 1%, not even 0.1%. 0.07%. That's 7 out of 10,000. There are two possibilities here. One: Less than a tenth of a percent of financial experts are skilled enough to consistently beat their competitors. Two. Less than a tenth of a percent of financial experts got lucky. Remember the stock-picking cat? https://www.forbes.com/sites/frederickallen/2013/01/15/cat-beats-professionals-at-stock-picking/#39a4ed6d621a Another analogy: if you played blackjack 10,000 times and hit a 'natural' 7 times, would you conclude that you're a skilled blackjack player? Or would you suppose that you just got lucky on a very small proportion of your games? Jim Collins, along with the people in this thread (including me: http://froogalstoodent.blogspot.com/2017/04/should-you-trust-stock-market-pt-ii.html) argue that #2 is the case, and that it is wise to avoid the headaches of trying to pick the winners. (Not to mention that buy-and-hold indexing has been shown to be effective in the long run of 20, 30, or 40 years, across a variety of different market and legal conditions...)
I've been following JL Collins for years and happy to see that he was invited to a talk at Google.
basically all he is saying "pay for beta" google it. YOU'RE WELCOME. i saved you 57 minutes and 44 seconds of precious life
you do NOT have to be a vet in order to get a VA home loan (no mortgage) You just have to KNOW a trustworthy vet, that's all.
if you put money into stocks that you would not blow at a casino, you're a fool, cause that's all the stock market IS, a casino for taking your money. You have no control whatsoever, over the market. A million fools like you, all acting in concert, would have no effect on the market. it's too big, it's too corrupt. Stick to what you CAN control, and that's low cost real estate. You can make 4k per week with a boarding house and live there. You'll HAVE to live there, and enter the rental rooms every day or inspection, btw, and be a REAL hardass. You coudn't rent out that house to a single tenant for more than $800 a month. So why settle for making 1/4 as much money, on your investment, hmm?
once you have 3 such boarding houses, you'll be able to afford paying some property management company to oversee your live-in building managers, and you can then go live anywhere you want, on your clear 50k a year. You can live like a KiNG on 50k a year, in many very nice countries, like Portugal, Thailand, Chile, Czech Republic, Nicaraugua, Panama,
you can save money on a minimum wage. You just have to get real about how you live. eat supper at the SA mission, eat lunch at the church, live in an old minivan, get around on a bicycle, sell your plasma, do craigslist jobs. If you do this, you'll discover that on a 15k a year minimum wage job, you can bank 7k a year. In 4 years, you can buy a house in OK (30k or less, I'm not kidding) , using some vets VA home loan (no down payment required) rent out 10 very small rooms for $100 a week each (cash) Do the math. You can live quite well on that cashflow.
it's really not that simple. first of all, $145,000 from 1993 adjusted for inflation is $250,000 in 2018. You've also had expenses you never would have paid as a renter, and adjusting them for inflation they really add up. property taxes, mortgage insurance, property insurance, interest, maintenance, etc. Additionally, when you sell, plan to lose at least 7% on commission and closing costs, and probably paying capital gains on whatever profit is left. you'll be extremely lucky to net $100,000 over the last 25 years, which is basically nothing.
IncognitoTorpedo crypto is the future
I first heard heard him on the Mad Fientist podcast and I also think he's worth listening to.
It's very expensive to go to.
Mateo, and if he rented for the same amount of time he would walk away with a fat zero, majority of people who rent and may pay less never invest the difference, its blown away on garbage
when you rent all costs are in the rent, dont think you're getting passed property taxes by renting, its already in your monthly rent
the amount of IQ in that room... no one thought to ask JL to speak louder? Jeez such great info please have the speakers talk louder google :)
That's also his advice to his wife for when he dies. Not that she'll run out of money.
Not bitcoin... BITCONNNNNNECTTTT!
Bitcoin, yes... five years ago.
I've rented and I've owned homes. Owning a home with a cheap mortgage wins every time, in my opinion. Renting means making someone else rich.
You forgot the first rule of Fight Club...
Why is the moderator so dry? She's always like 'Got it.' and then reads the next question. Jim is so full of wisdom.
