The Simple Path to Wealth, written by Jim L.Collins back in 2016 is considered an investment masterclass to assist people with regards to the subject of investing.
The formula is quite simple about how to invest and amass enough money to reach so-called Financial Independence, or work your future on your own terms.
With the focus being on keeping your future investing as simple as possible.
So how did the book come about, well it all started with his personal blog “the JL Collins blog” which he had started some years earlier. Which provided a background into his experiences of investing.
Amazon link to buy the book: Simple Path to Wealth. https://amzn.to/4mob6gu
So what is the book about ?
It’s relatively simple, in that you create something called FU-Money. A position whereby you have enough money saved in that you have freedom to quit your current job role or go part time in future. Or doing something completely different on your own terms and principles. Once you have attained that financial power your opportunities are considered endless.
Imagine a world where you don’t have to got to work every day doing a job that you may hate. Or being in a position to retire earlier than originally expected such as your 40’s or 50’s instead of your 60’s.
You could instead spend that time doing things you enjoy, such a splaying golf, sailing, travel and vacation, spending quality time with family and grandchildren whilst you have the health to enjoy it.
Imagine having that freedom to choose !
But I always thought the world of investing was hard ?
This book will do an excellent job to allay those myths and perceptions and convince you to invest in the stock market.
It is backed by sound data to show over the long term that the market will always go up over a prolonged period and it’s doesn’t have to restricted to the rich or wealthy through so called investment managers or financial advisors.
His simple strategy is based on investing in mutual or passive funds. What we call index investing.
Although he will recommend certain funds based in the USA such as Vanguard VTSAX, which covers the whole US stock market.
With the aim being to just switch off and avoid market noise and the returns will come and be compounded over the years.
During the accumulation period, you only need 1 fund which covers the whole market. Whereby most people will state that you need to diversify across numerous sectors and countries. But why complicate matters and create greater levels of admin and monitoring, which most people simply cannot control.
What about the later years ?
Once you reach your desire targets of accumulation figure you can then de-risk and and add a 2nd fund called VBTLX, which includes less riskier assets such as bonds.
Unfortunately though the author doesn’t diversify away into international investments, as it is solely focused on the US. But investors can pick similar funds from their respective country.
Most investors will seem to stay focused on their own country as it is what they supposedly know about and have greater knowledge or insight into that market.
The book will cover the possible dangers of using financial advisers to assist you. However though most of them only have their interests at heart and not yours. They will be working to some kind of fee based structure or can only recommend products under their company or umbrella.
Nobody should care more about your money than you, so get involved with your finances,
Amazon link to buy the book:https://amzn.to/4mob6gu
Contents of the book: (265 pages)
- Foreward by Peter Aden (aka Mr Money Mustache)
- Beginnings: (I to IV)
- Introduction,
- A short parable,
- His own story, it was never about retirement,
- Important notes
- Part 1: Orientation (chapters 1 to 5)
- Debt: The Unacceptable burden
- Why you need FU-money
- Can anyone retire a millionaire ?
- How to think about money
- Investing in a bull or bear market
- Part 2: How to harness the world’s most powerful wealth building tool (chapters 6 to 23)
- There’s a market crash coming
- The markets always goes up
- Why people lose money when investing
- the big ugly event
- keeping it simple (tools)
- Index funds are for lazy people ?
- Bonds
- Portfolio ideas to retain wealth
- Selecting your asset allocation.
- Internation funds
- ETF’s – the simplest path
- What if you can’t buy VTASx or vanguard ?
- What is it about Vanguard anyway
- The 401 (k), 403 (b) IRA and Roth buckets
- Surprise at the end of the tax rainbow
- HSA’s – more than just a way to pay medical bills
- Case study
- Why I don’t like investment advisors
- Part 3 – Magic Beans (chapters 24 to 28)
- Jack Bogle and the bashing of index funds
- Why I can’s pick winning stocks and neither can you
- Why I don’t like dollar cost averaging.
- How to be a guru and get on TV
- You too, can be conned
- Part 4: What to do when you get there (chapters 29 to 32)
- Withdrawal rates – How much should I spend ?
- How do I withdraw my 4%
- Social security – how secure is it ?
- How to give like a billionaire.
- Afterword: (chapters 33 to 35)
- My path for my kid, the first 10 years
- Tales from the South Pacific
- Some final thoughts.
- Praise from the simple path to wealth.
What I personally liked about the book
The simplicity of the book and it’s writing, although it is US based the concepts are easy to understand, no matter where you live.
The idea of having a selective fund and not lots within your portfolio is an advantage.
It’s saves the need to constantly monitor, tinker with or rebalance very few months or each year.
You can just switch off and avoid short term bad news and market noise and sentiment.
The writing style is easily readable and enjoyable. Which doesn’t come across as formal and completed and the use of jargon is limited to certain key chapters.
Also he is the honest about his early investing mistakes at the beginning of his journey.
The book is all about the idea and fundamentals to achieve Financial Freedom. But the premise is that you don’t need vast amounts of money to change and control your financial future or change your work or lifestyle balance to improve you future wellbeing.
What I didn’t like ?
He uses figures over the past 40 years that highlighted an annual return of 11.9%. There will be good years and bad years where you returns will be positive or negative. Plus most people don’t invest over such a long timeframe.
It is solely US based so doesn’t stray into foreign or international diversification. Although the US markets covers numerous large corporations, and normally attracts the biggest headline grabbing news.
It may be a better idea for somebody to invest in a simple global fund or ETF’ to get asset allocation across all markets around the world. You don’t need to have funds in each country or continent to meet these objectives.
Amazon link to buy this best selling book: https://amzn.to/4mob6gu
Remember !
If you like this book summary, follow the links on this blog https://moneyminted.co.uk to discover other investing books that I recommend reading. To hopefully improve your investing knowledge, so you too can reach your financial goals and aims.
It’s not a get rich quick journey, but you will get there in the end if you create an action plan and think long term.
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