Stocks — Part XXXII: Why you should not be in the stock market

A couple of weeks back my pal and fellow Chautauqua speaker Firecracker and I were talking. At one point I was sharing with her an insight I had begun to develop about myself. Namely that I simply must be fundamentally wired differently than most folks.

One of the key human characteristics that research has nailed down is that we are more loss adverse than gain driven. Makes sense. Back in our hunter gatherer days those who survived to pass on their genes  were more focused on avoiding being eaten by the tiger crouching in the tall grass than in gathering more roots or snaring an extra rabbit.

With tigers (sadly) few and roots and rabbit available in the supermarket, we now apply these evolutionary tendencies to a fear of loss in the stock market that is greater than the prospect for gain. But not me.

I, I told her, am much more bothered by missing out on the market’s rise than I am bothered by those times it drops. The market plunges and I yawn, roll over and go back to sleep. But let it rise with me having cash on the sidelines I hadn’t gotten around to investing and there is wailing and gnashing of teeth. The prospect of gain, for me, is far more enticing than the fear of loss.

No, she said after a pause to consider this case I had made, that’s not it at all.

For you there is no loss and so no fear of loss. Your understanding that the market always goes up and that its periodic plunges are so normal, expected and temporary means that, for you, there is no loss. There is only a temporary drop before the inevitable continued climb. Missing out on that climb is the real risk and that is your real fear.

It is not that I’m not afraid of tigers, it is that I know what is rustling in the grass is a sweet house cat pretending to be a tiger. The Nightmare on Wall Street is only a spooky story told to drive media ratings.

This all may seem obvious to you, but it was a revelation to me and while it shattered my conceit that I was a special little snowflake, it also revealed an even more important insight. If you are going to survive the next plunge without losing sleep or, worse, selling at the bottom in a panic, this is the mindset you want to cultivate for yourself.

I started this blog in the spring of 2011. By then the market had already been going up from its March 2009 bottom for two years. It has since gone up seven more. It has been a long time since a truly ugly bear has tested investors’ nerve.

If you are going to follow The Simple Path to Wealth described on this blog and in my book, it is critical that when the market plunges you ignore it and stay the course. If you don’t, if your nerve fails and you sell in the panic all around you…

The advice on this blog and in my book will leave you bleeding by the side of the road

There is no shame in understanding yourself well enough to know that a market plunge is more than you are willing or able to endure. Indeed I recently published a guest post from my pal Mr. Moose on his WARM strategy just for you.

But if you are on The Simple Path I’ve laid out, you have to be absolutely clear on this, especially if you have never lived thru a major crash. So right now, do yourself a favor, write this down and post it somewhere you can see it:

When the market crashes, for me, selling is simply not an option

When you buy VTSAX or a similar broad-based stock index fund your holding period should be forever. Once retired and living off the portfolio you’ll take the dividends in cash and maybe sell ~2% of your shares to reach the target withdrawl rate of 4%. That’s the only selling you need ever do and it certainly won’t be driven by what the market is doing at the time.

For this jlcollinsnh approach to work for you…

…you must stay the course when the market gets rough.

If you find yourself nodding and thinking, ‘Well of course!’, bear with me a little longer. Gather closer around the fire as darkness closes in and the coming storm builds.

Yes, you say, I already know this. The last time, back in those ancient days of 2007-9 the market lost ~50%. I can handle that, no sweat.

Would that it were that easy.

See, here’s the thing. Back in March of 2009 when the market hit bottom and those staying the course had seen their portfolios get cut in half…

Nobody knew then that the market had bottomed

Indeed, all of the smart guys I spoke to at the time were predicting the market would fall another 2/3rds. And their data and arguments were very persuasive. Especially for investors who had already watched their holdings relentlessly fall for some 18 months running.

Let’s look at this with some mathematically easy numbers.

Suppose after years of investing and saving your nest egg had reached the princely sum of $1,200,000 by 2007. By March 2009 it has been cut in half and you are now looking at only $600,000, reached by a months long grind of falling prices. And, as painful as this is, what you are now hearing all around is that you can expect this to be cut to $200,000 before the dust settles.

This, of course, turned out to be wrong. But you had no way of knowing that at the time. Trust me when I tell you emotions, especially fear, are running high.

This is why, if you are going to be on this Path, it is critical that, while things are calm and your mind is unemotionally rational, you hard wire your brain with this:

When the market crashes, for me, selling is simply not an option

You must tie yourself to the mast and avoid the siren song of panic.

To be clear, I am not predicting a bear market. My advice today is the same as that in 2013 when I wrote Investing in a Raging Bull.

As I have said many times in the posts and comments here, nobody can time the market. I have no idea what the market is going to do tomorrow, next week, next month, next year or five years out. Go out ten years and my bet is it will be higher. Go out 20+ years and assuming the United States and civilization in general have survived, the market will almost certainly have rewarded us handsomely. If we stay the course.

One of the most common questions I get runs along the lines of:

I have $xxx,xxx and want to invest. But the market is at an all time high. Wouldn’t I be better off waiting until it corrects 20%?

Here’s the short answer:

If you are asking this question you are not ready to invest. You don’t understand how the game works and what to expect from the ride. Until you do, stay away from the market.

Here is the longer answer:

  • The market is routinely setting new highs. Look at the chart in this post. The market always goes up over time and it is always setting new highs as it does. In fact, the market goes up ~3 out of every 4 years. In fact, the market has set new highs almost every month since March 2009.
  • Of course you would be better off if the market dropped 20% and then you invested and then it started back up again just for little old you. But as richly deserving as you most certainly are, the market is very unlikely to do that for little old you. It might just keep going up, leaving you in the dust. It might drop 19% and then go back up before hitting your 20% target, leaving you in the dust. It might drop 20%, see you invest and continue to fall.
  • Oh, and don’t expect Dollar Cost Averaging a lump sum to save you. Here’s why.

But here is the biggest problem with that question:

Along with the lack of understanding it reveals, it reveals the fear that lack of understanding leads to. And fear leads to panic when the market gets rough.

If you are afraid to invest your money today because the market might drop tomorrow, how will you feel once it is invested? There really is no difference.


*Both Chautauqua weeks have sold out. However, please feel free to put yourself on the:


What is a Chautauqua, you ask?

My take — Chautauqua 2018: Mount Olympus

What the speakers have to say:

Millennial RevolutionChautauqua: Come Join the Family   (This is a brilliant post with all the details!)

1500 Days to FreedomMeet some awesome people… (Another brilliant post, this one with dinosaurs!)

ChooseFI — Oh, the Places we will go   Chautauqua in the words of the speakers who will be in Greece. There is nothing quite like hearing the voices behind the words.

Also, be sure to listen to this episode with Travis Shakespeare.  Travis is a master story teller and, among other things, he shares three:

  • How the FI movement fits into the cultural fabric of America and its traditions of rugged individuals charting their own course.
  • The coming documentary on the FI movement of which he is the director. (Travis is a professional filmmaker)
  • How he decided to come to Chautauqua and what it has meant to him. One of the best insights I’ve heard or read yet.

Mad FientistMoney Talks panel discussion at Chautauqua UK  Attendees discussing FI and also a great inside look at the Chautauqua experience.

JL CollinsGreece 2018 Mount Olympus


My pal Firecracker also recently linked to my five part series describing my condo disaster way back when. It seemed to strike a cord with a lot of people so, in case you missed it, here is Part 1 of…

How I Lost Money in Real Estate Before it was Fashionable



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Important Resources

  • Talent Stacker is a resource that I learned about through my work with Jonathan and Brad at ChooseFI, and first heard about Salesforce as a career option in an episode where they featured Bradley Rice on the Podcast. In that episode, Bradley shared how he reached FI quickly thanks to his huge paychecks and discipline in keeping his expenses low. Jonathan teamed up with Bradley to build Talent Stacker, and they have helped more than 1,000 students from all walks of life complete the program and land jobs like clockwork, earning double or even triple their old salaries using a Salesforce certification to break into a no-code tech career.
  • 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.
  • Empower 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.


    • Mr. 1500 says

      I hope it’s not just sitting in cash though; especially if you’re young.

