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The Simple Path to Wealth

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How about that stock market?!

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sea-storm

Sea Storm

painting by  Sergey Gusev

So, earlier this evening I’m sitting here minding my own business and think, “Mmmm…Let’s just check out that cool new stats page of mine.”

Recently my pal, The Mad Fientist, did the heavy lifting in getting my blog revamped and remodeled. It now has a whole new set of clothes and several new features I still haven’t tired of playing with just yet.

Holy smokes!  Page views are exploding!!!  Seems MMM just put up a post featuring my stock series. In fairness, he did ask if I was OK with it (of course!) first. But it happened more promptly than I guessed it would.

For all you new folks dropping in, Welcome! It’s great that you’ll be visiting my newly remodeled joint. Seems we got the place cleaned up and the good silver all polished just in time.

As it happens, I am in the process of selling our house. We have a “sale pending” and things are moving along in fine fashion. If all goes well, sometime in April we’ll be homeless and renters again. Since we don’t have a mortgage this means we’ll also have a sizable chuck of cash to deploy. So this has had me wondering, “How about that stock market?!”

If you read my Stock Series you’ll learn in detail what I think about timing the market. Here’s the short version: It’s fun and profitable for MSNBC Gurus and a loser’s game for investors.

In that last link, you’ll find my own 2013 market predictions and learn why you should pay them no mind. If you read further in the blog, you’ll also learn what we own and why we own it.

Once the house sale check clears the bank and I’ve redeployed the money, we will hold exactly those same funds in exactly those same allocations. I will have spent not a single moment considering where the market is trading on the day I do it. If you’ve read the Stock Series, you know why.

Now, my only concern with this massive new influx of Stock Series readers is that it has warped the Most Viewed Posts feature. Since the blog’s hosting is new, this feature is only based on the readership of the last week. Until now, that was no problem as the most important core posts had already risen to the top. But now they’re buried, at least for the time being.

If you’re curious, here are a few:

How I failed my daughter and the simple path to wealth

Why you need F-you money

The bashing of Index Funds, Jack Bogle and a Jedi Dog Trick

Rent v. owning

Chautauqua

How to give like a Billionaire

So, my thanks to Mr. MM for his recommendation and kind words, and to you for stopping by. I’m glad you’re here. Enjoy your stay. Add a comment or two if you’d like. Subscribe and we’ll let you know when something new comes up.

 

Important Resources

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  • Credit Cards are like chain saws. Incredibly useful. Incredibly dangerous. Resolve to pay in full each month and never carry a balance. Do that and they can be great tools. Here are some of the very best for travel hacking, cash back and small business rewards.
  • 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
  • NewRetirement offers cool tools to help guide you in answering the question: Do I have enough money to retire? And getting started is free. Sign up and you will be offered two paths into their retirement planner. I was also on their podcast and you can check that out here:Video version, Podcast version.
  • Tuft & Needle (T&N) helps me sleep at night. They are a very cool company with a great product. Here’s my review of what we are currently sleeping on: Our Walnut Frame and Mint Mattress.
  • Vanguard.com

Filed Under: Money

Comments

  1. I was one of those who have become regular vistors after a glowing reference from MMM last year. Loved the ongoing stock investing series. It was proverbial punch in the face I needed to change most of my dosh from the high fee/low performing managed funds service and commission-based salesman to Vanguard managed funds once I moved back to Australia in January this year. Now I have set up regular fortnightly contributions going into the Vanguard high-growth lifestyle option and much happier than before.

    Please keep up the great posts!

    Reply

    • Thanks, and welcome AP….

      You are not alone in coming here via MMM. I don’t have any stats, but my guess is a very large portion of jlcollinsnh readers are MMM fans too.

      Glad you ditched the “high fee life!”

      Reply

  2. Jim,

    I’m always amazed at the different number of page views I receive from different sources. Sometimes 6 people will click over from another site, and sometimes it’s 6,000. I think we humans have difficulty understanding exponential growth and the sheer vastness of the internet… I know I do.

    Reply

    • Hey CR…

      Me, too!

