jlcollinsnh

The Simple Path to Wealth

Stock Series

Note 1:

If you are wondering whether to dive in, this independent review might help. I think it captures this blog’s essence perfectly.

If after reading it The Series sounds appealing, you will very likely enjoy it.

If by the same token your reaction is, “This doesn’t sound right for me,” it very likely isn’t.

Note 2: 

Is this Series worth reading? Frankies Girl thinks so. From her comment below:

LOVE this series! All I can say is read this, and you’ll be doing this later:

http://i.giphy.com/opmIBtljGbwZi.gif

Stock Series:

Part 1: There’s a major market crash coming!!!! and Dr. Lo can’t save you

Part II: The Market Always Goes Up

Part III: Most people lose money in the market

Part IV: The Big Ugly Event

Part V: Keeping it simple, considerations and tools

Part VI: Portfolio ideas to build and keep your wealth

Part VII: Can everyone really retire a millionaire?

Part VIII: The 401(k), 403(b), TSP,  IRA & Roth Buckets

Part VIII-b: Should you avoid your company’s 401k?

Part IX: Why I don’t like investment advisors

Part X: What if Vanguard gets Nuked?

Part XI: International Funds

Part XII: Bonds

Part XIII: The 4% Rule, withdrawal rates, and how much can I spend anyway?

Part XIV: Deflation, the ugly escort of Depressions

Part XV: Target Retirement Funds, the simplest path to wealth of all

Part XVI: Index Funds are really just for lazy people, right?

Part XVII: What if you can’t buy VTSAX? Or even Vanguard?

Part XVIII: Investing in a raging bull

Part XIX: How to think about money

Part XX: Early Retirement Withdrawal Strategies and Roth Conversion Ladders from a Mad Fientist

Part XXI: Investing with Vanguard for Europeans

Part XXII: Stepping away from REITS

Part XXIII: Selecting your asset allocation

Part XXIV: RMDs, the ugly surprise at the end of the tax-deferred rainbow

Part XXV: HSAs, more than just a way to pay your medical bills

Part XXVI: Pulling the 4%

Part XXVII: Why I don’t like Dollar Cost Averaging

Part XXVIII: Debt –The Unacceptable Burden

Part XXIX: How to save for college. Or not

Related Posts:

How to unload your unwanted stocks and funds

You, too, can be conned

Why you need F-you money

F-you Money: John Goodman v. jlcollinsnh

How I failed my daughter and a simple path to wealth

My path for my kid — the first ten years

What we own and why we own it

The smoother path to wealth

Putting the Simple Path to wealth into action

Why I can’t pick winning stocks, and you can’t either

Dividend Growth Investing

Magic Beans

Jack Bogle, the bashing of Index Funds and a Jedi dog trick

Social Security: How secure and when to take it

How to give like a Billionaire

Betterment: A simpler path to wealth

Why your house is a terrible investment

Rent v. Owning, opportunity costs and running the numbers

Death, taxes, estate plans, probate and Prob8

My guest post on MMM: It has never been about retirement

Important Resources

  • Vanguard.com (unfortunately Vanguard doesn't have an affiliate program)
  • Personal Capital* is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you'll see what's working and what you might want to change. Here's my full review.
  • Betterment* is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • YNAB* has the best budgeting tools going and just might be the Best Place to Work Ever
  • Republic Wireless* is my $10 a month phone plan. My daughter is in South East Asia and is on the $5 a month plan. We talk whenever can and for however long we please. My RW Review tells you how.
  • Tuft & Needle helps me sleep at night. A very cool company and a great product.

*These are affiliate links and should you chose to do business with them, this blog will earn a small commission.

Comments

  1. The page I’ve been waiting for!

    Everything you need to be a successful investor is right here so rather than take the time to write about any of these topics myself, I can now just link to this page instead 🙂

    Reply

    • LOVE the blog…. LOVE it… even if I’m still afraid of throwing all my money into VTSAX…. hopefully I can get over it.

      Here’s my question though, I just had a kid, I am very happy dumping a bunch of money into VTSAX for her as it will have lots of time to grow. Whats the best way to set up that account in Vanguard so that its hers but has no tax implications for me giving her that money. Do I set up an account in her name? Do I set up a separate account in my name with her as a beneficiary. If this question has already been addressed please point me to the right place as I’ve looked around and can’t find the specifics on the tax implications of claiming, giving etc…

      Thanks! THANKS!!!

      SC

      Reply

      • Thank you SC!

        Glad you like it!