      Jim mentions loss aversion in this post, but risk aversion is another behavior that can hinder us.

    • Anna says

      CDs and Bonds are the riskier things I invest.
      Although it has been true that US stock Market always went up in the past while US was the global leader, that might no be true now that clearly US has lost that position to China and our president is helping a lot with that. I hope JLC continues to be right until he ins’t anymore

      • Kamil says

        That’s why I’m not trying to guess which country will take the lead in XXI century and I’m fully on board with global market.

        • Subbuteo says

          The stock market leading companies in the US are usually leaders globally so even if things take a turn for the worst in the US, the stock market is likely to continue to do okay. That said, I invest globally too.

    • Dave says

      Hi Anna, Everyone should manage their finances in a way that lets them sleep at night. Fear of loss is powerful and sometimes crippling emotion.

      Guaranteed investments like CD’s have their place in a portfolio as do bonds, at least for some situations. For longer time horizons those two investments are virtually certain to fall short of inflation. That leaves working much later in life as the only realistic way to offset the loss of buying power to inflation.

  1. Financially Free, Pharm.D. says

    Back to the basics – staying the course and not selling when there is panic. I remember reading these words of wisdom early on in your stock series. Still a good reminder, and always reassuring to know your sensei practices the words he preaches! ????

    PS. What do you mean by having money on the sidelines you haven’t gotten around to investing yet?! ????

  2. Ms. Maxi says

    That blog post is highly welcome, because recently I have been thinking about exactly that: will I be able to handle a market crash?
    As my cash is starting to pile up in my account (invested), I am getting more and more anxious to test the water to see if I can really weather the storm.

    So, let’s set a new mantra: When the market crashes, for me, selling is simply not an option

    And this mantra is going straight to my vision board!
    Thank you Jim, for being a grandfather to us rookies and educating us! 😉
    Ms. Maxi

  3. Jason@WinningPersonalFinance says

    Another classic Jim. Fear of loss is the single most common idea that prevents people from investing in the stock market. It’s fantastic that blogs like yours are out here educating the public. Once somebody can get their head around the stock market always going up over the long term, they are ready to invest. And do so for the long term. There’s no reason to stress about the ups and downs of the roller coaster. Once they do get it and start investing, they put themselves in a position to win!

  4. ex-Sgt Pepper says

    Excellent post Jim. I can absolutely relate to the “fear > greed” and it is only after reading (repeatedly!) explanatory posts such as this by you and MMM that I’ve come to settle comfortably (ok, that’s a relative term) with the concept. You’ll be heartened to know, as I learned through a finance article a few weeks ago, that the recent 10% January drop precipitated a storm of trading activity just about everywhere except… Vanguard account-holders. So this message is getting through, I believe. It’s so important to acknowledge that what seems obvious in hindsight (e.g., that somewhere in 2009 was the bottom of that particular swoon) is crushingly difficult to predict in real-time. We bought a house in June 2008, after the initial 15% drop in price, thinking it was a housing bottom, only to watch it drop much further.

    • jlcollinsnh says

      Thanks ESP…

      …your ’08 house is a great real world example.

      We’ll see during the next 20%+ dive how well the message has sunk in. My guess is, not very. 😉

  5. Syed says

    This post hits me hard. I’ve been a reader of your blog and other like minded blogs while getting my initial investing education from the Bogleheads. So I know that the market will always drop at some point and I should not be panicking but buying more stocks if I get the chance.

    I started investing in July 2009. Almost exactly when the market started its current run. And being almost exclusively in Vanguard stock index funds, the ride up has been really fun. I don’t know what a bear market or recession feels like. Sure I read a lot about the recession in 2008, but I was still a student and had no skin in the game. I literally haven’t had a year in which my investments have lost any money.

    I don’t say this to boast at all, because it’s just coincidence to have started investing when I did. That’s why I appreciate this post. I know a drop is going to happen, and I know I should not sell. But I also know I’m a human and I will have some twinge in the back of my head that wants me to panic and put everything in a money market fund. But I will try my best to stay the course! Thanks Jim for the important reminder.

    • jlcollinsnh says

      Hi Syed…

      Geezer that I am, I have been thru numerous market plunges and they feel common and expected.

      I need to remind myself that there is a whole new generation of adults, like yourself, who have been investing for years and never have.

      When I do, it leads to posts like this one. 🙂

  6. kyle says

    Great insight, as always Jim. ‘Stay the course’ is an investing tenet and philosophy that every new and old investor should constantly remind themselves of.

  7. tony says

    Not only do I tell myself that a loss in the market isn’t a big deal, I also tell myself that it’s a sale. I’m very new to investing (maybe 6 months?) and I’m waiting in anticipation for the chance my monthly contributions are able to buy stocks on clearance! Not that I’m saving a stock pile of cash trying to time the market, but every time it goes down at the end of the month, I celebrate a little inside.
    And when everyone else screams and rants about the market when it finally does drop out, I will be dancing a happy dance!

  8. Renee Cue says

    Good afternoon! You helped me back in October at the Chautauqua think more clearly about how much to keep out of the market vs. in in order to handle the risks asociated with the short-term volatility of the market. I took your advice to heart, figured out 3 to 5 times annual expenses and targeted that amount in cash/fixed. Voila.
    More importantly, you helped all of us internalize another truth; we have power, flexibility, adaptability and life is so much more than the net worth statement.
    Cheers to you!

    • jlcollinsnh says

      Hey Renee…

      Great to hear from you!

      Sounds like you’ve made great progress.

      “…we have power, flexibility, adaptability and life is so much more than the net worth statement.”

      Well said 🙂

  9. Susan @ FI Ideas says

    Thank you Jim for your experienced guidance. Because the market has been up for a very long time, some of the newer investors may not have experienced a prolonged downturn. I remember when our net worth crossed the 1 Million mark and I told my husband to expect to see it cross that line many times. And it did. It took quite a hit in 2008 but we just kept plowing money in. It is easier said than done. Love that Tiger analogy!

    P.S. I am a lucky ticket holder for week 2 in Greece. It will be great to meet you in person. Who knows, maybe the market will be down and we can see how people are holding up.

    • jlcollinsnh says

      You and I, Susan, have the advantage of having seen this movie several times before.

      But, like I said to Syed above, I have to remind myself there is a whole new generation of folks who have now been investing for years without having lived thru a serious bear. 🙂

      See you in Greece!

  10. techwiz says

    Great post.
    I always need reminders of not timing the market. I did buy the recent dip with my new years contributions into my tax sheltered account, but should just plow the money into the market when it’s available. (in the long run I will likely be holding too much cash for too long if I wait for dips)

    No point to be afraid of Tigers, and Bears… but stay away from the Lions!

  11. Prob8 says

    Having been an investor during the dot com boom/bust and the following great recession I can attest to how difficult it is to see your portfolio get decimated. Nothing like a couple 50 percent haircuts to test your mettle. Although I didn’t sell, I’ll admit to being afraid to put more money in. Foolish in retrospect but at the time (both times) it seemed as if if the sky was falling. Even though I remain heavy in VTSAX, the stench of fear still lingers. I know the elevator down is coming and Dr. Lo can’t save me. Having lived through a couple of these, I also know I have what it takes to walk the stairs back up. Nice to know I’ll be walking those stairs in good company. Great post. Hope you are well, Jim.

  12. Mr. 1500 says

    “But let it rise with me having cash on the sidelines I hadn’t gotten around to investing and there is wailing and gnashing of teeth.”

    “No, she said after a pause to consider this case I had made, that’s not it at all. For you there is no loss and so no fear of loss”

    But I think you do have fear of loss. It’s just different. People are most fearful of losing stuff they already have. That’s why they freak out and move to cash when the market has a little fart.

    You have an evolved form of loss aversion in that you’re fearful of missing out on something you don’t have yet, but probably will attain (future market gains). Of course, this form of loss aversion is much healthier than the other kind.