      There are any number of sites that people click over from to come here. And I can always tell when somebody over in the MMM forum has been kind enough to link to one of my posts.

      But when I did the guest post on MMM last spring, the response blew the doors off. Now this post of Mr. MM’s listing the links to my stock series looks to be about to leave that one in the dust.

      We didn’t plan it that way, but I’m glad the new format was up and running in time for all my new guests!

      Reply

  3. Thanks for the very informative investing series. I learned the hard way last year that I don’t know how to pick stocks having lost some of my money, at least it wasn’t a big loss.

    I even ignored my own advice. About three years ago I started an online practice account over at updown.com. I wanted to see how I would do picking my own stocks. For the first two years I beat the S&P 500 by a pretty high margin. This gave me a false sense of confidence in my stock picking ability.

    Well, it was too good to last and as of today I am about 20 percentage points behind the return on the S&P 500 since I began that account. Luckily it’s fake money! I am currently not in the market as I am paying off a big debt load but when I am done with that it will just be index investing for me.

    Your investing series posts are a great road map thanks for putting it together!

    Reply

    • Welcome DD…

      ..and don’t feel too bad. It took me literally decades to figure it out. The problem is that when you get a stock pick that works and it starts to rise on a tear, well, few things in life are more intoxicating.

      This is why I tend to roll my eyes and sneer a bit at all these folks claiming they are outperforming the index funds, that indexing is only for those who too lazy or stupid to do better, and that it it only takes a little savvy to be just like Warren. Reading his annual letters should be enough. How hard can it be just to avoid the losers?

      I cringe and I sneer because those are my own misguided words from not so very long ago.

      Reply

  4. Mr. Collins,

    Glad to hear the house sale is moving right along!
    I do enjoy looking at the market, and I do invest in individual companies that I believe in for the future[*] but I also own VTSAX and if the market goes up, so does VTSAX.
    This means that in my LazyAssInvestor ways, I can catch a snippet on TV or radio about “the market is going crazy and is up 50 points today alone” and know that my investments are heading the right way.

    No thinking, no clicking, no checking individual stocks. No worrying about sectors or anything else. Just “all is well in my world”.

    I suppose with the increase in readership a small ad or two might recover your blog costs if you care for that sort of thing. I don’t think mine runs me more than $100/year, but then again, my blog is more of a reference for my own family/friends of what I do and how I save. It’s never really been geared towards the public, despite being public. Sort of like yours. hehe

    [*]As in, I invest in a company, by buying shares. The company would have to be one that I believe makes a difference, for the long term, which also means it remains profitable over 5-10-15-20 years and beyond. Similar to VTSAX in that I don’t have to think about them.

    Reply

    • Thank you RD…

      ..we are looking forward to being free of it. Just tonight we spent a fun few hours deciding what will make the move and what gets left behind.

      Figuring out how to make a bit of money from the blog is the next step. I certainly want to cover my costs and while it is a labor of love, it is a labor none the less. I like getting paid for my labor, at least a little.

      At the same time I don’t want to “tart it up” like some blogs I see. A fine line.

      Interesting about your blog. That, as you know, was and still mostly is my plan here.

      Good luck with your stock picking. Sounds like you’ve got the right attitude about it. As I’ve said, it is an intoxicating thrill when things go your way. It’s just not a good way to make money. 😉

      Reply

  5. Hi Jim
    I have enjoyed your blog on many occasions and yes I did find you from MMM.

    The concept of F U money resonates with all readers who are working. I enjoy reading different points of view from many different bloggers and have seen you on other blogrolls as well.

    Sorry for the ramble but I would love to see you write about a very important aspect of investing that many young and up n coming financial independent readers need to understand.

    You have touched on it but the psychology of investing is sooo important even if you are on JLCollins autopilot lazy ass etc investor. That is to not to panic when the market goes down. Many experienced and older investors with 7 figure dollars have screamed “uncle” in the last down draft.

    It is really hard to watch your account be reduced by 100,000 to 500,000 dollars in a 2 month period. Much of todays gains are based on a few assumptions on the street.