Bryan Mauro, very rude!! Food is not the only reason people get out of shape, there are several other reasons such as health
And fish and meat.
Index is a low risk low research method of growing your wealth but is not the highest or most successful or most efficient. If you have a good financial education and a long term view you can easily have peak growth of up to 50%. I have have had compounded growth of over the last 20 years of 28% on my portfolio. You can achieve spectacular growth by apply Buffett's own principles and Buffets principles are based on Benjamin Graham's Security Analysis which is a super heavy technical book on wealth and investment. If you are an ordinary person I would recommend the same authors book Intelligent Investor which is more for the masses. Buffets wife will more than likely have people who can advise her on the path that Buffet lays out.
The key to index fund investment is diversification. That mean investing in lots of index funds and not just one but be aware that some are of higher risk than other. You can get index investment for almost anything and I mean almost anything there ones out there based on pets such as pet passion index.
At the end of rent you own nothing. You have paid for a service that is for the hear and now but gives you no asset at the end. A house can be lived in when you retire but if you rent guess what you will still need to rent for the next 20 years of retirement. If you pay rent of $1000 today and when you are due to retire that rent will be $2000 to $9000 in value (depends on where you live). On top of that property tax will still be calculated into rent as weill the cost of maintenance and profit for the landlord. Legacy properties that have their debt liabilities paid of will be cheaper to rent but you can bet your rent that in 25 years time that property will have more than likely be sold again with new debt liabilities attached. Many of you have so much to learn but seem to think it is hip and cool to rent. Trust me renting in your 40s or 60s is not the same as in your teens or early 20s.
+Jonathan Weaver One of the production yields of a business I partnered in made growth of 70% and 50% in consecutive years. The amount of hours that went into the venture was insane and was very very tiring and with lots of headaches and problems before everything was in place.
+Jonathan Weaver There are many businesses over a 20 year period that have created these levels of growth and there have been many that have failed. When you analyse it on a spreadsheet or as some paper exercise it seems spectacular. Over half of all business are claimed to not exist after 5 year and when you examine that figure it just seems freightning. But you will find businesses that do achieve 50% growth for a limited period of time. There are no magical formulas that you can use or special techniques. I worked 80 to 100 hour weeks routinely for years. I own farms, food production, window manufacturing, aerospace manufacturing, IT services and many other small to medium sized businesses. I am sure if you look you will find people who started out with $10,000 who grew their businesses to several million dollars maybe you even know people that have done this and for them to have done this they would needed to have created compounded growth of a high value. Buffet and gates are the most extraordinary cases producing off the chart growth at times. I hate the word passive investor which just assumes you can pick a good value investment and just sit back and it does all the work for you.
Big hands I absolutely doubt you have doubled your money 3.5 times in 10 years.
bighands69
I myself have achieved 28% compounded over the last 20 years. Buffet himself has stated he could achieve 50%. Index investment should be the foundation of investment for many people. It is almost idiot proof and only a fool could actually lose money on index investment.
+DigitalHaze65536 I would greatly suggest that research Buffets investment strategy it is based on his mentor Benjamin Graham's two books Security Analysis and Intelligent investor. For 99% of the population the intelligent investor would be perfect as it is easy to ready and understand. I myself have been hitting growth of about 28% compounded for the last 20 years on the same principle without actually knowing that I was doing it.
"You're in a room full of above average people" Bitch. Watch your mouth. Only in certain aspects from a certain perspective
1) Wealth = Security + Freedom 2) Assets that 4% of it can cover your annual expenses , equals to financial independence. - extensive reading :https://www.investopedia.com/terms/f/four-percent-rule.asp 3) How much asset do you need? First determine your annual expenses , for example 50k a year. Then use that amount to multiply 25 , that's the amount you need for financial independence. ( 50k * 25 = 1.25 million ) 4) Invest in passively managed funds , such as a low cost index fund. Throw in some stable stocks and bonds as time goes by. 5) Don't try to outsmart the index funds. According to the research cited by JL , for every 1 person that succeeded , many have failed. 6) House is a terrible investment , same sentiment as Robert Kiyosaki and Grant Cardone. Buying a house is more of a lifestyle decision , rather than an investment. Unless on a huge rising market ( or bubble like pre 2008 ) , house is often a less attractive investment than stocks. 7) Importance of having Fuck You Money. Got inspired by movie The Gambler , here is the video. https://www.youtube.com/watch?v=xdfeXqHFmPI 8) VTSAX - Vanguard Total Stock Market Index Fund being his favorite index fund. 9) Biggest mistakes : Picking stocks yourself , or picking people to pick stocks for you. 10) Time in the market > timing the market. 11) Buy the dip , celebrate when we have another market meltdown , don't panic sell. 12) If you're receiving stocks of your company as part of your compensation , don't hold all of them because that's essentially placing all your eggs in one basket. Sell and diversify.
