JL Collins: The “Simple” Path to Wealth, FIRE, and Stress-Free Investing

Summary

BiggerPockets Money Podcast Episode Summary: JL Collins on the “Simple” Path to Wealth, FIRE, and Stress-Free Investing

Release Date: May 13, 2025
Host: Mindy Jensen and Scott Trench
Guest: J.L. Collins, author of The Simple Path to Wealth

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1. Introduction to the Current Market Landscape

[00:00] Mindy Jensen opens the episode by highlighting the tumultuous state of the 2025 market, characterized by volatility, escalating tariffs, fluctuating interest rates, and a shifting tax system. These factors are putting retirement portfolios under significant strain. The discussion sets the stage for exploring strategies to not only survive market downturns but also potentially leverage them to strengthen one's financial position.

2. Revisiting J.L. Collins’ Investment Philosophy

[01:49] Scott Trench introduces J.L. Collins, lauding his book The Simple Path to Wealth as a seminal work in personal finance. Collins emphasizes the importance of simplicity in investing, advocating for strategies that are not only easier to manage but also more effective in the long run.

[02:13] J.L. Collins clarifies a common misconception: his investment philosophy does not advocate for a 100% stock portfolio, especially for those nearing or in retirement. Instead, he differentiates between the wealth accumulation stage and retirement, recommending a higher allocation to stocks during the former and incorporating bonds as one approaches retirement.

3. Asset Allocation: Stocks vs. Bonds

[02:13] J.L. Collins explains:

“When you are in what I call the wealth accumulation stage, I actually do call for 100% stocks and specifically a broad-based, low cost total stock market index fund.”

However, he advises that upon retirement, introducing bonds into the portfolio can help mitigate volatility and provide liquidity to take advantage of market dips.

[04:44] Scott Trench probes further, asking Collins to specify recommended bond percentages for retirement portfolios.

[04:55] J.L. Collins responds:

“I never want your bonds to be more than 50%, because if you go more than 50% in bonds, then suddenly the math that the 4% rule has been developed on through the Trinity study, that starts to break down.”

He personally maintains a 20% bond allocation, balancing growth potential with risk management.

4. Navigating Market Volatility

[06:15] Mindy Jensen questions Collins’ comfort with maintaining a low bond allocation amidst recent market upheavals.

[06:21] J.L. Collins affirms his strategy, noting his strong financial position allows him to weather storms without heavily relying on bonds:

“If the market were to take a major dive... I'll probably move into 100% stocks because I really no longer need the bonds to smooth the ride.”

He underscores the long-term nature of investing, emphasizing resilience through market cycles.

5. Potential Market Shifts in the FIRE Community

[14:35] Scott Trench raises concerns about the FIRE (Financial Independence, Retire Early) community potentially unwinding stock investments due to political and economic uncertainties.

[16:35] J.L. Collins dismisses the notion that such movements could significantly impact the broader market:

“I doubt it. The market is huge... the FI community is small. I don't really see anything that the FI community would do that would substantially move the market all at once.”

He emphasizes that the stock market's immense size makes it resilient to the actions of relatively small investor groups.

6. The Long-Term Thesis of Stock Market Investment

[18:31] Scott Trench seeks Collins' reassurance regarding long-term stock market investments.

[18:45] J.L. Collins reiterates his core thesis:

“The long term thesis is that the stock market always goes up. ... it's a very volatile way up. ... the market is always making new time highs because the stock market is always going up.”

He cautions against attempting to predict market movements, advocating instead for consistent, long-term investing.

7. Real Estate Exposure and Strategy

[22:58] J.L. Collins discusses his minimal real estate exposure, limiting investments to personal residences and avoiding the complexities of active real estate management:

“I don't have real estate exposure other than personal residence... I owned investment real estate when I was a young man, but I came to the conclusion that for me it was just way too much like work.”

He shares insights into his previous ventures into REITs (Real Estate Investment Trusts) and his rationale for divesting from them.

8. Views on Cryptocurrency

[25:04] J.L. Collins offers a critical perspective on cryptocurrency, categorizing it as speculative rather than a viable investment:

“It's too volatile to actually serve as a currency in the vast majority of cases. What you really have, it seems to me, is a speculation.”

He advises those inclined to speculate to limit such activities to a small portfolio percentage, emphasizing his own avoidance of crypto investments.

9. Evolution of Collins’ Investment Approach

[34:45] J.L. Collins reflects on his journey from active investing to embracing index funds, acknowledging the allure and pitfalls of stock picking:

“Picking individual stocks... is quite the journey. I have the addiction. So it's one day at a time.”

His transition to a strategy centered around broad-based index funds underscores his commitment to simplicity and long-term growth.

10. Updates on The Simple Path to Wealth

[47:55] J.L. Collins announces the upcoming release of the updated edition of his book on May 20, detailing the revisions made to reflect the past decade's financial changes. The new edition includes updated data on 401(k)s, IRAs, and new sections like a Toolkit with FAQs and a case study titled “What It Looks Like When Everything Financial Goes Wrong.”

11. Addressing High Price-to-Earnings Ratios

[45:56] J.L. Collins addresses concerns about the market's high Shiller P/E ratio:

“I don't know, are they too high or is that just a reflection of the value of these companies at this point and going higher?”

He emphasizes that P/E ratios are not reliable predictors of future stock prices and cautions against overanalyzing such metrics.

12. Final Reflections and Takeaways

[52:34] Scott Trench and [57:17] Mindy Jensen conclude by highlighting Collins' nuanced approach to investing, dispelling myths that his strategy is a rigid 100% stock portfolio. They stress the importance of understanding one's financial position and risk tolerance when applying Collins' principles.

Key Takeaways:

• Diversified Approach: While a high stock allocation is recommended during wealth accumulation, integrating bonds becomes crucial as one approaches retirement to manage risk and ensure portfolio longevity.

• Long-Term Investing: Consistent, long-term investment strategies in broad-based index funds are advocated, with an emphasis on resisting the urge to time the market.

