The Simple Path To Wealth, by JL Collins

In a world of complicated distractions, I found the book “The Simple Path to Wealth” a deep cleansing breath of fresh air.

The Simple Path to Wealth

We live in an interesting and complicated time. There are more tools and more information available to investors than at any time in history. BUT, this constant barrage of information can come at a cost. The cost is over complication, decision fatigue, distraction and overall ineffectiveness.

See, our monkey brains are not good at processing an overwhelming amount of information and unlimited opportunities. We need focus to be effective.

In addition, all the grand and dramatic stories of instant wealth creation we see on Tin Tock can be intoxicating and misleading. We are never really seeing the complete story behind these stories. We also do not see the thousands of people doing simple things to grow wealthy.

Key Guidelines

  • Spend less than you earn, invest the surplus, avoid debt.
  • If your lifestyle exceeds your income, you are no more than a gilded slave.
  • Life choices are not always about the money, but you should know the financial impact of your choices.
  • Sounds investing is not complicated.
  • The greater the percent of your income you save and invest, the sooner you’ll have “F-you” money.
  • The stock market is a powerful wealth building tool. But realize that the market and the value of your shares will sometimes drop dramatically. This is absolutely normal and to be expected. When it happens, ignore the drops and buy more shares.
  • Nobody can predict when these things happen. The media is filled with those who claim they can. They are delusional and probably trying to sell you something.
  • When you can live off 4% of your investments per year, you are financially independent.

Some powerful quotes from the book:

“Warren Buffett is rather famously quoted as saying: Rule #1: Never lose money, Rule #2: Never forget rule #1. Unfortunately too many people take this at face value and leap to the conclusion that Mr. Buffett has found a magical way to dance in and out of the market…This is not true, and in fact he is on record speaking to the folly of trying to do so.”

“It’s simply not possible to time the market…”

“The stock market is the most powerful wealth building tool of all time…”

“The market always goes up and it is always a wild and rocky ride along the way…Since we can’t predict the swings, we need to toughen up mentally and ride them out.”

“Toughen up cupcake and cure your bad behavior.”

“The market always recovers. Always. And if someday it really doesn’t, no investment will be safe and none of this financial stuff will matter anyway.”

“The next 10-50 years will have just as many collapses, recessions and disasters as in the past…Every time this happens your investments will take a hit. Every time it will be scary as hell. Every time all the smart guys will be screaming SELL!!!! And every time only those few with enough nerve will stay the course and prosper.”

“The market is self cleansing.” None of the original Dow Jones 30 are left in the index. In other words as those companies got washed out, new and more powerful companies came in and took their place. This makes investing in a total stock market index so appealing. It is self cleansing and self evolving.

“The great irony of investing is that the more you watch and fiddle with your holdings the less well you are likely to do. Fill your basket, add as much as you can along the way and ignore it the rest of the time. You likely wake up rich.”

There is much more in this book of value and I would recommend it. Again, the bottomline is that sometimes the simple approach is the hardest approach to actually execute because we are forced to confront ourselves. We must master ourselves and our own human shortcomings.

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