    I like the boat picture. Was that intended to be a shoutout to Vanguard? 🙂

    • jlcollinsnh says

      Caught me in my FOMO 🙂

      Yep, that and I couldn’t think of another animal picture that would fit. 😉

  13. Collin says

    What you write here isn’t bad advice, and I don’t have a problem with you advising people in this way. And what I’m about to say might not be helpful, but after reading your article I felt compelled to mention it.
    Your statement that the market always keeps going up is true under the right time frames and conditions, but it is not an absolute guarantee.
    The market keeps going up over the long term due to factors such as population growth, productivity growth (usually due to better technology), and money supply.
    None of these factors are completely immune to contraction, and a period of stagnation longer than most people are retired for (20+ years, for example) is not unheard of.
    Japan, for example, had a really lackluster market for a long time due to demographic trends.
    I do think there is a 80 – 90% chance that the market will continue to trend upward in the long term for our lifetimes, but to assume that it is surely a certain thing is either not understanding the long-term trends that drive the market up, or just having a really optimistic view of life in general.

    • jlcollinsnh says

      Your concern is, by far, the most common objection raised in this Stock Series. As such it has been addressed many times.

      I encourage anyone interested to read thru the entire stock series and comments, not only for perspective on this, but to fully understand the approach before making any choices.

  14. Barbara Hughes says

    Thank you as always for the very timely reminder to stay the course.I know intellectually that continuing to invest is always the right path but it’s sometimes more difficult to align this with emotionally.I am as always enormously grateful to you for your book which I gave to all my nieces and nephews when it was published,regards Barb ara

    • jlcollinsnh says


      …important to know in the gut as well as the head. 😉

      Hope your nieces & nephews enjoyed and benefited from my book!

    • jlcollinsnh says

      Hi QT…

      It can be a terrifying experience, no error.

      Which is why you want to sort how you will react to the raging storm before it comes.

  15. Tracyl5 says

    I don’t think I’ll have any problem staying the course; actually, I’m pretty sure I’ll think of it as a sale since we’re currently contributing $5,000 a month to our accounts… But it WILL be crushing if we can’t retire as we’re hoping to in 4 years or less. We’ve been doing so well, and it’s tantilizingly close! But we’ll do what we have to do :o/

  16. Raman K says

    I can’t say that I have seen a bear market. However, after the long bull run of 2017 when the market reached a peak in January and corrected by over 10%, I for one did not lose my nerve and sell. I knew I had to hold on as I still owned the same number of securities as before. Just their value had been reduced due to uncontrolled public sentiment. And for this I am really happy!

  17. Justin says

    I noticed that the RSS feed for the site has been a partial feed for some time now and wanted to express interest in a return to a full feed. Full feeds are much more convenient as a reader, I like having articles all in one place so that I can read on the go. I flag posts that I find particularly interesting on the initial read through so that I can peruse comments on my computer at a later time. Unfortunately the partial feeds don’t show enough text for me to get a good feel for the article to know if I’m interested and clicking the link on my phone is inconvenient. Is there a chance that the site could be changed back to a full feed?

    • jlcollinsnh says

      Hi Justin…

      Actually, this is the first post with the new approach. We’re going to try it this way for a while and see how it goes.

      Hope you’ll give it some time.

    • Adam says

      This happened once before. I commented then and it was returned to the full feed. I wonder if we can do the same again. 🙂

      Obviously forcing people reading via RSS to come direct to the site increases traffic and allows you to gather statistics. But like flashing adds, popups, etc., but because it helps the metrics / adds to the bottom line doesn’t mean it’s the right thing to do. 😉

  18. FIRECracker says

    You made me sound WAY too articulate. Not a single swear word or incoherent rambling was mentioned.

    Maybe you can be my speech filter from now on. Insanity + profanity + rambling -> JLCollins filter -> intelligent human speech. TADA!

    Btw, I love this line “You must tie yourself to the mast and avoid the siren song of panic.”

    I’m good with ropes, so there’s that 😉 Bring on the rough seas!

    • jlcollinsnh says


      Just look at your lovely, articulate comment right here. Fuckin’ great!

      Good with ropes, eh?

      Bryce is a lucky man. 😉

  19. Accidental FIRE says

    I survived the 08-09 crash and didn’t sell a darn thing. I held tight. I know I can do the same for the next one. Is it fun? Nope. But I know I can do it. I would like to think I’m only getting wiser as I age…..

    • jlcollinsnh says

      Be it wisdom or sheer endurance, staying the course thru 2008-9 is a good indicator you’ve got what it takes. 🙂

  20. Ms ZiYou says

    I love your approach Jim, and I’m still waiting to see if I will hold my nerve when the next crash comes, as this will be the first one when I have a significant amount invested. I’m pretty sure I will, but everyone says I have to experience it!

    • jlcollinsnh says

      Thanks Ms Z…

      …and that is why you want to decide now what you’ll do when the crash comes and not in the middle of it and all the noise. 🙂

  21. David B. says

    You told me this a long time ago “When the market goes down and your portfolio doesn’t the same, you haven’t lost any money- it’s just that the numbers you are looking at got smaller. If you can ignore the reduction then the numbers will eventually rise and you’ll be happy again. You don’t lose money if you don’t cash out” … or something like that. I’ve practiced that discipline and fairly mastered it. It works.
    Call when you have some time. I’ve got some positive changes in my life.

  22. M says

    Hi Jim,
    great post, I was wondering did you sell any in the bottom of 2008-09? or other major drops.If you did , how sure are you that you yourself would hang on to the ride down? We always say we will do things differently next time , but as humans we keep repeating the same mistakes. I know I have. I liked your google talk. I also like Charley Ellis and Burton Malkiel: “The Elements of Investing” Talks at Google.
    I think Buffet’s idea to buy continuously over time makes sense so you won’t be buying on top of any market condition. SP500 makes more sense to me, they rotate ten to forty of the stocks every year. It’s almost like a wonderful scam.

      • M says

        Thanks Jim,
        I just read it, I’m impressed that held on during the 2008 downturn. It takes a lot of nerves. I always like to have cash on the sidelines. I read a great book years ago,”where are the customers yachts”. He gives a great advice in the end that if you are patient every four or five years we normally have a big plunge. If you have cash that’s when you deploy it. If you have not read it , I think you would like it. I think it is available in a free pdf format on the web.

        • Steve says

          Amazing how well this book has held up. Not just investing advice, but how corrupt and self-dealing Wall Street has always been. There was nothing fundamentally new about the fraud leading to the 2008 crash.

  23. Markola says

    Hi Jim, It’s so psychological, isn’t it? One tool that helped me find out how my own profile is the free Investor Questionnaire on the Vanguard site.
    When I answered it – honestly – (Question 4 about how I ACTUALLY behaved in the 2008 crash made me look hard in the mirror and sweat a bit) I learned that this particular snow flake nearing early retirement should own 40% bonds. So, over the last few years, I’ve drifted to 60% stock index and 40% bond index down from 80/20. I know you like 75/25 for yourself. It “feels good” to know that we’d have several years expenses stashed in bonds, which actually went up during the last crash years, and hopefully would again.

    My question for you: I never paid attention to stock yields back during last crash. Did they zoom up? If so, that would be some compensation, at least.

    • jlcollinsnh says

      If by stock yields you mean dividend percentages, then yes when the stock price falls the dividend percentage rises by definition.

      Of course, this doesn’t change the actually dollar amount of your dividend unless the paying company choses to cut or raise it.

  24. mike says

    Loss aversion vs. gain driven. I agree Jim, we’re wired more toward loss aversion.

    In Vegas, when gambling, I get way more upset by losing money than by being happy through winning money. And I think most people feel the same way. That being the case, it dumbfounds me why people continue to gamble. Especially knowing the odds are against them.

    With the market though, one has to use common sense, have a basic knowledge of statistics, and realize that over time the market goes up. FACT.

    Jim, another thoughtful post, my mentor extraordinaire.

  25. Steve (NWOutlier) says

    Just a quick note; a market drop for someone that has been in the market for 5, 10, 20 years isn’t really a drop…. Hear me out; assume I invested 50k and no more; 15 years later it is 100k… the market drops 25%…. have I ‘lost’ money? My investment is still intact – the value has just adjusted.