• Simplicity and Flexibility: Collins' investment philosophy centers on simple, low-cost strategies that can adapt based on individual financial positions and market conditions.

• Caution with Speculative Investments: Cryptocurrency and other speculative assets are seen as high-risk and are not recommended as core portfolio components.

• Continuous Learning: The updated edition of The Simple Path to Wealth aims to provide readers with current data and strategies, maintaining the book's foundational principles while addressing contemporary financial landscapes.

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Notable Quotes:

• [04:55] J.L. Collins: “I never want your bonds to be more than 50%, because if you go more than 50% in bonds, then suddenly the math that the 4% rule has been developed on through the Trinity study, that starts to break down.”

• [18:45] J.L. Collins: “The long term thesis is that the stock market always goes up... the market is always making new time highs because the stock market is always going up.”

• [25:04] J.L. Collins: “It's too volatile to actually serve as a currency in the vast majority of cases... I am not a speculator.”

• [31:06] J.L. Collins: “This is not something that I don't share publicly or that I don't write about that is kind of hidden behind some curtains.”

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This episode offers valuable insights into constructing a resilient and growth-oriented investment portfolio, tailored to different life stages. J.L. Collins' pragmatic approach emphasizes simplicity, long-term planning, and adaptability, making it a cornerstone for individuals seeking financial independence and stress-free investing.

Transcript

[Mindy Jensen]

The market in 2025 has become a perfect storm of volatility, tariffs escalating, interest rates fluctuating wildly, tax systems in flux, and your hard earned retirement portfolio caught in the crossfire. Whether you're just beginning your journey to financial independence or you've already retired early today's episode will outline the simple strategies for not just surviving market downturns, but potentially using them to strengthen your position. Hello, hello, hello and welcome to the BiggerPockets Money Podcast. My name is Mindy Jensen and with me, as always, is my not so simple co host, Scott Trench.

[Scott Trench]

Mindy, great to be here. Thanks so much for joining me on the perpetual path to wealth. For our listeners that we are always on, BiggerPockets has a goal, creating 1 million millionaires. You are in the right place if you want to get your financial house in order, because we truly believe financial freedom is attainable for everyone, no matter when or where you're starting, as long as you follow a consistent long term approach. We are so excited to be joined by the one and only J.L. collins. I think this is third time, maybe the fourth time we've now had you on, but if you aren't familiar with JL he is the author of the Simple Path to Wealth, one of the best reads in the personal finance category in the history of what's been written out there. A lot of ways it's even a better audio book if you haven't checked it out yet. Now, with 10 more years of market chaos as evidence, JL has worked on an updated book with a powerful message. Simplicity isn't just easier, it's actually more effective. And I also want to call out, this is very timely given that I have been a little skittish about the public markets in the recent past. And so we're going to have me getting schooled by JL Here today and he'll tell me about how wrong I am and how I need to reread his book. So, JL thank you so much for joining us here on BiggerPocks Money. We couldn't be more excited to have you.

[J.L. Collins]

I guess I have to come back every few years and tell you how wrong you are. Scott, is that what I'm hearing?

[Scott Trench]

That's exactly right, yes, my pleasure.

[J.L. Collins]

I do what I can.

[Scott Trench]

Well, I want to start off with something right off the bat here. For someone who is at or close to retirement, I want to remind everybody your book does not call for and your philosophy does not call for 100% stock portfolios. Is that correct?

[J.L. Collins]

Well, it Depends on what stage of your life you're in. So when you are in what I call the wealth accumulation stage, I actually do call for 100% stocks and specifically a broad based, low cost total stock market index fund. My preference is Vanguard's VTSAX. And that for instance, is how my 33 year old daughter invests. Now, when you retire, then you want to bring some bonds into the mix, or most people want to bring some bonds in the mix for two reasons. Bonds help smooth the volatility of stocks and also they provide some dry powder. So if stocks were to go down, you have an opportunity to reallocate and pick up some shares at a lower cost. You don't need that when you're building your wealth because presumably you're working, you have an ongoing earned income coming in. And if you're smart and following the simple path to wealth that I recommend, you are diverting a significant portion of that into your investments on a regular basis. And that allows you to take advantage of the inevitable dips in the market.

[Mindy Jensen]

One of the big problems that we are seeing in the fire community right now is that their portfolio, even at retirement, approaching retirement, after retirement, looks a lot more like your 33 year old daughter's portfolio than one with more bonds inside of it. Where do you suggest people start moving into bonds? Because you know, now it seems like a great idea to be in bonds. We've got stock market upheaval. Maybe I have been so busy today, I haven't even checked the market. Maybe it's up. But we've got all of this uncertainty going on and you know, for the foreseeable future that's probably going to be the case. If somebody were approaching retirement like, like how, how far before retirement do you suggest starting the ease into bonds?

[J.L. Collins]

So it kind of depends on your tolerance for risk. I mean, and I'm not recommending this necessarily. I didn't move into bonds until the day I retired. Now that's probably not optimal. But on the other hand, I had more than enough assets to weather a storm. So it depends on where you are financially and what your tolerance for risk is. Probably the better advice is to begin making that transition, say five years out and kind of do it a little bit slowly, building it up to whatever percentage of bonds that you're looking for.

[Scott Trench]

What percentage of bonds would you say is like, you know, I'm looking for the simple answer here that, that what a good retirement portfolio looks like. Would you have a range that you, you'd recommend?

