The Simple Path to Wealth

Lessons from The Simple Path to Wealth by JL Collins

Core Investment Philosophy

Invest in low-cost, broad-market index funds, specifically VTSAX for simplicity and diversification
The stock market always goes up over long periods, despite short-term volatility, equities have consistently grown over decades
Avoid bonds until you're near or in retirement, stocks provide better long-term returns for younger investors
Dollar-cost averaging happens naturally, just keep investing regularly regardless of market conditions
Market timing is impossible, nobody can consistently predict when to buy or sell

Spend less than you earn and invest the difference, wealth accumulation is primarily about your savings rate, not income level
Avoid debt, especially high-interest consumer debt, debt is the enemy of wealth building
Live below your means, not within them, create a gap between income and expenses to fund investments
F-You Money is the goal, having enough invested assets to walk away from jobs or situations you don't want
Your savings rate is more important than your investment returns, focus on what you can control

Keep it simple, complex investment strategies usually underperform simple index fund investing
Ignore financial advisors and stock pickers, they can't beat the market consistently after fees
Rebalancing is optional for young investors, just keep buying the same index fund
International diversification is unnecessary, the US total market provides global exposure through multinational companies
Tax-advantaged accounts first, max out 401(k), IRA, and HSA contributions before taxable investing

Volatility is normal and healthy, stock market drops are sales, not disasters
Stay the course during market crashes, the worst thing you can do is sell during downturns
Ignore financial media and market predictions, they exist to sell advertising, not help you invest
Emotions are your enemy in investing, fear and greed lead to poor timing decisions
Market corrections create buying opportunities, bear markets are when wealth is built

The 4% rule for retirement withdrawals, you can safely withdraw 4% of your portfolio annually in retirement
25x your annual expenses is your FI number, multiply yearly spending by 25 to determine your financial independence target
Social Security is a bonus, not a plan, don't rely on it for retirement security
Healthcare costs are the wild card, plan for significant medical expenses in retirement

Automate your investments, set up automatic transfers to remove emotion and ensure consistency
Start investing immediately, even with small amounts, time in the market beats timing the market
Keep investment fees as low as possible, high fees compound against you over time
Use tax-loss harvesting in taxable accounts, offset gains with losses to reduce tax burden
Don't check your account balance obsessively, frequent monitoring leads to emotional decisions

Young investors should be 100% in stocks, you have time to ride out volatility
Add bonds as you approach retirement, shift to more conservative allocation to preserve capital
In retirement, maintain some stock exposure, you still need growth to combat inflation

Avoid lifestyle inflation, don't increase spending just because income rises
Protect your wealth from others' poor advice, most financial products benefit the seller, not buyer
Estate planning matters, ensure your wealth transfers efficiently to heirs
Teach your children about money, financial literacy is one of the most valuable gifts you can give