        Don’t worry about being afraid. VTSAX will be a wild ride over the decades and until you can be comfortable with that, and sure you’ll stay the course, it is better to wait. If when the market plunges you panic and sell you will be MUCH worse off than if you just sit in cash. Not that sitting in cash is a good idea: inflation nibbles away at it like rats in the granary.

        For your kid, four options:

        1. 529 fund. Money grows tax free in her name. Details here: https://investor.vanguard.com/what-we-offer/college/overview

        2. UGMA. For a nice comparison between this and the 529 go to https://investor.vanguard.com/what-we-offer/college/overview
        and find this on the opening page:

        Other ways to save for education goals
        Uniform Gifts/Transfers to Minors Act (UGMA/UTMA)
        ›Compare all college savings options

        Click on: “Compare all college savings options”

        3. Set up a regular taxable account for her in her name. Low taxes as she’ll be in a lower bracket than you.You’ll be the custodian and have control until she’s 18. Then it is hers. For better or worse. We did this for our daughter and it worked out fine.

        4. Create an account in your name, earmarked for her. Max taxes, depending on your bracket, and max control.

        Bonus idea:

        Once she starts working, fund a Roth IRA for her in her name. We also do this for our daughter and it is the greatest gift you can offer as long as you train her to understand it is not to be touched. At the moment, you can fund it with $5500 0r the total amount of her annual earnings up to $5500, which ever is less.

        Reply

        • We started a college fund for our first grandchild. Before it reached $2000 he developed leukemia at 7 months (our greatest sorrow). We had to remove the funds to prevent him from being ineligible for TEFRA funds to assist in the hugely expensive treatment. Above $2k would have made him in ineligible for help ( even a 529 college plan). We had $1600 in our2nd grandchild name when he was diagnosed with mild autism. So we had to take that money out also to keep him eligible for assistance. So no more money in children’s names! Use caution with putting money in children’s names.

          Reply

          • Hi Cara…

            and welcome.

            I am very sorry to hear of your grandchildren’s illnesses. Thanks for sharing the cautionary tale.

            May I ask a couple of questions?

            1. How exactly did you remove the funds from the accounts?
            2. Did you have to meet any time constraints in pulling it out?
            2. Do the parents’ assets count toward assessing eligibility for assistance?

  3. Terrific compilation. We readers aiming for financial independence should run here and re-read the whole thing as soon as the markets tank next time. Thanks for sharing your experience and wisdom. – for free. It’s a real service!

    Reply

    • Thanks Mark…

      I hope they do just that.

      Even more I hope they remember that crashes, bears and corrections are all just part of the process. Regardless of the breathless media reporting.

      Reply

  4. Thanks Mr. Collins – I have forwarded the link to my whole family. You are a really great writer and make it easy to understand. Thank you for your efforts and serving us all. PS one of my goals when time permits is to see the East in the fall. Your comments about it over some of your posts have made it a priority.

    Reply

    • My pleasure, Mark…

      and thanks for passing it along.

      If your travels out east bring you to NH let me know and we’ll have a coffee.

      Reply

  5. Hi Jim,

    You rock! This was just what I was looking for and I was giddy as a schoolgirl to be immortalized on your blog. Seriously, ask my wife… I burst in on her with my laptop, grinning ear to ear, while she was getting the kids ready for bed. I think the new tab for the series is great… keep adding to the great content. 🙂

    Reply

    • Ha!

      Well I hope she was suitably excited and the kids not so thrilled for you they couldn’t sleep. 😉

      In your excitement, you probably left this comment in the wrong place. More folks will understand if they see it under the post I wrote announcing this and, in the process, immortalizing you as you so richly deserve. 🙂

      Feel free to put it there too if you like.

      Reply

  6. Yay! I’ve sent the link to my dear husband. He sometimes thinks I’m a crazy woman when I’m responding to his questions about why we should throw more dough into index funds with: “Well, because jlcollinsnh SAYS SO! Read his articles and you’ll understand!”
    I certainly hope he’s going to read all your great articles in the series.

    Reply

  7. Awesome that you added this tab. Sounds like I’m not the only reader that comes back to the Stock Series again and again it’s such good stuff.

    Reply

    • Thanks JK!

      Actually, I’m also always referring back to these posts for one reason or another and it is amazing how much easier having this new page has made it for me too. 😉

      Reply

  9. This series really helped me get a real perspective on investing. Thanks so much for this series of posts – I read them all in one sitting, then have revisited them over a few days!