    1. the banks will start to make loans again(making more money for themselves)
    2. This will help the housing industry and everything that feeds it as well.
    3. QE3 has put a boatload of money into the system and juiced the market.
    4. add in alot of small investor money has been parked on the sidelines and now getting in because they are afraid they will miss out on the rally.(they already did).

    I am happy your blog has gained traction because you do have something to say! Thanks for the interesting posts.

    Reply

    • Welcome Howie…

      As you read thru the stock series you’ll find the psychology of investing woven throughout the posts.

      You’ll also find that I recommend the approach I do not to be “lazy ass” but for superior performance. It is simpler and that’s a bonus. But we use it because it’s more powerful.

      Reply

  6. Hey Jim, I just read your stock articles series also after coming from MMM. They are a great primer, thanks for writing them. It seems I am in a pretty similar position to you in that I have a large chunk of cash that is waiting to re-enter the market. I am wondering whether to buy stocks in one large order (subject to asset allocation), or break up the buys over the course of a longer time period to try to avoid the risk of a downturn in the market (in reaction to the new record highs). Currently the cash is sitting in an au high interest account earning 4.5%. How would you play it out? I realize that timing the market is probably a bad idea but I’ve also heard there can be good and bad times to buy in. Thanks!

    Reply

    • @ Zoltan – 4.5% is one hell of an interest rate in a savings(?) account. Nice work on that one. Care to share more details on what that is? Anyway . . . although I can’t remember where, JLC has addressed your question in the comments of a prior post. In fact, I asked that very same question when I had about $100k to add to my “stash.” His approach was to just go ahead and put it in the market in a lump. When you have time, you might want to spend some time in the comments sections of the various posts. Many good questions asked and answered.

      Reply

      • Hey, I guess the thing that worries me is being the exceptionally unlucky person to have gone all in before the crash at the 1929 peak (as referenced in part IV). I guess i’m wondering why it’s not safer to have invested over say a two year period to mitigate a large loss like that (and risk missing out on a huge windfall in the case of a huge bull market). The savings account is an Australian commonwealth bank account, interest rates are really high in Australia hence it’s easy to find an account with a high rate.

        Reply

        • Hi Zoltan…

          It would be safer to to invest your money over two years, so you are thinking correctly on that. The reason is, as I mentioned in my initial response, effectively you are holding a large cash allocation for most of that time. Cash is less volatile than equities.

          If the market moves down, you’ll do well. If it moves up, you will have left gains on the table. But now you are in the realm of predicting the future.

          There are rare times when the market is at dramatic valuation extremes. 1929. 1999. and, on the low side, March of 2009.

          But, despite pushing record levels, today’s valuations are pretty mid-pack. That, and my admittedly high tolerance for risk, chosen allocation and ability to ride out the storms, means I’ll deploy all of mine the day I get it.

          You should do what makes you feel comfortable. There is nothing worse than wasting time worrying about your investments. If you want to deploy your cash over two years that’s just fine and over the decades you’ll hold those investments it won’t matter much.

          Thanks for clarifying on the 4.5%. Makes sense now!

          Reply

    • Hi Zoltan…

      Prob8 is spot on, and I kinda answered that question in this post:

      “Once the house sale check clears the bank and I’ve redeployed the money, we will hold exactly those same funds in exactly those same allocations. I will have spent not a single moment considering where the market is trading on the day I do it. If you’ve read the Stock Series, you know why.”

      The problem with investing it over time, commonly called dollar-cost-averaging, is that effectively you are holding an outsized cash position while you do it. Since holding cash is unproductive, especially with the low interest rates of today, it’s not my choice.

      If it’s yours, just be sure you understand that’s what you’re doing.

      Also, like Prob8, I’m curious about where you are holding your money and earning 4.5%. Sounds like a bond fund to me and a fairly aggressive one at that. If it is, there’s nothing inherently wrong with it as long as you understand you are not holding cash are are subject to capital loss risk.

      Glad you like the series!

      Reply

  7. Well, I suppose it was only a matter of time before this little gem of a blog was overrun. I wish you the best of luck in keeping up with all the comments that are sure to follow. Hopefully you’ll see a return on your investment as well. Oh, and congrats on the pending house sale too!