[J.L. Collins]

It kind of depends. Again, on your risk for tolerance. So the equation is the more you have in stocks, the greater growth potential you have over time. But the greater the volatility, the more you have in bonds, the lower the growth, but the smoother the ride, by and large, right? So for me, I only hold 20% in bonds, which is a very, very low percentage. But I like the aggressive growth and frankly, my portfolio is larger than I need it to be in order to live on it. So I have that flexibility. If you were cutting it a little closer to the edge in terms of using the 4% rule as your guideline, where you needed every penny of what your portfolio could throw off at 4%, you'd probably want to go a little heavier into bonds than that. So maybe 60, 40. The key thing to remember though is you never want your bonds to be more than 50%, because if you go more than 50% in bonds, then suddenly the math that the 4% rule has been developed on through the Trinity study, that starts to break down. If you don't have the growth engine of stocks in a large enough proportion, then your portfolio is probably not going to last for an extended period of time. So I would personally Never go below 60% in stocks.

[Mindy Jensen]

Do you feel comfortable with that, given the recent market upheaval?

[J.L. Collins]

Absolutely. But you have to have that in the context of my financial position, which is really very strong. So for instance, if, and I'm not predicting this, but if the market were to take a major dive, or when the market next takes a major dive, which will happen at some point, I'll probably move into 100% stocks because I really no longer need the bonds to smooth the ride. And I am much more interested in the long term growth that stocks offer now, not for me, but for the charities I support and for my heirs. You know, this is a long term game. At my age, it's not a long term game. But the portfolio isn't just tied to my age. It's going to live on beyond me. In fact, during COVID you know, when we had the COVID crash, my intention was to move out of bonds. And I was kind of looking at that, saying, okay, if it gets down and it's gone down more than 35%, then I'll probably go ahead and pull the trigger and move. And it got down to about 33% and then turned around and went back up. So that didn't happen. So I'm content to hold it, to hold the 20% bonds indefinitely. But if the market gives me an opportunity, I'll Change, but that's me. That's my personal situation.

[Scott Trench]

Let's put yourself in a position where you're much closer to a true 4% rule portfolio based on your current spending right now. And would you be moving more into bonds than the 8020 split if you were in that situation?

[J.L. Collins]

Well, if I were in that situation, I probably wouldn't be at 80 20. I'd probably be more 60, 40. Right. Because when you're in that situation, volatility becomes a much bigger issue, you know, and so you want, even though you're going to give up some growth, you're going to want a little greater reduction of that volatility the bonds can give you. But if I was at the 60, 40, then, no, I wouldn't be changing that. I wouldn't be trying to play that game. Now, if stocks were to plummet in such a fashion that that percentage, because, you know, as stocks go up or down or bonds go up and down for that matter, it will change the percentage allocation. Right. So a bond or stocks rather drop dramatically in value, then suddenly the percentage that they represent in that portfolio is going to be less than 60 and maybe it'll shift to, who knows, 50, 50. Well, at that point I'd shift some of my bonds into the stocks when the stocks are at the lower price to bring it back to that 60, 40 balance.

[Scott Trench]

Again, using this hypothetical of. Of you're closer to the 4% rule on here. Let's say stocks doubled from here in price at the same relative earnings ratio. Would that, would the inverse be true? Would there be a world where you would move more into bonds with that portfolio?

[J.L. Collins]

Absolutely. So if stocks were to double from here, then the percentage of stocks would go up and maybe my 6040 is, you know, 70, 30 or 75, 25 or something. Well, then that you use that opportunity to sell some of those stocks and build your bond portfolio back up and that. That provides a automatic discipline, if you will, of selling high and buying low. You don't want to get into a situation where you're doing that every time the market moves, 2 or 5% or something, you know, to really make a move like that, the market would have to move, in my view, about 20%. What we do, or what we used to do is on my wife's birthday, which is just a random day on the calendar as far as the market's concerned, we'd look at the portfolio and if the allocation was out of whack, we'd adjust it then. And the only time I'd adjusted other than that is if the market did something really dramatic. As I mentioned during COVID when it was dropping, I was, I was sort of gearing up to take advantage of that, but it didn't drop enough.

[Mindy Jensen]

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[Scott Trench]

All right, thanks for sticking with us. Welcome back, J.L. i woke up, you know, here in 2025, and I saw that the market, you know, come up 50% in the last two years in stocks and that my portfolio was essentially 70% in stocks and very little, no bonds whatsoever, a little cash and the rest in real estate, essentially. I became very uncomfortable with that dynamic. And so I, I decided to sell a major portion of my index fund portfolio and move it into real estate, which I considered to be a bond in some ways, or bond like when it is paid off. Right. So there's no leverage on the rental property that I purchased on there. And that was, that was in response to, you know, me, me knowing you reading your book three times, listening to it, and not being able to just, like, keep doing it in the context of the current environment on there. And there's like a part of me that's like, is that, how is that, how am I thinking about that? Is that a good, bad decision, whatever here. But I got the chance to actually interview you and ask you about your thought process on that. And what is your reaction in general to that, given the context of the current market?

[J.L. Collins]

Well, my first reaction is there are things other than bonds that conserve that role. Right. I like bonds because, remember, this is the simple path to wealth and bonds are simply simpler to own than real estate. But you can certainly do what you've done with, with real estate. And, you know, if, if somebody has a pension, you can count whatever the amount your pension is as part of your bond allocation and figuring out what that percent would be if you're on Social Security. It's as I am. It's the same kind of thing. I don't bother to factor it in personally, but if you were running close to the edge, you certainly could and it would make sense. So, yeah, I have no objection to doing what you're doing with real estate, especially, as I recall, you're doing it without leverage. And I think that that makes it a more bond, like, if you will.

[Scott Trench]

Well, come on. We were supposed to have a big fight about this.

[J.L. Collins]

You'll have to come up with something else for us to fight about.