    Most examples I read, using the same numbers above, typically use a short term example; I invest 50k, the market drops within a year or two (or a month) and in this instance, sure – there is lost money, but not ‘realized’ losses if you don’t sell.

    So the longer you’re in the market, the lower the risk in my opinion. I’ve read somewhere (maybe here?) – Time “in” the market is better than “timing” the market.


    • jlcollinsnh says

      I’ve used that phrase, and agree with it, but it is not original to me. I don’t actually know who coined it.

  26. paul delyria says

    Wouldn’t it be reasonable to sell and then buy another total market index fund to take advantage of tax loss harvesting?

  27. The Frug says

    Great post. I’ve been FI since 2013 and have never left money on the sidelines. I do keep a years worth of expenses in a tax free (for VA residents) Virginia municipal money market fund that’s part of a 20% overall bond allocation. These are there to smooth the ride and allow me to avoid selling any stocks during a downturn. The current tax free yeild is 3.19 %, that I reinvest to build up the up the fund, so even with a big market drop, I’ll have a year to ride out the storm before I start selling other bonds in our portfolio. Hopefully never touching the stocks. Curios if others use this strategy.

  28. Jill says

    Hopefully I’m not being naive – but I’m not worried at all. I’m on the Simple Path to Wealth plan for sure. Here’s my plan for when it happens:

    Mantras: You have the same number of shares you have had and growing! No one’s taking my shares from me. Protect my number of shares!

    Actions: 1. make sure my auto purchases to Vanguard are squeezing every penny out of my accounts. 2. Just don’t check my vanguard accounts much. 3. Take a break from personal cap. 4. Be excited about buying shares at a discount.

  29. The Poor Swiss says

    Excellent post! It’s very good when posts are accompanied with facts and math, rather than simply some advices. Keep up with the good work.

    “You must tie yourself to the mast and avoid the siren song of panic.” That’s a very good quote 🙂

  30. John Casey says

    Thanks for the reminder Jim. Always welcomed. During the recent mini-correction where the market dropped 10% I remember my knee jerk action of concern. I then took a few deep breaths, increased my 401(k) contribution rate another 5% and hoped the market would continue to fall (I’m 47 with a 15-20 year window on accessing my fist retirement dollar). This was a good test run on my reaction to the market dropping.

    Investing is 95% behavior and 5% fifth grade math. Thanks to people like you, Mr. Money Moustache, Paula Pant , and Mike & Lauren I finally get it. Thanks again for sharing your wisdom and spreading facts over fear.

    • jlcollinsnh says

      “Investing is 95% behavior and 5% fifth grade math.”

      Well said.

      “…hoped the market would continue to fall”

      Me, too. I think a nice solid ~20% drop would be very healthy just about now.

      But, of course, Mr. Market cares not a whit for what we think or hope. 😉

  31. Scott says

    Thanks for this pep talk Jim, it is good to keep this fresh in mind should the claws come out.
    I have been eagerly waiting to hear more about your home ownership project here in Wisconsin. Are you regretting that decision yet?

    • jlcollinsnh says

      No regrets so far, Scott.

      The work is taking longer than I had planned and it now seems unlikely that it will be ready to Airbnb for this summer season. Guess we’ll just have to enjoy the summer here ourselves. 🙂

      A bit to my surprise, I have really enjoyed the winter here. The lake is ever changing and ever beautiful. The day may come when I get tired of it, but for now I remain stunned at how lucky I am to wake up to our view each day.

  32. Wealthy Doc says

    I didn’t panic after 10/19/87. I didn’t lose during 2000. I did not have such resolve in 2008 though. I didn’t quite panic and sell, but it shook me for sure. Once I got my money “back.” I shifted to a more conservative asset allocation. I have not been bothered by lost upside at all. I’m more loss-averse (like most people). I feel more confident going into the next crash. Since I’m already FI and working part-time (since I enjoy my work) I don’t feel the need to take the added risk (short-term fluctuation) of a higher equity percentage.

    • jlcollinsnh says

      If you weathered those storms, you should be good to go for whatever Mr. Market comes up with next.

      ’08 was a nail biter for sure, but using it to refine your asset allocation thinking is the ideal way to deal with it.

      Well played!

  33. Lady Dividend says

    I cleaned up my portfolio a few years ago and got rid of individual stocks. Now I feel confident enough to never sell, even the market tanks. That short term benefit ain’t got nothing on the long term dividends.

    • jlcollinsnh says


      One of the many beauties of a broad-based index fund like VTSAX is that it is “self-cleansing” and you can hold it forever.

  34. James says

    “When you buy VTSAX or a similar broad-based stock index fund your holding period should be forever. Once retired and living off the portfolio you’ll take the dividends in cash and maybe sell ~2% of your shares to reach the target withdrawl rate of 4%. That’s the only selling you need ever do and it certainly won’t be driven by what the market is doing at the time.”

    I really love this statement – it puts my mind at rest for one, knowing that i never need to think about selling and also reaffirms how long i’m actually going to hold these index’s for if i’m true to my beliefs (forever)!

    Thanks Jim

  35. Down-under says

    Hey Jim

    Back in the ‘dark days’ of 08-09 I was in the midst of a career change, not the best time for that as it turned out. I was sitting comfortably, house paid off and the ‘FU’ money in place.

    It was a gloomy time and their was noise in the media that it was the end of stocks and the financial system as we knew it.

    I was on about $25 an hour and one of the banks here was trading about the same price per share. Going to work each day at 4am, I focused my mind on the concept of 1 hour of my working time, give or take was buying 1 of these shares. Each pay period I bought 80 or more of the shares. When the market moved up I unloaded them all for around $68 per share. In the end, my working hour was worth $68 + dividends.

    It was a very nice deposit on a rental property and a lump sum into our equivalent of your 401(k) invested 80/20 shares / other options, we have these investments to this day.

    If I had held out the shares went up to just under $100 per share but the game was over for us at that point and time to take the money off the table at $68.

    Nice story and outcome, but the key for me is that we must forget the noise and the gloom, have a plan and see through the dark days as the sun always comes out again.

    all the best

    • jlcollinsnh says

      Hi DU…

      While I am not a fan of buying individual stocks, I do love your way of conflating the price of your labor with the price of a share and then noting how rising share prices equaled more money per hour of your labor. 🙂

  36. Sput says

    Good post! Your mantra goes hand in hand with the one I’ve used since I first started investing in 2004. Anytime the market dips (or tanks as in ’08), I just tell myself, “Buying at rock-bottom prices. Buying at rock-bottom prices.”

    I have found that by taking the focus off the money I already have invested and focusing instead on putting more in, I don’t spend as much time worrying about how much I’ve “lost”. And besides, I haven’t lost anything yet because I haven’t cashed out!!

  37. Cammie says

    Thank you for this info, it’s so good to hear this side of the market run up! My father retired in June of 2007 at age 63, picked up a part time consulting gig and I remember him saying – stay the course. It was easy for me because I had about $5 invested but even when his $million+ nest egg diminished to half he held steady. He’s glad he did especially now. I asked him the other day if he diversified into bonds now that he doesn’t have that consulting income …he said he doesn’t believe in bonds and the low return. I’m not sure I can stomach a drop like that but it’s food for thought and I appreciate his grit and his approach.

    • jlcollinsnh says

      Your dad provides an inspirational example and I too admire his grit.

      Just curious, since he doesn’t like bonds, does that mean he is 100% stocks?

      • Cammie says

        I haven’t seen his monthly reports but he did say he was 100% in stocks. I was shocked but my guess he’s heavily in large-cap value. As I make a career shift into financial advising myself I’m sure I’ll have more conversations but I guess he’s on one extreme for a 73 year old!

        • jlcollinsnh says

          My guess, Cammie…

          …is that he is no longer investing for his lifetime. He has moved on to investing for his heirs.

          A process I am going thru myself and hope to post about at some point.

  38. Nick says

    I think part of dropping the fear of loss is being happy with what you have. I really want for nothing at this point, so I don’t fear losing money anymore.

    When the market crashes, for me, selling is simply not an option

    • jlcollinsnh says

      Good point, Nick…

      …and, as an extension, knowing you could still be happy with the less you used to have.