    Reply

    • Thanks Prob8…

      …and thanks!

      I’ve always appreciated your participation around here. jlcollinsnh is a long way from the level of, say, MMM. So I’ve room to rum a bit yet I think. 😉

      Reply

  8. I have savings accounts (3 year term) with 6% interest in a certain EU country (no, not Greece nor Spain :)). This is in USD. The interest is higher in the local currency. All gov. insured.

    Reply

    • Thanks Pat!

      With the international readership this blog enjoys, it really should have occurred to me that Zoltan’s 4.5% was simply an account not in the USA.

      D’oh!

      Reply

  9. Guilty, as charged. I arrived here via MMM… and so glad I did. I’ve read through several of your posts, and my favorite (so far) was the one you wrote for your daughter (the simple path).

    Unlike most of your readers, I’m not particularly financially savvy (despite an MBA in Finance!) because it always seemed like too much work to really learn about. Now, because of your blog, MMM, and a few others, I’m finding it’s remarkably simple to get ahead financially, and I’ve started down that road.

    What I struggle with at the moment is the “mourning” effect of having “wasted” so much money over the course of 20 years. On the plus side, I’m not burdened with huge debts since I’m basically frugal. But the opportunity cost of all that wastefulness is haunting me a bit. I know it’s sunk, and I need to move on… and yet, it seems a moment of silence is in order.

    Anyway, THANKS for the awesome blog, congrats on the house, and your daughter is very lucky to have you (though she may not know it yet).

    🙂

    Reply

    • PS: On the apparent “frugal” vs “wasteful” paradox… I was frugal enough to live within my means, but wasteful in that I didn’t save or invest for financial freedom.

      Reply

    • Welcome Lisis….

      ..glad you found your way here.

      The Simple Path is one of my favorites, too, and it’s been one of the most popular.

      The whole idea of this blog to start was to put down some thoughts on investing and life for my daughter for when she was old enough to be interested. I’m still a bit stunned it has found a wider and growing audience.

      I hear you on ‘the “mourning” effect of having “wasted” so much money.’ I’ve made countless mistakes that have cost me a small fortune and the stories of many are sprinkled in the posts. When I really want to depress myself, I count it all up and figure what it could have earned in VTSAX over the years. 😉

      It has been an expensive education and if the info here in the blog helps others avoid the same traps the effort will be worth it.

      Thanks for your very kind words. Hope to see in the comments going forward!

      Reply

  10. Great new look! Very fresh.

    So, a renter once more? Sounds like you’re looking forward to it. Are you planning on living near to where you currently own? Becoming a traveling vagabond? Moving to Ecuador? The flexibility is wonderful, no?

    Congrats on the additional traffic. Wonderful blog and well deserved.

    Best wishes!

    Reply

    • Hi DM…

      Nice to see you back around these parts. I have been keeping tabs on your portfolio over on your site and always enjoy your posts.

      Yep! We’re moving to an old mill building that has been converted into loft apartments. It will put us in walking distance to the cafes, restaurants, summer events and library the city offers.

      The traveling vagabond/Ecuador stage is 3 or 4 years out.

      Reply

  11. You have me convinced on VGSLX. I don’t currently have an inflation hedge. Problem is, it’s closed to new investors. Can you recommend something similar (from Vanguard or another company)?

    Any help would be greatly appreciated. :o)

    Reply

      • I just spoke to Vanguard. You’re right, it’s open to new investors but only if you buy it through Vanguard. It says that it’s closed when I try to buy it through another major investment house. When I spoke to Vanguard, they said I’d need to buy VGSIX if I went through a non-Vanguard investment house. VGSIX is basically the same fund except that it has a .23 expense ratio instead of .1. I’ll probably be opening a Vanguard account to grab the lower expense ratio. Evidently the “admiral” shares are only available to Vanguard account holders.

        Your blog is very helpful.

        Reply

        • Thanks Jason….

          I appreciate your filling us in. This explains why some have reported the funds I mention as closed.

          I’ll be quoting you going forward!

          Thanks for adding to the info base here!

          Reply

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