[Scott Trench]

I think I showed you this when we were, you know, a couple weeks ago or last week actually, when we chatted. But we polled the bigger pockets money audience, and we found that our friends, who are liberal investors, so they lean left. And our audience is remarkably close to 50 50. So we will not share any political preferences on here and try to keep it that Way we like, we like the balance there. But our friends who are liberal investors tend to be more set it and forget it index fund investors. And I believe that the data supports the hypothesis that they tend to be 100% in stock portfolios with little to no bond exposure, regardless of how close they are to retirement. And a worry I have here in 2025 is that those folks, many of whom have not read your book on there and have internalized the long term thesis for stock investing, will begin to ask themselves the question, how comfortable am I with the stock market being this expensive and the activity set of the Trump administration and leaving 100% of my financial portfolio in index funds? And I believe there's a risk that this results in people stopping buying new stocks. They're selling portions of their existing portfolio and, or taking the dividends or other proceeds and putting them into some alternative, whether that's bonds, whether that's international stocks, whether that's cash or whatever. I think that's a real potential risk here in 2025 to US markets, not to mention international folks, maybe not being, being a little bit more reluctant to invest in U.S. stocks. What's your response to that, that risk? Can you reassure me?

[J.L. Collins]

So if I'm understanding you correctly, you think there's a risk that, that people will unwind. This group of people, this, have this particular political view in the FI community if they were to start unwinding a portion of their stock holdings, that that would affect the market overall?

[Scott Trench]

Yes.

[J.L. Collins]

I doubt it. The market is huge. I mean, in the FI community is small. I'm fond of saying we're unicorns. So I don't really see anything that the FI community would do that would substantially move the market all at once. And then the other thing is that even if your thesis is correct, in this group of people, which again are only half of your listeners, Right. And so let's extrapolate and say maybe they're half of the FI community overall. Well, are they going to unload all their stocks all at once or are they going to unload 20%? I mean it's, you know, there's just a lot of variables to that. So I think trying to suss out those kinds of things, those macro moves that might happen and how it would impact the market overall is, is you're kind of spinning your wheels. This is something we can fight about. I was listening to a guy being interviewed not too long ago and he was making the point that baby boomers, of which I am one, are getting older. Well, he's got that part right. But he went on to say that and we own a lot of stocks, which you got that part right too. But because we're older, we're going to sell all of those stocks all at once and go into cash and bonds. Well, that's nonsense. I'm not doing that. There's no data that supports that baby boomers are doing that. In fact, the data suggests that baby boomers, at least those wealthy enough to own portfolios, are actually not spending those portfolios down at all. So, you know, I think people go down these rabbit holes and then make leaps from them that aren't going to be valid. So there are a lot of things to worry about in life and investing, but I don't think this is one of them.

[Scott Trench]

I'm one of those people. And that's what we need to hear here on it. And I think that's a great argument there. Can you remind us of the long term thesis for broad based index fund investments at a fundamental level?

[J.L. Collins]

Sure. Well, the long term thesis is that the stock market always goes up. Now, as we've already discussed, it's a very rocky ride. It's a very volatile way up. But if you look at any long term chart of the stock market and I reproduce such a chart in the simple path to wealth, you see this relentless rise up and to the right. Now you can see some dips in that rise. You know, the Great Depression is the one that jumps out most dramatically. The one in 070809 jumps out a little bit, but not nearly as dramatically, even though that was the second biggest in market history. You know, some of them are that, that we are so worried about in the moment don't register or barely register. That's the thesis. And what it suggests is you can never predict when the market's going to drop. A lot of people think they know the market's going to drop right now, but I don't know that. I mean, it's been very volatile, but the fact that it's volatile means that the market hasn't decided what it wants to do yet. Now maybe we're coming up to a crash that will allow me to move my bonds into stocks, but maybe not. I wrote a blog post before the inauguration but after the election about whether the election of Trump, whether you love him or loathe him, should influence your, your investment approach. And spoiler alert, the answer is no, because we just don't know how the market's going to react. I would have thought when he was elected the first time just because he was an agent of change, that the market doesn't like uncertainty and would have been a rough ride for a little bit, but it wasn't. You know, it turns out it did very well for all four of those years. So anytime I think I know what the market's going to do, I remind myself that whenever I think about those things, I'm almost always wrong. But so is everybody else who makes those predictions. Right. As somebody once said, the market will do whatever it takes to embarrass the largest number of people.

[Scott Trench]

That's a great prediction for 2025, 2026 from JL Collins here. But I do love, so I love the long term thesis here. Could you go in one more level of depth on that and remind us about what fundamentally the stock market forward over the long term?

[J.L. Collins]

Sure. What fundamentally drives it is our capitalist system. And capitalism is a kind of a loaded word these days and it shouldn't be. But capitalism just means that individuals are allowed to own property, whether it's real estate or their homes or businesses. And within this capitalist system, we have a stock market, we have publicly traded companies that you and I can own. So when I own vtsax, Vanguard's Total Stock Market Index Fund, I own a piece of virtually every publicly traded company in the United States of America. It's about 3,600. The number varies a lot, but about 30, let's call it 3,600. And everybody in those companies from the factory floor to the CEO is working to make me richer. They're working to make their companies more successful, to make them better products and better services for their customers. And they're working to out compete the other companies that are trying to do the same thing. That's the dynamic that drives the market higher and higher because they are actually income producing, money creating entities. Now some of them won't succeed, some of them will fail. Others will succeed in a spectacular fashion. And those will become steadily more and more of a greater percentage of the index as they because it's cap weighted. So the more successful the larger company is, the greater percentage of the index it accounts for. Some people, by the way, see that as a flaw, as a bug. It's, for me, it's a feature.

[Scott Trench]

Remind me about how you view your real estate exposure in the context of your index fund investing.

[J.L. Collins]

Well, I, I don't have real estate exposure other than personal residence. We have this little cabin on Lake Michigan and Wisconsin and we have a condo in Florida. I used to own investment real estate When I was a young man. But I came to the conclusion that for me it was just way too much like work.

[Scott Trench]

Walk me through your REIT analysis, because I believe you at one point were invested in REITs and then came to the conclusion to sell them a while back because of the dynamic of how REITs are also included in broad based US index funds.