      Love your last line 😉

  39. Andy says

    Awesome post this just sums up my realization yesterday. I was trying to run number of why having several years of money sitting in cash (suggested by a financial advisor) to outlast an extended down market was better than reverse dollar cost averaging. I couldn’t find a scenario longer than 5 years that cash was better. And for the most part it is much worse because of not catching the upside of the market always going up in the long run. Then I thought “what would JL Collins have to say”, and bam you just wrote an article on it a week ago. Thanks for sharing your knowledge! You have definitely changed my approach over the years.

  40. Debbie P says

    I’ve been investing in VTSAX for just over a year now (and my 401k since 2013) so I haven’t weathered anything yet. But….the way I look at it is that I’m investing money that I don’t “need” (i.e. excess to my day-to-day living expenses + 6 months worth of emergency fund). Therefore if the market crashes, I have no need to pull that money out. If I did, I would instantly make a huge loss, so where is the incentive to do that? Basically I have absolutely no incentive to sell in a market crash. I love what you said about the holding period being forever – that is the best way to think about it.

    • jlcollinsnh says

      Hi Debbie…

      I think the incentive is fear, specifically fear of further loss.

      But I like your way of thinking better. 🙂

  41. Jamese20 says

    Hi Jim,

    i am more of the guy who is constantly saying to myself “why was I such a prat in my 20’s blowing all my spare money on gambling, women and alochol” I could be FI by now! that feeling is worse than any bear market I will ever face for sure! so I have no fear in fact I am secretly hoping for a crash in 12 months time when I can go full steam ahead into investing.

    One thing I would say, after reading the intelligent investor I do like to ask myself what such sound business minded person like ben do today? and I feel he would be only 25% invested in stocks and 75% in bonds if he was starting out right now… would you not agree? isnt there an argument for sensible evaluation on this and being more in stocks when valuations get more “value” orientated and therefore get the best out of both worlds in a sense? I have this sneaky suspicion you were doing this yourself whilst in your wealth building mode? 🙂 to get those extra benefits..

    I am way more into investing and the stock markets than most as you can probably tell and i fully get why you preach a more basic path for your normal reader, as you say, we are the nerds of this stuff and not the norm

    maybe you should have an investor nerd section? 🙂

    • jlcollinsnh says

      You know the old saying Jamese….

      “I spent most of my money on wine, women and song; and the rest I just wasted.” 🙂

      As for Benjamin Graham, he wrote his famous book before index funds came to be. Once they did, he went on record as recommending them over stock picking:

      The readers here seem to be a mix of those who just want to know how to make the market work for them and those who love this stuff. I have thought of starting a forum for those discussions.

      But just to be clear, while the path I lay out has the advantage of being more simple, it is also simply more powerful. Indeed, if I thought there were a better, more powerful path that this simple one, that is what I would write about.

      The truth is, the more folks tinker the less well they do.

  42. Gino says

    The Wealthy Accountant wrote an article awhile ago that I thought was a helpful way of staying the course during a bear market.

    Keith said to focus not on your dollar balances but the share balances.

    Although your dollar amount balance may be dropping, the shares you own will continue to climb through reinvesting dividends and capital gains. And additional contributions.

    It’s a simple mental exercise to look at your portfolio with the objective of focusing on increasing the shares you own.

    And then as the market trends upwards, you will be rewarded for your efforts.

    Great article Jim!

    • jlcollinsnh says

      Thanks Gino!

      That is a good way to think about it. As long as you don’t sell, you continue to own the same piece of the companies in your fund. If you reinvest dividends and add new money, you get to add more ownership at even better prices.

  43. Vorhees says

    Hello Mr. Collins I have been following your blog for the past couple of months and read your book. I’m 23 with a 401k a roth ira and am in the process of getting the 10k needed for VSTAX. Just out of curiosity when The time comes for bonds and you were going to do say 70/30 stocks an bonds would you simply move 30 percent out of VSTAX and move it to VBTLX? Also with early retirement being a goal of mine would an early withdraw from VSTAX be as easy as just paying a 10% penalty?


    • jlcollinsnh says

      Hi Vorhees…

      First, if you want to get into the VTSAX portfolio earlier, you can start with the Investor Shares version:

      Once in it, Vanguard will move you automatically to VTSAX once you reach the 10K level.

      As to your questions:

      1. Yes, you can simply move 30% to VBTLX when the time comes. However, some people prefer to make the change slowly as they approach the target date. Either way works just fine.

      2. Yes, you can withdrawn from a tax advantaged account anytime. But before age 59.5 you will be hit with a 10% penalty and at any age you will be subject to taxes on the withdrawal.

      That said, to reach early retirement you will almost certainly be saving beyond the contribution limits on your IRAs and 401Ks. This excess invested in taxable accounts will be available penalty free anytime and will be your first place to draw down.

  44. Josh says

    Mr. Collins,

    Thanks for your post. A few months back I earned a windfall amount through my business. Determined to do the right thing with this money, I conducted a ton of research, which led me to your blog and your book. Everything you have written resonated with me, and I have shared your writings with numerous friends and colleagues. Thank you.

    I have followed pretty much every piece of advice you provided, with a couple of exceptions: (1) I opted for an 80/20 VTSAX/VBTLX asset allocation because I am new to investing, I’m a self-employed 38 y/o with three kids and an unpredictable income and I don’t want to lose sleep at night, and while I *think* I would stay the course at 100% VTSAX, I *know* I can do it at 80/20; and (2) I opted to Dollar Cost Average my windfall into my Vanguard SEP IRA with weekly automatic contributions from my bank account.

    With respect to (2), I’m glad I decided to DCA, because it turns out that the market peaked the very day I made my first deposit, and losing tens of thousands of dollars during my first week as an investor would not have been a great start to my investing career. And it probably would have made it more challenging for me to stay the course.

    But here is my issue: each time the market has dropped somewhat significantly (i.e., two percentage points in a day) since I opened my Vanguard SEP IRA in January, I have purchased VTSAX shares after the market closes for the day to lock in a bargain price, but it appears that the transaction does not go through until after the share price has gone back up.

    I understand that what I am doing amounts to attempting to time the market, but my plan is to only do it until my windfall is fully invested. And I am getting frustrated that it seems that each one of my automatic contributions has fallen on a day when the market peaked for the week.

    Any thoughts on how to proceed? Thanks in advance for your help.

    • jlcollinsnh says

      Hi Josh…

      Thanks for the kind words. I’m glad my approach resonates with you and you were able to adapt it to your personal needs.

      When you buy or sell a mutual fund like VTSAX, the trade closes at the end of the market day at the closing price. Thus you don’t get the price as of when you place the order.

      Ordinarily, this is not a problem. But as you’ve seen, of late the market has been extraordinarily volatile. It can be down 500 points at noon only to close up 200.

      Personally, I don’t chase 2% daily moves, but if you want to, ETFs were created just for you. When you buy or sell an ETF you get the price in effect the moment the trade happens.

      The ETF version of VTSAX is VTI.

      Good luck!

  45. Doc G says

    Hey Jim,
    Long time reader and new commenter. Thanks for this post.
    My two rules for the market:
    1)Invest when the market is low.
    2)Invest when the market is high
    Just keep investing.

    • jlcollinsnh says

      Hi Doc…

      Glad this post pulled you into the comments.

      Well said on your two rules!

      We actually never know if the market is high or low at any given time 🙂

    • jlcollinsnh says

      Margin, which is borrowing money from your broker to buy stocks, is a form of leverage. Like all leverage, it is a two edge sword. It magnifies your gains when the market rises and losses when it falls.

      Worse, when the market falls, it can wipe you out completely.

      If the market falls 50% and you are 50% margined, which last I checked is the max, you are broke. This is exactly why/how so many people went bust in the crash of 1929.

      Un-margined, you still own the same number of shares and can just wait until the market recovers.

      Is it workable in the sense of can you do it? Yes.

      Should you? No.