    Reply

  10. I came here from the Betterment blog (I see most people came from your guest post on MMM), your audience is growing larger. I have found your ideas of great help.
    I just finished reading the stock series and I can only say THANK YOU.
    Please keep up the good work.

    Reply

  11. Hi Jim,

    I recently found your site along with MMM and the Mad Fientist and I am loving everything I have read. I have implemented most of the stuff you teach here in my own finances. My question is about a traditional IRA vs a Roth IRA. I am 24 with a $50K salary. I noticed you are a big proponent of the Roth IRA however in Part XX, Mad Fientist contradicts this and suggests it’s better for someone in my position to use a traditional IRA. Just wanted to get your thoughts on this and if you actually recommend the traditional or Roth for someone in my position. Thanks for creating this amazing blog and I look forward to anything you might post in the future!

    Reply

    • Hi Mike…
      …and welcome!

      Thanks for the kind words. Glad you like it here.

      Astute observation and great question.

      Indeed MF’s analysis has altered my thinking. Go with the ideas in Part XX.

      Reply

      • Thanks for the quick response! I was hoping you would say that since I already maxed out my Traditional IRA for 2014 haha

        Reply

  12. Hi Jim,

    Can you share some thoughts on the optimal time to rebalance? Most things I read suggest once per year, but what if there is only, say a 5% change from one year to another? Another scenario might be a 20% change mid-year (or larger), do you rebalance at a predetermined market value threshold or wait until a certain rebalance date that might be year end for example. Thanks!

    Reply

    • Hi Dean…

      I’m not sure there is an optimal formula. Like changing the oil in your car. It’s less important (and everybody has a different opinion!) whether you do it at 3,5,7.5 or 10,000 miles as it is that you do it!

      Personally, we do it once a year in April on my wife’s birthday. Makes it easy to remember and helps avoid the market distortions that sometimes happen at the very end/beginning of the year when everybody else is doing tax selling and new buying.

      As you suggest, I’ll also rebalance when the market makes a big move up or down. 20% is a good benchmark.

      Of course, I try to do all this in my IRAs to avoid any tax consequences.

      Some contend that more frequent reallocations can improve performance over time and in fact Betterment, who I like and recommend, makes this case:

      http://jlcollinsnh.com/2013/12/16/betterment-wants-to-give-you-25/

      I’m not sure I fully buy the premise, but I do like the way they use your new contributions and any dividends to make it happen efficiently.

      Reply

  13. Hi Jim,

    I have really enjoyed your blog and have found it immensely invaluable. I have shared it with my family and have begun making changes to my investments.

    I have a (hopefully) simple question. You speak a lot about investing in both retirement accounts (401K, 403(b), Roth, etc. using VTSAX if possible) and a separate taxable index fund. What percentage of my non-living expenses cash should I be investing in my retirement account and in a separate taxable index fund? I currently do not have the income to max out my retirement account. Should that be my focus first?

    Reply

  14. Hi Jim,

    Just wanted to say thanks for the great website! I opened my Vanguard account this morning and put $10K into VTSAX with a plan to make monthly deposits going forward. I love the stock series and the insightful writing, keep it up!

    Reply

  15. Good morning Jcollinsh,

    I am a pastor, I’m 27, I currently participate in a 403b Its got about 8,000, I’m in the process of opening a Roth Ira (my wife already has one), do I also need to start a regular Ira or are the 403b and the Roth enough? I’ve also read you talking about maxing out tax advantaged accounts first so that more of your money can work for you longer. Does that mean I should start the Roth and leave it alone until my 403 b contributions are maxed out? Or should I be contributing to all of them simultaneously? We also have about 30,000 in an investment account through morgan stanley, It’s invested, but should we move it, should we leave it alone, should we add to it, would it be better in a tax advantaged or deferred account?
    our savings rate is about 20 percent right now because we had a baby at the beginning of the year, and were still paying the hospital bills, but in 2 or three months we’ll be back to 50% I appreciate your blog, and it has been extremely helpful to me already.

    Thank you
    Seth McDevitt

    Reply

    • Hi Seth…

      Here is my basic hierarchy for deploying investment money:

      –Fund your 403(b) to the full match, if any.
      –Fully fund a deductible IRA, rather than the Roth. The reason is the money you don’t pay in taxes will compound for you over the decades.
      –Finish funding the 403(b) to the max.
      –Fund your taxable account with any money left.

      If your $30,000 is in a taxable account you can’t just move it into a tax-advantaged account other than using this money to fund those. It is better to fund your tax-advantaged accounts with new money to keep your investment amounts growing.