[J.L. Collins]

Right now my portfolio, as we discussed, is stocks and bonds, right? Both held in broad based index funds. But at one point it was 50% stocks, 25% bonds, and 25% REITs. One point it occurred to me that, well, REITs, which are publicly traded, are part of the total stock market index. And so I already own them through that vehicle, through that index fund. And by owning a REIT fund, what I was really saying was that out of all the sectors my total stock market index Funds owns, REITs being one of them. I evidently believed that REITs were going to outperform everything else. Other why else would I own it, right? And I didn't believe that. That was not my belief. In fact, as I sit here at the moment, I'm not quite sure why I was owning REITs. Probably because I thought the income was a good idea. But in any event, once it occurred to me that I already owned them and that owning a REIT fund was basically saying I thought it was a sector that was going to outperform. And I didn't think. That doesn't mean that I thought it was due poorly. I just didn't have any reason to think it would outperform tech or finance or consumer goods or any other sector. Well, then it just didn't make any sense to hold them anymore. I probably own them as I'm thinking this through, because I used to invest in real estate directly. And when I gave that up, I thought, well, you know, maybe I should still keep an OR in real estate. So I'll do it with these REITs that are easier to own, and they certainly are that.

[Mindy Jensen]

Okay, J.L. let's talk about crypto. What is your opinion of crypto?

[J.L. Collins]

Well, my opinion of crypto is, is unchanged, first of all. So it's too volatile to actually serve as a currency in, in the vast majority of cases. What you really have, it seems to me, is a speculation. And to be clear, it's a speculation that has, has turned out extraordinarily well over the last 10, 15 years. I mean, certainly if I'd had a crystal ball, I would have in 2012 moved everything into bitcoin and I would be worth a whole Lot more money than I am today. But speculations, by the nature of the beast, don't always work out well. You know, tulip bulbs in Holland 400 years ago were a spectacular success right up until they weren't. I'm not predicting that for crypto, but just throwing it out as an illustration. So a speculation is the kind of a thing where, unlike an investment, which are the companies I just described, where you have a business that is producing a product or a service that's generating revenue, and if it's run well, it's throwing off profits that can either be used to further build the business or distribute it to the shareholders. So there is a financial engine at work that'll drive the price of the value of that company up. That doesn't exist in a speculation. And that's not just crypto. That's gold, that's art, that's classic cars. All of these things are things that you buy, hoping, expecting that in the future somebody will be willing to pay more money for it than you paid. And the case of bitcoin, by and large, that's been a good guess. That's been the case. But a lot of speculations don't work, and most of them don't work forever. So I am not a speculator.

[Mindy Jensen]

What percentage of your portfolio is in crypto?

[J.L. Collins]

I would think you could have guessed, given that answer is zero.

[Mindy Jensen]

Zero. Okay, I am in crypto as much as you are. But you said if I could go back and, you know, I would go to 2012 and put it all in bitcoin, and I know you're joking about that, but it's had a huge run. And what would you say to a younger investor who feels like they're missing out by not investing or speculating in cryptocurrency? Is there any amount of a portfolio that would be okay to speculate with?

[J.L. Collins]

If you had a time machine or a crystal ball or you could see into the future? Crypto is not the only thing that's had an extraordinary run. I mean, they're. At one point, I don't know if this is still true, but Philip Morris. If I had bought Philip Morris stock back in 1975 when I'd first started investing, and just owned that and put money into that, that was the best performing stock of the last half century. Again, I'm not sure if that's still true in the last decade or so, but at one point it was. So if you have a crystal ball, then yeah, you could. And then you could have jumped off. Philip Morris and gone into Bitcoin 15 years ago or whatever, but we don't have that. What I say, anybody who is inclined to delve into a speculation, whether it's crypto or gold or anything else, because they see the potential for great wealth, nothing I'm going to say is going to steer them away from it. This is not advice that I like to give. But if you are hell bent on doing it, then set aside a small percentage of your portfolio and play with it. I don't do that because I don't expect my money to entertain me. I only expect it to make money for me. Right. But if you feel you have to do that, then do it. The other thing I would say is when you look at envy of those people and there have been people with all speculations, this is true, who do phenomenally well. There are people who become billionaires investing in bitcoin. My guess is that very few of them will hold onto that wealth because the tendency is to confuse luck with skill. If you went into bitcoin and it's made you fabulously wealthy, it's luck just like it's like winning the lottery. Nobody, at least I hope nobody, thinks that. Oh, I'm just really skilled at picking lottery numbers.

[Mindy Jensen]

I think there are people who think that. However, I agree with you.

[J.L. Collins]

You're probably right, Mindy, There probably are. And it distresses me to hear that. But there are probably more people, though, who have done well in bitcoin who think, wow, I just know how to pick these speculations. They probably don't even think of it as the speculation. And that means that they're going to keep trying. They're going to keep rolling the dice, and inevitably they will give it back. That's how casinos, by the way, make money. Casinos have an extraordinarily high payout rate. They pay out something like 96% because they want people winning. Because when the people in the casino see people winning, then they're more likely to continue betting themselves. And what the casino knows is that big winner is going to continue gambling. And over time, gambling is a losing proposition. Over time, the casino will get all of that money back and then some.

[Scott Trench]

Let's go back a second here to kind of a very important point, which is I think that a lot of people JL read the Simple Path to Wealth and they miss some critical realities about you as the author and the message in the book, which is one, you do not advise a retiree to have a 100% stock portfolio close to the 4% rule. You advise them to have a mixed stock bond portfolio. And you're open to a range depending on the risk tolerance. There's an absolutely personal choice that's allowable inside of the range within your approach. Is that a correct statement?

[J.L. Collins]

Absolutely. And I think both your statements are correct that people misconstrue that. But what you're saying is absolutely correct and it's in the book. This is not something that I don't share publicly or that I don't write about that is kind of hidden behind some curtains. It always amazes me some of the questions that I get even beyond that which I read them. And did you read the book? Because if you had, you would know the answer to that question. One of my favorites, by the way, is, and I have to believe that whoever did this was pulling my chain. But on the blog at one point I got a question saying, would you recommend vtsax?