  46. Neil says

    Dear Jim,
    First, let me thank you for your blog. As many others have noted, your Occam’s-razor-like advice was a beacon through a storm of confusing, overwhelming, and often harmful information. I forget how I came across your blog, but, when I did, I felt a sense of relief. The unknown and seemingly unknowable became, suddenly, knowable. Not only are your ideas straightforward and well-thought-out, but your clear, succinct, and witty writing style adds tremendously to the ease by which I made it through your posts and book. Over a period of a couple weeks, I spent numerous hours each day reading your Stock Series and your other posts, invariably going off on tangents of varying lengths, via the numerous hyperlinks that you inserted into your posts. I was prompted to buy your book, which I also read.

    Second, as I devoured your posts, links, and book, I accumulated some questions. (I did not see a donation tab on our blog by which to “tip” you for your time and expertise, but I did notice the Amazon click-thru tab. I buy a lot on Amazon.) I noticed that you may be travelling or hosting your retreats, which may explain the note on your “ask jlcollinsnh” page that says you are unable to answer questions. Nevertheless, I see that you’ve been posting, and are currently answering questions to posts. So, in the case that you forgot about your “ask jlcollinsnh” page, and with the tax deadline looming, I am posting my questions here, in the hopes you might find time between travels and other activities to lend some helpful advice. Some of my questions and comments pertain to your current post, but most do not. If this post is better suited for your “ask jlcollinsnh” page, just let me know, and I’ll wait to re-ask/re-post there when you resume taking questions there.

    Before I ask my questions, I should obviously give some background of myself and my financial situation. I will be turning 43 soon. Saving and planning have, unfortunately, never been a priority. This due to the fact that no one instilled upon me the power of compound interest, and how steady, yearly saving—even a little—can reap long-term rewards. I also never took the initiative, overwhelmed by the wall of information, and the self-doubt that I did not have the knowledge or “enough” money to invest. After college and a major I would never use professionally, I found myself in Europe, teaching skiing, travelling, and spending any extra money I had on liters of beer. That free-wheelin’ period ran its course, at which point I found myself back in school for another degree. I came out in 2008, with about $120,000 in debt, entering a job wasteland. A few years of loan payment deferments and the capitalization of interest found me with about $136,000 of debt.

    I eventually found work in my field, on a contractual basis. The pay was not always good, and the work not always steady. But I made hay while the sun shined, and have managed to pay down all of my high-interest and variable rate loans. Fast forward ten years. I am down to about $26,000, all of which is locked in at 3.5%. I pay off my credit cards each month. I do not have a 401(K). My employers change frequently. Once one project ends, I find another, usually with another placement agency. The employers often do not have a 401(K). My current employer does not, but I will participate if ever I work with an employer who has a 401(K). I do not own a home, but live in my fiancé’s home, and pay a third of the house expenses, which comes to about $1,400. (It is a larger house and we’re living in one of the more expensive areas of the country.) We rent out the finished basement, to help with the mortgage.

    I try to live a simple, minimalist lifestyle. I gave up drinking last year. (If only I had even half the money back that I spent on booze and in bars over the last 20 years!!) I rarely go out now, and bring my own food to workSome say I’m cheap, others frugal. I say I’m practical. For example, I wash and re-use re-sealable bags, often hypermile when driving, and make our own laundry detergent. With house-related payments, car lease, food, and health insurance (pay it myself; keeps increasing), I’m guessing my expenses are about $2,500 per month. My only splurge is supplies for our small yard and even smaller garden. (Regarding my car lease, of which I know you disprove, I sold my 1997 Honda that had 190K miles due to the needed repairs beginning to cost many times more than the vehicle. I did not have the money to buy a used car at the time. So I lease at $219 per month, zero down, zero interest. Also, being in real estate on the side, my fiancé assures me it is a needed expense to “look the part,” and not drive a “beater.”)

    My current work project has been very good to me. I find myself now with over $55,000 in my checking account, and pulling in about $10,400 per month, after taxes. (This may last a few more months, at which point the project ends, and I must find a new one. The pay rate may decline, and hours might be less. There is no consistency with my current work.) When I had reached about $30K of savings, and was knocking out my high-interest student loans, I felt I had my nose above water. I started thinking that I needed to look into this investment and retirement thing. Better late than never, as they say. I bought Tony Robbins book, “Master the Game.” (I found some similarities between your advice and his, although Ray Dalio’s recommended “all season” portfolio, which Robbins touts highly, seemed very, very conservative.) It was your blog, however, that ignited the savings spark within me. As your current post again made clear, the only right time to invest is now. I just have a few questions before I put my money on the Vanguard ship to F-You Money Land. Help me set sail.

    For simplicity, I will enumerate my questions and comments. I understand your answers might have a lot of caveats, but based on the info that you have, I would appreciate a WWJD (What Would Jim Do) scenario. Any help is appreciated. To quote Sargent Schultz, when it comes to finances, “I know nuszeen!”
    1.) Should I pay off my $26,000 of student loan debt, in one, fell swoop? It is locked in at 3.5%. I read your suggestion that, if one’s debt is between 3-5%, one should do whatever feels comfortable: use extra money to pay off the debt quickly, or invest. WWJD in my place?

    2.) I opened an IRA with Vanguard (of course).
    a. I plan to max out the $5,500 contribution limit, for 2017. I will need to amend my taxes. I believe I can do that, before April 17th.

    b. I plan to max out the $5,500 limit, for 2018, right away. The quicker the compounding begins, the better!

    c. Invest all money in Vanguard index funds. (See question 4.) Transfer all shares to Admiral once over $10,000.

    3.) I opened up a Health Savings Account, through Vanguard. Vanguard uses a third party company, Health Savings Administrators.
    a. I plan to max out my $3,400 contribution limit, for 2017. Again, I will need to amend my taxes.

    b. I plan to max out the $3,450 contribution limit for 2018.

    c. Invest all money in Vanguard index funds. (See question 4.) Transfer all shares to Admiral once over $10,000.

    4.) Why VTSAX? Now, this may sound like an odd question, from someone who’s claimed to have read your blog and book. Heck, I was dead set on VTSAX, too. I, however, was opening up an HSA account, and looked at Vanguard fund options. To my virgin eyes, some of the 23 available funds seemed better than VTSAX. Namely, VSMAX and VMGMX jumped out at me. VSMAX has a net expense ratio (“NER”) of 0.06%, with an average annual performance (“AAP”), since inception, of 9.54%. VMGMX has a 0.07% NER and an AAP, since inception, of 14.98%. In contrast, VTSAX sports a 0.04% NER, but an AAP, since inception, of “only” 6.98%.
    I understand that you picked VTSAX likely because it has slightly lower fees, a wider coverage of the U.S. equity market by containing “small-, mid-, and large-cap growth and value stocks,” and a risk potential of 4, whereas VSMAX and VMGMX focus only on small- and mid-cap stocks, respectively, and have a risk potential of 5. But if, as you note, the stock market always has, and likely always will go up, why not invest in VMGMX, for example, and get more bang for one’s buck?

    5.) Non-deductible vs Deductible/Traditional IRAs: This is one of your explanations that I did not find to be clear. You describe them as if they are two, separate things, from which one can choose. Thinking that they were two, distinct things, I spent some time looking for these products online, and on Vanguard, to no avail. It seems, from what little I know, and after doing some research, that they are the same thing, rather than two, distinct products. The difference is whether one’s finances (income, work 401(K), or joint marriage filing) push one over that year’s IRS thresholds for being able to deduct IRA contributions from one’s taxes. Such a person’s IRA would be a “non-deductible IRA.” But, if I understand correctly, once that person’s financial situation puts them under the IRS thresholds, they can put money into the same IRA, but now the contributions will be deductible, thereby making the same IRA a “traditional IRA.” Correct?

    6.) Is there any sort of “Roth ladder” method to use for HSA accounts, such that one can transfer monies from an HSA to a Roth, to prevent these savings from being taxed upon withdrawal, after 65 years of age? I am assuming the answer is “no,” but just checking!