the technology behind it, yes bitcoin futures, NO
I agree that for the regular investor who is not that interested in business, should index, but I disagree philosophically with indexing in that you are buying a lot a trash companies with crap management, which is rewarding mediocrity. Invest in market leaders and brands that you use and enjoy. Ends.
Collins concludes that the path to financial investing success is to simply buy and hold a broadly invested index fund, the sooner the better. He reasons that the market has historically increased in value over time and that no one can predict the future, therefore, no one should time the market. Is not there a contradiction in this logic? Is he not assuming that the market will continue to move upward over time? What does one do when the market crashes as it has done twice since 2000, losing 50% to 60% of its value? He says to just ignore that and stay the course (aka John Bogle's advice.) For a person who depends on his investments, this approach will permanent losses of a significant amount of wealth from having to liquidate during a correction. The "buckets" approach can address this concern.
Didn’t get the memo? Bonds are in a bonafide bear market since mid 2016 ....... AVOID
I found the book to be very insightful. Thank you for the wonderful advice!
I love Jim Collins, and read everything the guy's written that I can get my hands on, but I think it's contradictory to say that timing the market is impossible and don't bother trying, and then recommend re-balancing. Re-balancing is a very simple market timing algorithm that relies on stocks and bond prices being imperfectly correlated over whatever time you leave between re-balancing events.
My pleasure! Good luck in the game of life :)
Patrick Lim Thanks Patrick!!
I bought my house in 2008 for 57k. Sold it in 2018 for 160k. Put about 100k in my pocket after closing cost etc. If I had been renting there would be NO 100k flowing into my bank account. Today I am debt free and have about 60k in the bank. The point is, every one will have a unique financial story in the end. There is NO 1 financial plan fits all that is going to work 100% of the time. Although I agree and like the investing option of index funds, to make a statement such as "Why your house is a terrible investment" can be a misleading statement and not true in my case. Good luck to all in your financial endeavors.
Bitcoin is a great start if you're on the lower end of the economic ladder.
Wise man! The best one hour I've spent yet.
Elaine's weird boyfriend from Seinfeld? Cannot remember actors name.
He has done 2 episodes of the ChooseFI podcast too, both are great. Episode 019 & 034.
Also, dividends aren't required for compounding. Stocks also increase in value over time. This value compounds.
WANKING ELVIS wrong.. if he invested the 20% instead of buying a house and put the $125 difference per month in this fidelity fund that has returned 13.79% he would have 996k by now.. You can rent and make more money if you know where to look
she was ok but nothing to out of the ordinary.
JL Collins is one of my very favorite financial bloggers/writers. Great interview and kudos to the interviewer for asking good questions and letting him fully answer. Excellent interview.
There is a lot of talk about JC speaking the gospel and guiding lost souls to the promise land. Jim Collins is the real deal. Listen, meditate on his concepts, and lead a better life.
Hope for all A fool and his money are soon parted.
Speculation. Not an investement.
The moderator is Téa Leoni’s twin sister!!
bali song dividend checks are easier to cash than rent checks. Also, not everyone has access to "low cost real estate".
Jeff Goldblum
I wish he spoke a little about Infinite Banking Concept. If one reads "Becoming Your Own Banker" by Nelson Nash, every investment get better.
sell women! this guy needs all carb no fa diet his abs are clearly off season
Oooh, hot nerd in cowperson boots, I'm in love!