[Scott Trench]

No, no, I'm totally against that. You got to go vti. You got to go vti.

[J.L. Collins]

Well, or crypto. You know, I mean, if you read anything I've written, you've probably gotten far enough to know the answer to that question. So yeah, I mean, it's. But as a writer, you can't. All you can do is put your ideas down on paper. I present my ideas as concisely and as clearly as I am capable of doing. And yet people still say the things that you're saying that, oh, he recommends 100% stocks, even for retired people who are 90. I have said that, as I just said on this, you know, that that's probably what I'm going to do in my old age, but that's not a general recommendation.

[Scott Trench]

So that was the first observation I think is really important for folks. I think there's a little bit of this. I read the book several years ago and I remember the message for index funds, but I forgot chapter 12 where we talk about the retired reportfolio having a 6040 stock bond portfolio. And like that's. That's missing from the discussion because it's, it's. It's too easy to take the simple path to wealth and say that's the index funds argument. All index funds. So I think that's one, one thing that I want to call here. The second is you personally have and do and will intend to move your portfolio based on major macro events in terms of reallocations. They're not rebalances. You would reallocate the 20% that are in bonds to stocks in the event of a market crash. Is that correct?

[J.L. Collins]

Yeah. I mean, if there's a significant market crash at some point and market crashes, just like bear markets and corrections are a natural part of the process. The problem is we can't predict when they're going to happen. So I have no idea. There may never be a market crash for the rest of market my life, which probably isn't that many years. But if there happens to be one, if we get something like, like 0809 again, then yeah, I'll probably use that opportunity to move into stocks because of the financial position I'm in, A, in terms of it supporting me, but B, because I'm not managing this portfolio against my lifetime, I'm managing against a much longer period of time.

[Scott Trench]

That's the second kind of core observation here is the simple path to wealth is not 100% stock. Set it, forget it forever on there. And it may not also be set it as a 6040 portfolio and just rebalance once a year. There's absolutely wiggle room in your philosophy personally to rebalance at least between those two assets classes, broadly index funds and bonds, based on what you're seeing in certain conditions in there. And I think that's important for folks to know because that's there. And the third thing I want to observe is it took you while to arrive at this, right? Can you walk us through the ways that you thought about investing prior to leading up to the portfolio that you've arrived at now and settle on and how that influenced your thesis here that so many millions I think follow today?

[J.L. Collins]

I was an active investor for decades. I mean, I started investing in 1975. I had never heard of index funds. In fact, 1975 was when Jack Bogle created the first index fund, the S&P 500 fund. I didn't know that at the time. I'd never heard of Vanguard or Jack Bogle at that point. I wish I had. I mean, how much easier and more lucrative my investing track would have been if I'd stumbled on it in 1975 and been wise enough to embrace it. But I know I wouldn't have been wise enough to embrace it because when it finally came to my attention in about 1985, I wasn't, you know, I, a college buddy of mine who was a financial analyst, become involved in this stuff and, and he was explaining to me. And when I hear people, active, active enthusiasts arguing against indexing, it's my own voice I hear in my head. I made all those same arguments and candidly, I made them better than most of the people I hear making them today.

[Scott Trench]

He almost said, I made them better than you here.

[J.L. Collins]

Yeah. But I. But it took me a. It took me a long time. Probably I didn't full embrace indexing probably until around 2000. And then indexing then just became a portion of what I did. It was. It became a growing portion. But picking individual stocks, or by extension, managers of funds that are. Pick individual stocks, if you get that right. If you pick an individual stock, you know, you look at it, you research it, you know, you wind up buying it. And. And it works. It goes up. That's intoxicating. There are very few things I've experienced in life that are more intoxicating than that. It's an addiction. I refer to it as the disease. And I still have it. I still get tempted. I haven't owned an individual stock probably in, I don't know, 15 years, but I still get tempted because it's so, you know, you remember the intoxicating times. But of course, you know, I also remember some of the painful times, you know, when people claim that they do so well picking individual stocks. I'm very skeptical because I think, yeah, if you're doing it, you certainly have your winners, and that's branded into your brain, and it's easy to just sort of discount all those ones that didn't work, that you should have been looking at the performance of your winners and the performance of your losers to come up with your ultimate performance, which probably lagged the basic index. Certainly, in my case, it did. And I think I was reasonably good at picking stocks. But, yeah, so it was quite the journey. And again, I have the addiction. So it's one day at a time. Right?

[Scott Trench]

Yeah. And you also have a great book on how to lose a large amount of money in real estate.

[J.L. Collins]

That was my second book. Yes.

[Mindy Jensen]

Yeah. Wasn't that how I lost the money in real estate before it was fashionable?

[J.L. Collins]

Exactly. A cautionary tale. Yeah. Unfortunately for me, my. My education in. In real estate and ultimately I. I made some money in real estate because I learned from that first disastrous purchase. But it was the same thing, you know, with. With stock investing. I mean, I. I have some very expensive lessons in my history that, you know, when I wrote the book, I'm hoping that my daughter, because that's who I fundamentally wrote it for, will read the book and she'll avoid all of that quicksand and traps that I blundered into as I kind of wandered in the wilderness. You know, when I was doing this. Well, when I first started, there was no Internet. I mean, there was nobody else doing this stuff. You know, there was no book out there to say, yeah, I have people who say, you know, man, I wish you'd written the simple path to wealth 40 years ago when I started investing. And I'm like, man, I wish I did too. You know, I would have loved to have had the simple bath wealth 40 or 50 years ago. But those things, you know, now is a golden period of time to be an investor if you're open to the ideas that can make you successful. But it's just, it's a brilliant time. Never has there been a better time, in my view.

[Mindy Jensen]

Okay, and jail. What do you say about the current stock market upheaval to people who are freaking out about the current stock market upheaval?