    7.) You mention, in both your blog and book, “that there are studies that indicate” a 75-90% stock allocation will actually slightly out-perform a 100% stock allocation. You never provide, however, a citation to these studies. Could you provide a citation to these studies now? Also, do these studies stand the test of time? In other words, were the achieved results dependent on a specific economic or investing environment? Were you referencing the William Bengen studies, or the related Trinity Studies?

    8.) What should I do with my extra money (assuming a future employer does not have a 401(K) or, even if they do, I max that and all other tax-deferred accounts out, and still have cash left over.)

    Vanguard Taxable Savings Account:
    After I fully contribute to my HSA and IRA accounts (and 401(K), when available), should I open up a “General Savings Account” (taxable account) with Vanguard, and invest the majority of my savings (and a high % of my weekly paychecks) into VTSAX or other Vanguard index fund?

    Checking Account or Savings Account or VMMXX:
    I should also have cash with which to pay for life’s necessities, infrequent, non-extravagant pleasures, and emergencies. You say that you put your cash into either a savings account at your bank, or a VMMXX, depending on which has the higher interest rate. How much should be kept in such an account? I do not recall you saying? A few months’ worth of expenses? Also, where and how do you invest in VMMXX– via a taxable account that you have with Vanguard?

    Access to Cash for Real Estate Investing:
    I know you have your horror stories about real estate. You do not condone owning a (large) home, if at all possible. But I got the sense from your writings and some of the people to whom you linked (lackofambition) that you are not averse to investing in real estate, if one does their research. I live near Washington, D.C. My fiancé is in real estate. She is quite good. The housing market here is booming. Prices, however, are crazy high relative to anywhere outside NYC and San Francisco. The market is always fairly stable due to the federal government and military bases, a huge tech industry, and some of the best school districts in the country, which drives loving parents, who have lots of money, to the area. I want to invest in some rental properties at some point. To do so, I obviously need some cash for a down payment when a good opportunity arises. How might I best allocate my cash to take advantage of an opportunity?

    9.) Marriage. (Let’s set aside the fact that 50% of marriages fail. 🙂 )
    As someone who is engaged, are there any tax or investment tips or tricks such that a marriage, partnership, or civil union might be more advantageous than the other form of union? I understand these things vary from state to state, but do any ideas or tips come to mind? My fiancé has been married before, and would be up for saving money, if possible. Adhering to one of your main tenets, she is fiscally responsible so, as Carl Spackler would say, “I got that goin’ for me, which is nice.”

    10.) TIAA Cref Insurance Policies as an investment tool.
    I read somewhere that high-earners (accredited investors worth at least $1 million) can use a type of insurance policy as another vehicle for investing, namely private placement life insurance (“PPLI”). That’s not me, obviously.
    But, for those of us who are well below these thresholds, apparently there is an option: TIAA Cref insurance policies. This according to Tony Robbins’, in “Master the Game.” There is not much info regarding this topic online. Here is what Robbins says:
    I think the TIAA Cref insurance policy to which he might be referring might be this one:

    What are your thoughts on such insurance policies as an investment vehicle? By the way, TIAA seems to offer Vanguard’s VTSAX:

    Well, those are all the questions and concerns that I had. Sorry for the length, and no worries if you don’t have the time to respond, or would like me to wait and post on your “ask jlcollinsnh” page, once you start monitoring it again. Thanks for any help or advice you are able to offer.

    Happy travels and investing,

    • jlcollinsnh says

      Hi Neil…

      First, thanks for the very kind words regarding my book and blog.

      I’m glad you like them, because I am going to send you back to them to, as best you can, sort thru your many questions. 🙂

      Unfortunately, I simply haven’t the time to respond to these kinds of extensive requests. It is why I closed the comments on Ask JLC.

      • Neil says

        I completely understand, Jim. Please delete my original post, and the subsequent responses. No need for my lengthy post to take up space or people’s time.

    • Tracyl5 says

      I think I can speak to #4… You can’t look at return since inception date because all of these funds have different inception dates. So they’ve been through different periods of ups and downs which affects the yield for their particular inception date through present. A better comparison would be the 10 year or 5 year yields. VMGMX hasn’t even been around for 10 years. Looking at the 5 year yield, VTSAX leads. Looking at the 10 year, VSMAX leads by a little, but since that is only small cap funds, you’re really limiting yourself to a small portion of the market. VTSAX has greater diversification since it includes the total market. Hope that helps! And maybe some other readers can help answer your other questions!

      • Neil says

        Yes. Thank you. Tracyl5! I looked at these values on the Health Savings Administrator site (affiliated with Vanguard), after I opened an HSA account with them (did not fund or finalize, luckily). I thought about the inception date as being a factor, but the way the funds were displayed on this site, they all had 10-yr values, for some reason (e.g., VMGMX had a 9.04% value). But, when I went to the Vanguard site (after reading your post), I did notice that VMGMX was started in 2011 and VSMAX in 2000. It seems that the HSA site might have used a “spliced mid-cap growth index” value to use for the 10-yr performance of VMGMX? Although Vanguard is affiliated with this site, I should of went to the source. Ironic thing is that, after more research, I decided to go with another outfit for my HSA: The HSA Authority. Anyway, thanks for the help.

      • jlcollinsnh says


        Tracyl5 provides a great answer here.

        I would only add that backtesting you can always find funds that have outperformed VTSAX over some period of time. Mostly because that period happened to favor a certain style. Sometimes small caps are in fashion, sometime not.

        Since VTSAX holds the total market I don’t have to worry about what will be in fashion when. Since my holding period is forever, this matters to me.

        Thanks, Tracyl5 for weighing in! 🙂

        This is exactly why I have left Neil’s comment/questions up.

  47. Jay says

    Hi ! I am an overseas fans of yours. Really love your articles and index funds investment philosophy. I would love to read your thoughts and strategies of the following situation:

    There is One thing that really bothers me, is the assumption that “stock market will eventually rise”. Take Japan as an example, from the 1990s – 2008s onward, the stock market is basically an ” L “shape, for a period of 20 plus years (look at the graph of Topix on bloomberg or google finance)

    I know you don’t do market predictions etc. but what if the future stock market (not only US, but globally) experience 0 growth, and the stock market has been L shaped for an extraordinary long period of time, say 10 – 20 years (just like the Portugal and Japan stock market now). Just make that as an assumption…. Is that going to change your investment strategies (in consistently putting funds into VTSAX) ? Are you going to change your fund allocations? Change the frequency of dollar cost averaging? I would really love to read your view on this topic ! Probably BOJ (Bank of Japan) would also be interested in reading your views on this, since they have been buying index ETFs for a period of time now !

    Thank you and look forward hearing from you !

    • jlcollinsnh says

      The Japan question has been raised in the comments many times here in many posts.

      My approach is not dependent on the market performing in any certain way.

  48. Dave says

    To invest a large percentage of your assets in stocks or stock funds, an investor needs to have a growth mindset. An example of that would be to view market corrections as buying opportunities. If you lay awake at night thinking about your assets, you might have too much exposure to equities. While every investor needs to hold some stocks, finding an allocation that you can live with is crucial to long term success.

  49. Smile If You Dare says

    As the saying goes, “If you can’t stand the heat, stay out of the kitchen!”

    Yes, if people panic and sell when the market goes down, then they shouldn’t be in the market in the first place. Most people think they are investing, but they really are speculating.

    One way to survive is to focus on dividends, not on stock price. Dividends are much more stable than prices.

    Dividend investing is not for everyone:
    1. Diversification is required.
    2. Patience is required.
    3. Invest for the looooong term.
    4. Ability to ignore the daily ups and downs of the market.

  50. Tim Cullum says

    Great reminder Jim. I’m in the early retirement stage and use guaranteed interest of 3 % as my bond balance. I did move about 10 % from stocks into that at year end. If the market tanks that gives me money to live on while it recovers and also some to buy when there’s a fire sale. I’m still about 60/40 which is aggressive for my age. I’m amazed at how VTSAX does not go down as much as the broader market and seems to recover better than the broad market. Whats up with that?

    • jlcollinsnh says

      VTSAX, which is a total stock market index fund, is by definition the “broad market” 😉

      I think you are comparing it to the more popular Dow, which is a much smaller index of about 30 very large cap stocks. While the two track surprisingly closely, during larger moves there is often a noticeable difference.