Mateo, as far as PITI is concerned, that cost is transferred to the renter. When you are renting, you are paying someone else's property taxes, mortgage insurance, interest, principal, etc. The owner of the house gets the equity and the tax breaks from your payment, not you. On top of that, since the rent payment isn't transparent in what exactly it covers, you are likely paying a premium on top of that. And the owner can change the rent to whatever they want in the future.
Particle Config. Yeah, fasten your seatbelt for the ass raping you’re about to be served
Daniel Dugan My uncle is my dog so I can understand the resemblance
Very inviting and not overly complex in the way he explains his views and advice.
JL Collins > bitch robo advisor
haven't you heard? Dad bod's back in, bitch.
go put your tinfoil hat back on, bitch boi. With any luck, being a "REAL hardass" will get you sued somehow by a tenant. Then we'll see how much of a hardass you are, dipshit. I have RE investments too, I just don't bash the stock market calling it a "casino". It's called diversification, Google it. My guess: you got burned trying to time the market and buying individual stocks.
same, i mean why the fuck would i invest when i can motorboat some titties instead and hit up the strip club like a baller every night?
The term it's never too late doesn't apply in finances, but at least you found your way before it was. I'm 30 and I too wasted a lot of time when I could have been researching and contributing toward my future retirement.
Index funds are for the average person who wants average returns. This dude assumes everybody who isn't investing in index funds is actively trading their portfolios, which couldn't be further from the truth. That said, Collins gives wonderful, common sense advice worth following.
JL Collins > bitch ass robo advisor
Cowperson boots? WTF?
Best question at 32:22
Time and time again, I see that the fundamental quality to succeed with money is to be humble. To be who I am and conduct myself with the flaws that I have and stay humble and agile enough to admit when I am wrong and correct the path. As years passes, humble and patient people become my real heroes. May Lord give us the change of heart to practice same virtues as this good man.
Quickest way to fall asleep,watch this video.
I will listen to any advice that comes out of that voice ..
Wake me up when it's over SO I CAN SPANK THE MODERATOR!
Very good interview. I like content and the format. Nice people.
Congratulations! You bought at just about the perfect time and sold at just about the perfect time! But here's the thing: If you had put that 57k into an index fund and reinvested the dividends, the value in 2018 would have been around 300k or more instead of 160k. Your perfect timing 'investment' on a house STILL didn't even get close to matching VTSAX in performance over the same period. Between buying and selling costs, RE taxes, insurance, and maintenance, hidden costs can often wipe out any financial gains from buying and selling a house. Collins is saying that it's perfectly fine to buy a house to live in. That's a lifestyle choice, a common one. But never buy one thinking of it as an INVESTMENT, because it won't ever be a good one, comparatively. That's "Why your house is a terrible investment." Yes. Even yours.
No problem! I should note that I own a condo, myself. I bought it in 2013, just before the housing market I'm in started to really recover from the recession. According to zillow and eproperty, its value has doubled since I bought it! But I still wouldn't call it an investment. I got an amazing deal on a home I intend to spend a large portion of the rest of my life in. But if I sold it today, the return on it wouldn't even be close to what I would have gotten with the same amount of starting money from S&P 500 or full stock market index funds over the same time frame. I love my condo. I don't regret buying it at all. I would absolutely buy it again if presented the same choice. But it's still a terrible 'investment', mathematically.
Interesting, thanks for doing the math and replying. That's an incredible ROI!!!
7:47 Not above average levels of humility though :-)
That's about a 7.7% avg. return. Meh.
@Bryan Couillard you're completely wrong on your math above. It would not be 300k for Ultra_Vex, lol.
This video changed my life. Thanks Collins!
Really Jordan? Let's take out the perfect scenario. Even if he invested 57k at the very start of they year in 2009, instead of its actual low point, VTSAX would have turned 57k into over 208k by the end of 2017, going by the index's publically available rate of return by year. Still significantly better than what he got from his house. But if you're talking perfect timing (Invest 3/9/2009, Sell 1/26/18) it actually is pretty close to 300k. My math may have been a LITTLE off in the first post because I wasn't taking the time to actually go look at the returns by year and I was considering the perfect scenario to make a clear point, but that doesn't change the fact that even a 'perfectly timed' purchase of a house loses to VTSAX as far as investments go. And it's not close. Is it possible to buy a house that ends up being a better investment than an index fund? Sure. Just like it's possible to become a billionaire picking stocks like Warren Buffet or flip a coin and get heads 100 times in a row. Are YOU or anyone reading this likely to manage it? No.