      I would, however, move it from MS to Vanguard for reasons I describe here: http://jlcollinsnh.com/2012/09/07/stocks-part-x-what-if-vanguard-gets-nuked/

      Congratulations on your new baby!

      Reply

  16. Dear Jim,

    Thank you for all the time you have dedicated to this blog and spreading this knowledge! I know it will save me quite a bit of time in my future…
    I am a very appreciative potential success story from your formula. I am at the very beginning of my journey having only come across your blog in April. This is a lengthy self-serving comment as it is helping me reflect on the last couple of months!

    I came here from GoCrackerCurry’s blog which I found out about in a Facebook post less than two months ago. In the first post I read on GCC they linked to your Stock Series and gave high praise. I came here and could not stop reading it!
    It helped me make many concrete changes in my life that I had contemplated but just did not move forward with– I did not have a retirement savings account to my name (well I had a couple open but they were not actually funded!) nor did I have a concept of FI or “F” YOU money. I focused on retiring at 60+ in the manner mainstream financial media is always harping about and in the mean time I just imagined earning “forever” and accumulating a ton of rental properties (you could say I am pretty optimistic in a sense).

    I am 28 now but I worked from 18-26 years old without a dime (or property) to show for it. Luckily I started to turn that around and saved about $20,000 since then. I am glad I came across your blog at this time. Those funds were collecting dust in a savings account (could be worse than earning 0.75% APR with no fees but that is not exactly having the money work for me). Since starting to read your blog in April, I have now contributed the maximum $5500 to a Vanguard Traditional IRA for this year into VTSMX (I’ll exchange that over to VTSAX next year when I contribute my next $5500), purchased $10,000 of VSIAX (somehow I strayed from ALL your advice and was enticed by the small cap fund, was this a mistake?) in a non-retirement Vanguard account, and have set up my biweekly paycheck contribution to my company’s 401k in an S&P index fund (JFIVX) at $692.30 to get me to the max $18,000 annually (this is very recent, only two deductions so far). Unfortunately my 401k does not match and the S&P index fund has a pretty high 1% expense ratio but it happened to be the lowest of all available funds in my company’s plan. In any case I am still looking forward to the reduction in my AGI!

    I have a lot of growing to do in my life financially (my FI number is about $270,000), professionally (I never finished college but am back on pace to do so in 2017-18 and I recently received a promotion and raise but have a lot more to do), and personally (college, learning, relationships). I believe your blog is helping me tremendously and in more than one area and I really appreciate it. At this point I do not have the fortitude to leave the working world voluntarily as you did many times until I reach full financial independence but in any case your information has shown me the way. I project I should reach this by the time I hit 37 which is not bad considering just two months ago I was mapping my working life through 65 and arbitrarily setting a milestone of accumulating a seven figure nest egg.

    The numbers I present here are superficial and just to illustrate my takeaways from your blog. However the knowledge and entertainment I find in your blog is priceless and was my first in depth exposure to the FI perspective of personal finance which is antithetical to everything I used to read (and I am glad).

    Thanks for all your help so far,
    Marcelo

    Reply

    • Hi Marcelo…

      Thanks so much for sharing your story. You made my day. 🙂

      …and I’m pleased to hear I may have played a small role in laying the foundation for your future success. You’re off to a fine start.

      As for VSIAX, it is not a “mistake” but it is a very focused fund. Still, small caps do well over time and now that you own it, while I might not add to it, I’d just hold it for the long term.

      Enjoy your journey!

      Reply

  17. Mr. Collins,

    I’m so excited I bumped into your website and all these other FI blogs. We have been saving like you do, but never really had anyone/thing to model it after and your blog allows me to make a lot of useful adjustments. I never really thought about the fees I was paying for my S&P500 index fund through USAA. Turns out i’m only paying .15 percent vs. the .05 I would pay with vanguard. I’m guessing, since I already bought my positions, it doesn’t make sense to sell them and move them over to Vanguard, I’ve already paid the fee. I could, however, put my future contributions into a vanguard s&p or total stock market and make a little more money with a slightly lower fee. Between my wife and I, we have about $250k in Roth IRA USAA S&P500 mutual funds. Does this sound right to you?

    Sincerely,

    Rich

    Reply

    • Hi Rich…

      While .15% is modest as ERs go, there is no reason to pay it if you can get the same portfolio for .05%.

      At the very least I would open a Vanguard account for any new monies.

      As for transferring the current balance, it depends on your capital gain and tax consequences.

