JL Collins: The Simple Path To Wealth

JL Collins from jlcollinsnh.com and author of “The Simple Path To Wealth” joins the show today to talk about the essentials of investing!

He is an inspiration to those in the FIRE community and has made a meaningful impact on thousands of people with his investing philosophy.

I truly believe his book is the only resource you need to become a successful investor.  It was a pleasure to have him on the show and I hope you appreciate the valuable information shared.

We Discuss:

• Investing In a Bear Market/Recession
• Housing: Buying vs Renting
• Owning REITs, Gold, Or Other Investments
• Exciting Chautauqua News
• His 9 Basic Principles

Listen To The Full Episode With JL Collins Now

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Transcript:

Chris: Hey JL! Thank you so much for joining and welcome to the show!

JL Collins: Thank you for the invite!

Chris: It’s an honor to have you on the show! I have you up there with the greats like Warren Buffett and Jack Bogle.  I’m excited about your investing advice with the audience like your stock series and your book “the simple path to wealth”.  So let’s start with the stock series because I think that is how your blog became so popular.  How did that stock series come about?

JL Collins: The whole blog came about as a way to achieve information for my daughter.  The stock series kind of grew out of that.  Now it’s up to about 33 posts but when I originally started it my vision was only for about 5 parts.  The rest of the posts after the fifth one came out with suggestions and questions from my readership.  These were topics that they wanted to hear about.  That’s how we ended up with 30 plus posts.

 

JL Collins – The Simple Path To Wealth

Chris: Yeah and it’s 30 plus great posts!  That’s what lead to the book “the simple path to wealth” is that right?  It’s made such a huge impact on so many people.

JL Collins: Yes the book has sold over 160,000 copies sold and the book’s 4th birthday was June 18th, 2020.  To my amazement, the book has sold better each year without much promotion.  I think it’s mostly word of mouth and favorable reviews on Amazon.

Chris: The simplicity of the book and the content is so essential.

JL Collins: And there is nothing in the book that you can’t find on the blog.  The book is more polished and better organized. This goes against the advice I received at the time which was to put things in the book that are not in the blog so people have to buy the book.  It seemed like a crappy thing to do to my audience.  So I chose not to do that.

Chris: I think that’s very honorable and a lot of people would have taken the other route but it shows just how much you care about your audience.  So if we can let’s jump into the investing questions.

 

Investing In a Bear Market/Recession

Chris: How long have you been investing and how did you learn to invest?

JL Collins: I started investing in 1975 and by coincidence, it’s the same year Jack Bogle introduced the index fund (the S&P 500 Fund).  I am self-taught in investing.  I’ve learned by making many mistakes with investing.  I’ve accumulated that knowledge over the years.  That’s how I wrote the book.  So the book looks at the stock market from 1975 up until about 2015.

Chris: Like you mentioned the stock market has gone through a lot at that time.  It reminds me of a statement you make that always gets a reaction which is “the market will always go up”.  Can you explain why you feel that way?

JL Collins: That is one of the statements that have gotten the most push back so I will caveat that the market will always go up as long as the United States is a capitalist country with a viable economic system and that it exists as a country.  If you don’t believe that the U.S has a future then you are probably right to be cautious about my statement.  However, if you do believe the U.S has a future, then almost by definition the market will recover from anything that gets thrown at it.

The U.S has gone through some horrible things and the market always recovers.  Market drops are a natural part of the process.

Stock Market Definitions

10% Market Drop = Correction

20% Market Drop = Bear Market

30% Market Drop = Crash

A crash is not nearly as common but it definitely shouldn’t surprise anyone.  It’s like living in New Hamshire and being surprised by a blizzard.  Or if you live in Florida you can use the example of hurricanes instead of blizzards.

Chris: I just so happen to live in Florida so I will use that!  I’m glad you mentioned the difficult times because 2008 was a difficult time but I was invested and most of the audience wasn’t either.  So how does this recent market crash compare to the market crash of 2008?  If you didn’t panic with the recent volatility was that a good test?

 

The Great Recession Of 2008

JL Collins: It can get a lot scarier.  One of the reasons why this recent market crash from COVID might not have been as bad is because we rebounded quite sharply.  In comparison, in the 2008 financial crisis, the drop was sudden and kept grinding down.  The market hit bottom around S&P 500 = 666 in 2009 after about a 50% drop.  So people see that and think “could I stand a 50% drop without panic selling?”

By the way, nobody should follow my advice unless they are certain they won’t panic sell.  Panic selling in the middle of a drop will leave you bleeding on the side of the road.  So going back to the 50% drop.  The perspective people need to understand is that when the market hit bottom in March of 2009 nobody knew that was the bottom.  Everyone at that time was predicting that it would continue to drop another 2/3rds.

So if you had a portfolio of 1.2 million then by March of 2009 your portfolio was valued at 600,000.  Everyone around you is telling you it will continue to go down another 2/3rds leaving you with potentially 200,000.  That is what an ugly market looks like.  Nobody knows what will happen in this case but that mental exercise can help you find your real tolerance for volatility.

 

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