The guy chewing gum at 41:44 lol
Mr Collins nothing is “simple” especially acquiring wealth in life, but what is “simple” is not giving up on acquiring wealth
It’s on an individual bases, some things and the right decisions come easy to certain people... set backs are a precursor to wealth... the hard way, these last decades like he states... making mistakes... if one thinks it takes a few missteps to acquire anything in life times the energy put forth by 10 and then you might succeed.
I'd mix it up a little for more diversification. Real estate is important so buying good value property (at least one) then most in index funds (US one he mentions and a global one) plus small allocation in cryptocurrencies (a number of different ones as well as Bitcoin, NEO, ZIL, ICX etc) as those could be even more than your main portfolio at some stage - always need to allocate small portion in new potential technology as the next Apple's / Googles etc
Classic voice, singer, actor, and lots of narration gigs: https://en.wikipedia.org/wiki/Hoyt_Axton. He was in The Black Stallion https://www.youtube.com/watch?v=cu0VOHIsdo4
Great piece of knowledge and wisdom !
If you learn what they are talking about, your knowledge of money and what to do with it will improve, leading to a better life for you :)
Great speaker and helpful moderator. The plastic water bottle was unnecessary. It is a shame to see people with such financial wisdom be ignorant about environmental issues.
I read some of his blog and listening to this I guess the message is only invest in index funds. Its hard to believe there is so much talking and a blog and a book just to say "only invest in index funds and don't sell." Warren Buffet says the same thing except Mr. Buffet also says if,you are gonna invest in individual stocks pick a solid company and invest for the long term. From what I have learned so far the key is once you get into the market don't get out of the market. Unless you panic or invest in something risky in the long run you will get a return.
jamesj24 I think that's the reason you go to bonds approx post 55 age. As you are close to 60 you dont care about markets in that case. If you were 40 in 2008 and your ira (or equivalent) crashed, wouldn't matter as you still have to have it there for 15+ Years more. So as you hit close to 60 move to a 80/20 stock/bond combo IMO.
He's an excellent speaker, and makes things so simple and easy to understand.
Great advice, but unless he deals with his physical conditioning he probably won't make it into old age.
stephen geraci I agree with you. If there were rent caps like in parts of Europe it might work but here in the UK, it's enslavement by renting. Maybe with a few years to live, I'd sell everything and rent just to enjoy the money but otherwise it's throwing money away.
Long term investing isn't terribly exciting to most people, that a big reason why those same people work much longer and don't have have a all that great of a retirement as those who invest their time young in life to learn about it and take action.
Bitcoin is very speculative, almost gambling. If one already has a good sized portfolio and they want to gamble a small amount on speculative investments, then that's debatably okay. Gambling is never a good idea for those on the low end of the economic ladder. You have it backwards.
Your concern is valid and isn't talked about enough, but there are ways to address it. Get the portfolio large enough that that dividends alone will support you in the first decade or so of retirement, this will nearly eliminate the sequence of returns risk you bring up. Many index investors focus on capital appreciation, I give a lot of thought to the dividend and dividend growth rate. One can still use index funds. The other way to look at it, is to simply have a smaller withdrawal rate. A withdrawal rate of 3% *significantly* reduces sequence of return risk the first few years of retirement.
Rental real estate and the stock market are not mutually exclusive. I much prefer to not have to deal with the hassle of managing rental real estate directly (and the liability), for RE exposure consider REITs.
Not just save money, but invest that you saved by living simply. Traditional "savings" doesn't even keep up with inflation.
It's funny he made a comparison to John Goodman because I was thinking he reminds me of the guy - similar voice, look, and likability!
stephen geraci House prices are exactly the same price where I grew up. And it was in a booming suburb of a capital city. Simply not true.
