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 (Vanguard Total Stock Market Index Fund) 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