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According to a report from The Washington Post, over half of all Americans have a combined $0 purchased in the stock market.
There are many reasons that so many individuals do not have any investment in the stock market; chief amongst them is that the stock market feels daunting, puzzling, and frightening. If you belong to this bulk, you must check out JL Collin’s book “The Simple Path To Wealth.”
In this article, I examine the simple path to wealth, which guarantees that books make buying the stock market amazing, simple, and available to nearly everyone.
What Is the Simple Path?
Individuals thinking about financial self-reliance understand that the core principles of the motion are really simple: conserve a large part of your earnings and invest it in the stock market.
The more you conserve and invest less, the earlier you’ll be economically free. This is the book’s primary message, and JL Collins explains how anybody can use these concepts in their own free life.
Five Simple Steps to Wealth
His simple actions are:
- Save– 50% or more of your pre-tax income.
- Invest — Allocate your cost savings between Lead’s Index Fund covering the entire US Stock Market
- (Ticker: VTSAX) and Vanguard’s United States Bond Index Fund (Ticker: VBTLX). The Stocks vs. Bonds Asset Allowance depends on where you remain in your wealth-building journey and how much risk you’d like to take.
- Be Prepared — Keep some as cash for an emergency
- Be Tax-Efficient — Fill all tax-advantaged accounts initially
- Keep going until you can live off 4% of your yearly portfolio. Try to increase your savings rate as you get raises.
ALSO READ: Best Compound Interest Investments in 2023
What I liked
In general, the Simple Path to Wealth is a fantastic book! I liked numerous things about it.
Initially, I entirely agree with the author on keeping it simple. Having just a couple of funds in a portfolio, one ideally is an excellent advantage. If you have only one fund, you do not have to rebalance it. You never need to think of what you must buy if you have multiple funds. You need to purchase a single fund each month.
The author is a great advocate for simplicity in investing. He truly made a lot of effort to keep his investing simple. And the book itself is simple as well. Some chapters are more complicated, but you can avoid some if they are unfathomable. The author himself is suggesting skipping some if essential!
The composing style of the book is extremely pleasurable. It is not too formal yet not too informal, either. The author strikes an excellent middle ground here. I enjoyed checking out that, and I read it extremely quickly. This book is among the few individual finance books that were truly satisfying.
I agree with using an extremely aggressive method during the wealth build-up phase. When we are young with a long period before retiring, we can afford a 100% stock allowance. Most people need not need bonds while they are still working. And it is a lot easier when you do not have to rebalance!
The author is truthful about his mistakes in this book. He made numerous investing errors (we all do) at the beginning of his journey. It took him a long time to recognize the value of passive investing. However, he made a lot of money with simple passive investing. A sincere person needs to recognize and discuss mistakes.
I also value the truth that the author promotes Financial Freedom by concentrating on flexibility. If necessary (or if you want), being able to stop working is an extremely effective tool. If you want to live on your term, being financially independent (even for a few years) can be life-altering.
Although this book is highly-focuses on the United States, it can be easily adapted to other nations. It would be simple enough to adjust it to Swiss financiers. The part about retirement would need to be revised. But the other parts would work well.
In general, The Simple Path to Wealth is an excellent book.
What I did not like
There are very few things in The Simple Path to Wealth that I would have liked.
It is not a good idea to base any computation on an 11.9% annual return. This 11.9% is undoubtedly the return on the 40 years the author took as an example. However, anticipating anything like 11.9% usually could be more reasonable at best. While this number may be the reality, it is expensive for individuals to expect in the future. Despite the fact that it would have been more artificial, I preferred an 8% return rate for all calculations of the book.
I do not completely agree with the author’s view of foreign diversification. The author argues that buying the U.S. stock market is enough because a lot of these companies are doing business in other parts of the world. And this ought to assess the efficiency of the stock market. And to some extent, this is true. Globalization made global diversification less important. However, even for U.S. financiers, diversification stays crucial. But this is the only thing I would change about the technique of the book.
That is it. This book must be the one I concur with the most. Most of what the author is doing with his money is what I am trying to do with mine.
Conclusion
Despite some over-simplifications, “The Simple Path To Wealth” is a wonderful book for new financiers or anyone seeking to switch to index investing.
Looking at the book through a beginner’s lens, it’s most likely a good thing to oversimplify things. By keeping his message exceptionally simple, Collins effectively interacts with a message that, ultimately, I agree with, which is that investing in inexpensive index funds is the most reasonable method to invest your cash in the long term.
When you are finished with the a simple path to wealth, return here for the unpopular details that are a little less simple.
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