Great talk! Been a long time fan of Jim.. I think a little more space between the two would have been nicer. That proximity is making me uncomfortable, LOL..
I like the idea of 4%
did you buy the book
Gold and denim. Nice.
duuuuude I come watch this video when i want a nap
Dollar cost averaging is great for sanity and psychology- the new investor learnes to "let go" of the cash they dont really need in the short term over time. Its also the only option available to people who dont have large ampunt of cash sitting around - almost everyone
Entertaining and informative. I love his FU money concept.
Justin Watkins lmao cowperson, like ur political correctness
I have been doing the same things as Collins for many years. He is the first person to back up my thoughts on investing. I feel a lot better about continuing my investing philosophy.
“Buddha, whoever...”
Really cool dude. I like him
How do I calculate 10, 20, & 30 years compounding with S&P 500 or VTSAX in details with $60k a year? Where exactly do I sign up for this and wire my money? I would like to forecast the potential outcome of these numbers. 23:34
Don`t take advice from someone who cannot manage their own wasteline.
Walter Matthau
Sounds like historian David McCullough who narrated things like Ken Burns' Civil War. Beautiful voice.
When I go to morningstar.com and look at the 10 year performance of VTSAX (one of the most touted Vanguard index funds), it shows a return of 10.63% (10.63% since 2008 to 2018). If you put that rate into a compounding calculator, assume an initial investment of $57K, 0 additional contributions and compound annually, it comes out to $156,532.30. This means your deal came out $3467.70 more than if you'd invested in a popular Vanguard index fund. If your closing costs and other fees came out to around $3K give or take a few K, it would have practically been a wash. If you actually pocketed $160 after fees, you'd have come out a bit ahead. I agree that in your case the home purchase and sell was a good investment. Good on you.
Finish school, no single parenting and have a job. 99% success rate then.
Collins provides fantastic tips about the market for the average individual...however you have understand something , purchasing index funds will never make you rich...there is a huge difference between and investment “return” and riches...one has to define exactly what they want
I recently read a decade of low to negative returns coming - how would that change someones strategy?
For those interested in investing, I have a chapter by chapter summary series on my channel. It's for the intelligent investor by Benjamin Graham (Warren Buffett's mentor). Investing is one path to wealth.
Yikes
100% in VTSAX, enjoy life when it hits $2.5M. Can't get any easier than that.
Mr.Collins fails to discuss how his strategy will kill you financially without expert timing and luck on your entry/exit timing into equity/bond investing. Try his theory if you started in 1986 or 1999 or 2007 only to be crushed in 1987, 2000 and 2009.
FDIC... Bitcoin is not regulated or insured...if your computer crashes,you can't get your money and where is the tangible asset that is backed-up by this?Will it be lost in cyberspace?If that's the case,I have some land in florida to sell you.
Love her boots, very nice
Go watch a Marvel movie and enjoy a (potentially) poor retirement then.
I bet you are Fuggly yourself.
Question..buying png or jnj or Unilever is it like buying index funds because they have so many products
and this one time, at wealth camp
wow
JL Collins is a very admirable guy I have followed for a long time. Love his work and his money perspective! I started my journey towards financial independence 3 years ago, hoping to be able to retire within 5 years. Let's see if I can do it. You can follow my progress month after month on https://financiallyfree.eu
Stocks, funds, IRA, 401k etc is what you do with money you don’t mind losing. Real estate is more effective. To prove this do the following: Ask a banker to lend you money to buy a rental property. Then ask a banker to loan you money for stocks. The bankers response will let you know what to do.
Hmm, paying off your home for a 5% return, Vs investing in a index fund for a 15% return?
What if the US Dollar crashes?
Mark Barrett I'm amazed they got 57 minutes out of this as the strategy is so simple but effective.
yeah, thanks for proving his point. with 57k invested in the s&p500 you would have netted at least 200k in 2018...
Love this man!
Why are people using these type glasses the woman is wearing. They make everyone who wears them look old
The host asks notoriously dumb questions and cannot facilitate a good interview. JL is great
“Simple Path to Wealth”....50+ minute video. Lol
Gotcha