[Scott Trench]

Specifically to the people who are afraid not just of the recent downturn, but of the fears that I have expressed here where there's an all time high or very close to it price to earnings ratio. In terms of the Shiller price to earnings ratio, it's seemingly lots of risks for inflation. There's seemingly lots of. There's this potential risk of a panic if, for example, folks do decide to the tunes of tens or hundreds of, you know, half the population, United States says, I'm going to take at least a little risk off the stock market. Given where the administration is, how do you reassure folks of that more fundamental space?

[J.L. Collins]

Nobody knows what the market is going to do from here because if any, if the market knew that, it would already be doing it. So when this releases, the market may have rebounded and gone on to new highs. Maybe it'll continue to plummet and maybe it'll be that crash that I'm kind of looking for. Or maybe it's just going to be bouncing back and forth trying to figure out what to do next. There's, you know, it's indicating a lot of uncertainty. I don't know what it's going to do and I don't care because I'm investing for decades. And anybody who's following the simple path to wealth shouldn't care because they're investing for decades. You know, you say, well, the market was at an all time high and that makes you nervous. If you look at any chart of the stock market and I reproduce it in the simple path of wealth, you'll see that the stock market is always making new time highs because the stock market is always going up. I mean, every now and again it drops down, but then it climbs back up and makes new all time highs. So if you said, well, once it makes an all time high, I'm going to get out while the getting's good, you would have left all the gains of future years on on the table. The other thing to understand is there is never going to be the perfect time to invest. There's never going to be a time when you're going to look at the market where all of the gurus talking about the market on the Internet and on television are going to say, now is the golden time to invest. The market is always, oh, you can't invest now, it's too high, or no, you can't invest now because it's dropping and who knows how low it'll go. The market is always volatile. The time to invest is when you have money to invest.

[Scott Trench]

All right, we've got to take one final ad break, but we'll be back with more after this. While we're on break, please go out and give us a a like or a follow on YouTube. Please give us a review on your favorite podcast listening app. We read every single one of them. Always appreciate the feedback.

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[Scott Trench]

I think that there's a lot of folks out there, myself included, who are very comfortable with the market hitting new all time highs. Just the one nuance I'd love to ask you about to address is the all time high price to earnings ratio that the market is trading at currently here in March 2025. When we look at the last 10 years of inflation adjusted earnings, the Shiller PE ratio that is at an all time high. What's your thoughts there?

[J.L. Collins]

The Shiller PE ratio has been a topic of concern for at least the last decade and the last decade has gone up. Eight of the last 10 years have been significantly up years. I don't know the answer to that. One of the things I do know is that the P E ratio of stocks overall on average is much higher than it used to be. And there are a lot of reasons for that. Some of the reasons are that dividends are not as big a part of the payout that you get for for stocks. Used to be the dividends were higher and they were a much bigger percentage of the return that owning a stock gave you. That's not so true anymore for a variety of reasons that I don't know if you want to go down that rabbit hole. But now it's, it's more of the capital gains that are are providing those returns. And that of course drives up PE ratios. I don't know, are they too high or is that just a reflection of the value of these companies at this point and going higher? And you have to remember that. What does PE stand for? Well, it's price earnings. So it's the price of the stock against the earnings. And if the earnings keep growing, then you're going to see that continue to increase. P ratios are a quick and dirty and easy thing to look at. But as far as I know, there is no indication that they are a predictor of future stock prices.

[Scott Trench]

That's a wonderful argument here from you. You are A true master at all things investing over this. And I love that how unique and wonderful your journey has been to getting here because you took that route as an active investor, spent many years kind of refining this thought process. Can talk in detail about all the specifics that go into making analyses in the specific cases. And still through all of that, through all that research, continue to come back to the simple path to wealth that you got here, including in the new edition that's coming out in a few weeks. So when is the new edition coming out and what's going to be the update?

[J.L. Collins]

I think it comes out May 20. One of the most gratifying things about this process is that my daughter Jessica has been very, very actively involved in the revision of the book. And it's been wonderful working with her. It's been a real, real pleasure. But it's also been wonderful because, you know, I knew she was following the simple path to wealth because she's well on the way to being financially independent herself. But I didn't realize how deeply she understood the concepts and what a great appreciation for the work she's developed. So that was very gratifying. We went through and updated everything in the book. So all of the numbers around 401ks and IRAs and how much you can invest, all that kind of thing got updated. All of the what if analysis that I do in the book and the calculators and what have you, we went through and updated all of those reflecting the decades since the original. You know, an interesting thing about that, by the way, a little sidebar is when I first put the first edition together in 2015, published in 2016, I looked at the 40 years I'd been investing, going back to 1975 at that point, and the stock market had posted an average annual gain over that 40 year period of 11.9%. That's a breathtaking number given all the turmoil over that 40 year period. I mean, you know, the crashes, the wars, it was not some golden era. And yet the market boasted almost 12% a year. And that kind of really threw me because I didn't want to and I don't want to today and I don't in the book for a moment suggest you can count on those kinds of returns going forward. But nevertheless, that's what the market actually produced. Well, you add this next 10 years and I was curious as to how that moved the number. Well, it turns out even though we had a Covid crash, the market is up 12.2% over the 50 years that I'm now looking at. So it's pretty incredible. Again, make no mistake, I'm not predicting it's going to be up 12% a year going forward. I wouldn't do my planning based on that. But it gives you, I mention it and I use it in some of the scenarios in the book because it gives you a, a sense of just how powerful a wealth building tool the market is and has been over the last half century of really tumultuous times.

[Scott Trench]

Last two questions here. When you said the book comes out May 20, where can you get the book and in which chapter has the advice on the 6040 stock bond portfolio?