      If you hold these funds in tax-advantaged accounts you can switch without concern.

      If not, you’ll want to assess your potential capital gains tax liability. For more on this, check out my recent conversation with Erin:

      http://jlcollinsnh.com/ask-jlcollinsnh/#comment-4213431

      Reply

  19. Hi Jim

    I love your blog, I just wish you’d written it about Australia. I can’t seem to find any good Australian based literature, I don’t suppose you’ve stumbled across any worthy reading material re the Australian stock market in your time?

    Thanks!

    Reply

  20. Dear Mr. Collins,
    I have enjoyed your website, great job! I wanted to know what you think of gold , silver and commodities in general. Have you made or lost money on them? I have collected coins (both gold and silver) since I was five years old . I have made a good profit owning them , but I do understand them. I have to say that I am a fan of Jim Rogers. Thanks for your thoughts, have a great vacation.

    Mo

    Reply

    • Hi Mo…

      I haven’t written a post about gold and other precious metals, but I did address the subject in this conversation:

      http://jlcollinsnh.com/ask-jlcollinsnh/#comment-4214514

      A number of years ago I read and enjoyed Jim Rogers’ book, “Investment Biker” about his round the world motorcycle trip and commentary on the world markets of the day.

      But, as for investing, he’s an active investor pursuing strategies that are far to complex and require far too much effort for my taste. Especially given the track record of index investing.

      When I was a boy, I inherited a small coin collection. I tried to get into it, but I have an aversion to collecting things. After a few years I sold it. Didn’t get much and sometimes I kinda wish I’d just tucked it into a draw. It might be fun to check in out today. Of course afterwards, me being me, I just sell it. 🙂

      Reply

      • Hi Jim ,
        Thanks for you response, I use to see Jim Rogers with his custom made Mercedes Driving around all the time. He is a very smart guy. On the side note we just bought a house and I showed my wife your list of why homes are a terrible investments. We do agree with you and we just had to move for the school system. It normally takes us about three to five years to look for a house and we look at over a hundred homes before we make the final decision. I know it might sound crazy but this way we buy below the market price . We also negotiate more than others. We have not lost money on the past two purchases even one during the housing bubble. I counted all the repairs, fees , taxes,closing, buying, selling, and opportunity costs. We have learned that if the house is purchased at the right price from the beginning it’s hard to lose much.

        Reply

    • It works, but you have to click on it.

      Worth doing. Too funny!

      I even made it a Note at the beginning of the post.

      Thanks, FG!

      Reply

  22. Hi! Would like to pick your brain about Vanguard when you have a moment. (I was directed to your series by Budgets Are Sexy!) I am intrigued! My 401K has the following Vanguard options: Vanguard 500 Index FD Admiral (VFIAX), Vanguard Mid-Cap Index Fund Admiral (VIMAX), Vanguard Small Cap Index (NAESX), and Vanguard Tot Stock Mkt Index (VTSMX). I put 100% in the Vanguard Mid-Cap Index Fund Admiral but I am wondering if I should I split up between these after reading your article. I do have a choice of Vanguard Target Retirement too. Any insight you could provide to a novice would be wonderful. Embarrassed to ask but decided to go for it anyway!

    Reply

    • Welcome Tina…

      My choice would be VTSMX. VFIAX would be fine, too.

      TRFs can work, depending on your needs.

      Keep reading thru the Stock Series and you’ll soon understand the reasons why.

      Reply

      • Thank you for your feedback. I made the changes to my retirement plan. My husband and I have set our sights on his 401K as well. I will continue to read the Stock Series! Thankful to be creeping out of the dark when it comes to investing.

        Reply

  23. Hello,
    Have a question that I would like you advise on. I have sold a bunch of my American Century Funds (traditional/Roth IRA $) for VTI recently to decrease my expense ratios. My wife still has approximately $250,000 (traditional IRA) in 2 Columbia Acorn International funds (ACRNX and ACINX) She says that ACINX is a closed fund? Anyway the expense ratios are 0.97 and 0.80 and I want to possibly sell and buy more Vanguard funds. The Columbia funds have been held since the early 90’s and have done OK over the years, but “when” is a good time to pull the plug and reduce expenses? And do you do all or some? After selling my Amer Cent funds we now have a fair amount of VTI. Many thanks for any comments and keep up the great work!!

    Reply

    • Hi Craig…

      Since these are held in an IRA there will be no tax consequence to the sale. That being the case, once you decide what you want to do, do it then. And no reason not to do it all at once.

      Reply

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