[J.L. Collins]

Ooh. Well, you're in that last one. You're testing my memory. There's a chapter on asset allocation, so it's probably, that's probably where you will find most of it. The exciting things about the new edition is I have a publisher, it's no longer self published and hopefully that'll push the book into bookstores and expand its reach. So you'll be able to get it on Amazon and bookstores sort of all the, all the traditional places. There's a whole new section called Toolkit in the book with an extensive faq. There's all these questions that I field over the years. I collected those and responded to that. There's a punch list in there. I added a new case study called what It Looks like When Everything Financial Goes Wrong, which is the story of my buddy Tom, where in fact that happened. And he wound up in his 60s, bankrupt and lost his house. He's one of the happiest human beings I know. And so I love that particular story. There's some new material in it, but the fundamental message, the fundamentals path is the same.

[Scott Trench]

And you recorded the audiobook, I hope as well. Right.

[J.L. Collins]

We haven't done an audiobook on the new edition yet.

[Scott Trench]

We'll have to wait for that one. That's always, that's one of the best ways to enjoy the original.

[J.L. Collins]

Yeah. Well, thank you. Yeah.

[Scott Trench]

JL thank you so much for sharing your wisdom, for changing so many lives with your holistic body of work that you've put together. And thanks for the I think now fourth appearance on BiggerPockets Money. Really appreciate it and always a true privilege to get to learn from you.

[Mindy Jensen]

Jael, thank you so much for your time today. This is always fun talking to you and we'll talk to you soon.

[J.L. Collins]

Well, it's always a pleasure hanging out with you guys and I always appreciate the invitation. So I look forward to the fifth time absolutely.

[Mindy Jensen]

All right, Scott, that was the inimitable J.L. collins. I loved the episode. I want to hear your thoughts.

[Scott Trench]

I mean, it's always a true pleasure to chat with JL And I think that he's just a genius, like a master at this. I think he's put in, you know, the decades of just accumulating knowledge, and he is ready with a response that is perfectly aligned with his core framework for every single question we can throw at him. I am shocked that I didn't get more of a scolding from JL in the post when we were chatting, just briefly for there, he did tell me that he would not be afraid to give me a scolding if I had done something stupider in his words, which I found fun. And again, I just want to point out that J.L. collins does not advocate for a 100% stock portfolio for those who are at or near retirement. J.L. collins will be the first to say that there's sometimes a difference between his core portfolio and what he actually does. J.L. collins said that he will time the market in the sense that he will move from his bond portfolio into stocks if he were to perceive that the market were to crash or to be at a suitably low, for example, price to earnings ratio, something we also discussed in post. And I think that that was super interesting for folks. I think a lot of folks say, oh, J.L. collins is the index fund. Set it and forget it. There's no other way to invest. Just do it in perpetuity guy. And that's not who he is. We know him. That's not his philosophy. You need to go back and reread the Simple Path to Wealth if you think that's what he advocates.

[Mindy Jensen]

Scott, I want to point out that J.L. collins portfolio is significantly larger than he needs it to be, which is what allows him to make these plays, these calculated risks, these educated maneuvers. He's not just, oh, the stock market's down, I'm going to throw it all in there. He thinks that he can have a reasonable estimation of what will eventually happen. He said it himself, the stock market always goes up, but it's a rocky going up. And he's not wrong. So when it dips a little bit, if he wants to move his bonds into the market and then it pops back up, great. That was a great decision. But if it dips a little bit, he moves his bonds in and then it dips further. That was an educated decision. That was a calculated risk that he took, and it comes from his Significant portfolio position. So if you are listening to this, you are lean phi, your barista phi, you're anything other than fat Fi. Maybe you shouldn't take his advice and it wasn't advice. You shouldn't take his commentary and apply it to your own portfolio because you're not in the same position that he is. However, if you are in a similar position where your portfolio far outweighs how much you need, maybe that's a strategy for you. Maybe that's something that you can do more research in before you jump into it. But I think, you know, just like with your selling of the 40% of your index fund, Scott, that's a decision made from education and pondering the scenarios, not just jumping in with both feet and hoping for the best.

[Scott Trench]

I was surprised, frankly. I was expecting. I was expecting more of a pushback against the moves that I, that I had made there. I was, I think, the most surprised by his intention to potentially move back out of bonds to 100% stocks if there was a drop in the market. I was like, wow, I would, I did not expect coming into the interview with JL to hear those, those two things. And that was, that was fun. That was interesting for all this. And I think that's right. I think, I think it comes back to understanding the core philosophy of what's going on here and making the right decisions for your portfolio based on where you are in the journey. And we all agree that for someone starting out with very little, Moving into a 100% aggressive portfolio is the right move. JL would say stocks. I would say I'm fine with stocks or house hacks or, you know, real estate or a small business play in that. In the sense, whatever that all in looks like for that young person at the beginning of their career with a long period of time to, to invest and compound returns on it. But I agree, like, why would you go anything into a safe portfolio when you have 100th or 1000th of the portfolio that you're going for in the long term? And as you approach that, there is a right answer, which I think JL Would say, it's not what I did, but it's what I would do. What I would prescribe as the right answer is beginning that shift towards a more diversified portfolio as you approach there. And again, his preference would be stocks and bonds.

[Mindy Jensen]

As part of that, J.L. collins has a new updated version of the Simple Path to Wealth that is out in stores now. I have personally purchased at least 50 or 100 copies of this book to give to other people who may not know about it, may not want to read it. I think it's an excellent primer for making your way to the simple path to wealth.

[Scott Trench]

Yeah, absolutely. I, I hand out the Simple Path to Wealth. You know, like I like I wrote Set for Life right, which is a very aggressive all out approach with involving house hacking and real estate and skill in a career. But for, for many people who don't want to do that all aggressive approach, simple path is, is more helpful. I find myself recommending his book almost as much, if not sometimes more than my own for, for, for many folks out there. So can't speak higher praise of, of JL than what we already have. And it's just, it's just awesome to be able to call him a friend and get a chance to pick his brain every now and then.

[Mindy Jensen]

Yep, he is a true legend. All right Scott, should we get out of here?

[Scott Trench]

Let's do it.

[Mindy Jensen]

That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Mindy Jensen. Saying bye for now. Highland Cow.

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