  51. Millionaire Immigrant says

    This is great! I love your examples and pictures which supplement your story and advice so well. I have read so many of your posts and the message is so simple and always the same and people still do not get it. In a way, it is probably good for your blog as you can keep writing about it. 🙂 As for the stock market, I say bring it on!

    • jlcollinsnh says

      Thanks, MI…

      …much appreciated!

      In truth, I think most people do get it but I am amazed at how many seem to miss the point. 😉

      I love the title of your blog, BTW. 🙂

  52. Gonzalo says

    Jim, your stock series should be a must read for every new college grad.

    I graduated from college last year, paid off 30k worth of student loans, and now I’m maxing out my 401k + HSA and throwing all I can at VTSAX… I’m up to 40k altogether! (I wrote about it, with a shout out to you and Mr. MM, here:

    What I love the most is how simple it can be:
    1. Have a high savings rate
    2. Pay off all debt
    3. Max out 401(k)
    4. Max out HSA
    5. Put the rest in VTSAX

    Thanks Jim!

    • jlcollinsnh says

      Thanks Gonzalo…

      …glad it helped and congrats on a great start!

      BTW, to avoid confusion with the Jim Collins who wrote “Good to Great” and some other business books, I prefer to go by JL Collins.

  53. Steph says

    I hadn’t read your blog in a while and came here to grab a link for a blog post I’m writing about financial independence. And then I found this gem, so now I have two links to your blog in my article. 🙂 Just wanted to let you know that I think you rock, JL Collins!

  54. Jenna says

    Looking forward for your words of advice and assurance in this time of turbulence in the market w/ US10Y breaking above 3%. Please JLC, reassure us in a new post that indexing is the best strategy!

  55. John L says

    Hi Mr Collins,

    Thank you for your blog! It has been such an education for me, I’ve always been interested in all thing money and investments and your posts (especially the stock series) really gave me the motivation and enthusiasm to proceed down my own FI path.

    Because I can’t help but tinker and constantly monitor my investments I, perhaps rather foolishly, ‘diversified’ my holdings with Vanguard to include their World Equity Index Fund as well as (separately) Europe and the UK (where I am from). Having looked at the fees, the World fund is the most expensive and having read more of your and others material I want to sell/switch the holdings I have in this fund to one of the more ‘mainstream’ and low fee funds US/UK. Do you think this is sensible? Or should I ‘have my cake and eat it’… And just stop tinkering!

    Many thanks,


  56. Carla says

    I’m ready to start investing, and I feel that I can hold the course and not sell when the market takes a tumble. This series has been extremely helpful in better understanding the many concepts around investments and thinking through what I want to do. Thank you for sharing your knowledge in such as accessible way!

    My one remaining question is about short term investing, when you have a goal requiring a lump sum of cash in the not-to0-distant future. Most of my assets will be in for the long haul. However, I anticipate wanting to buy a house (not as an investment, but as a place to live) in ~ 5 years. I hate to leave the future down payment money sitting in a savings account not even earning enough interest to keep up with inflation. But stocks also don’t seem to be the way to go, since who knows what the market will be when I’m ready to buy a house. Is this where bonds fit in? Or am I stuck with money market savings or CD’s?

    • jlcollinsnh says

      Hi Carla…

      It all depends on your risk tolerance.

      Let’s start with the fact that my approach is to invest for the long term. My holding period for VTSAX is literally forever. I only sell once the portfolio is providing the money to live on and then only to raise money not covered by the ~2% dividend.

      If you absolutely want/need to buy the house in five years hold cash in the bank or a money market fund.

      If you are willing to risk that deadline, you can try for greater growth with a stock/bond mix and, as always with such a mix, the more in stocks the better the potential gain and the greater risk.

      You set the mix based on you.

      Good luck!

  57. DJ says

    Jim, I bought your book and have enjoyed reading it and parts of it multiple times. I have also enjoyed reading most of your blog postings. Beyond the terrific information you share, your style is spot on for my taste. I’m mid 50s, and about to retire thus the information you have shared has been very helpful and timely.
    Right now our portfolio is set at 60 percent stock index and 40 percent bond index. All of our bond index funds are in my IRA so little room to rebalance the overall portfolio. We won’t start drawing down investments for another 2-years, so I am contemplating reducing our bond holdings and getting closer to 25-30 percent holding for bond index funds. I would welcome and appreciate your thoughts on the change or any ideas you have that from your experience or perspective might be useful for us.
    Thanks again for the information – it is real value!

  58. Karen says

    Thank you for all the great advice, I needed to read this today and will remember for when the market tumbles. Slow and steady wins the race 🙂

  59. Jon Howard says

    Heya Mr. Collins,

    I’m getting started, unfortunately, pretty late. I’m 41 and have 2 kids who are 7 and 9. My wife and I have $20k in a savings account for them, and having read your book I want to put the money into VTSAX to let it cook until they graduate college and surprise them with the account statement (and a copy of your book, naturally).

    My question is about when to put the money into VTSAX. I work in financial services and there is growing concern in the community about a recession. I’ve been privately expecting this since Trump was elected. Literally every Republican administration since Teddy Roosevelt has presided over a recession. That’s 115 or so worth of data, not a political statement. I believe 100% in the “stock market always goes up” idea, but it would also have blown massive chunks to put all the savings for your children in VTSAX the minute before the sub prime mortgage crash went down.

    I’m very interested in your perspective on this, although I think I already know what it is – “don’t wait, get in now, in 15 years you’ll thank your risk-taking self!”.

    Thanks in advance for any insight you can lend. Really love your work!

    • jlcollinsnh says

      Hi Jon…

      You have correctly anticipated my perspective. 🙂

      Working in financial services one of the things you especially need to guard against is listening to all the “noise.” Nothing has any predictive value as to what the market will do next. That includes past administrations.

      When Trump was first elected, I fully expected the market to take a major hit. But fortunately, and because I know nothing (not even my own predictions!) has predictive value, I left my portfolio alone.

      Here’s a post I wrote almost exactly five years ago on this:

      Thanks for your plans to gift your kids with my book on their college graduations and for your optimism that it will still be in print. 🙂

  60. vorlic says

    Funny thing, Mr Collins, I was trying to decide yesterday which I fear most – loss of current assets or loss of asset-earning opportunities. I toppled onto the latter (of course, I would say that here!), but then felt this could be a weakness where selling of assets is necessary, e.g., our house. But then I realised that a house is NOT an asset and that still having a home is the point! Sorted. So just sell when you want to, and don’t try to time it. You see, a spot of geo-arbitrage is over the next hill….

    This is the second time I have been wrestling with something and have thought, “I wonder what JL has to say about this,” and Bingo – your latest article is to this very point!

    Thanks as ever.

  61. Timothy brinker says

    Hi Jim,

    I’ve been scouring your blog posts for comments regarding 529 plans. Is there any difference in strategy for 529 plan than retirement plans? For example my son would need access to 529 in roughly 14 years. Should I think about aggressive or moderate fund within the Utah 529 plan? We adhere to your 100% VTSAX advice for retirement 401k/Roth IRA just not sure if that holds true for 529. Thanks for your important work.

  62. Bernz JP says

    I used to do a lot of trading myself thinking that I could make a decent living trading. After a little while, I realized that the stress was not worth it. You will never time the market whether you’re a seasoned investor or not. If you have a low tolerance for stress, Stockmarket trading may not be for you. In the past 12 years or so I started to change my strategy and to invest only in the stock market on a not so long-term basis. I’d buy stocks that I thought was good to hold for at least six months and take it from there. That doesn’t mean that I will never sell the stock before six months if the fundamentals have changed to the negative and I’ve also held on to shares longer than six months if it’s shown a longer-term potential. It’s been a good strategy for me so far. When the stock market dipped big time a few months ago, it did not bother me. In fact, I did not even look at the values.

    My advice, never trade stocks when you’re under pressure or stress.

    my 2 cents.

  63. Christine Ko says

    Hi Mr. Collins, I’m a huge fan, and am working to be financially independent within 10 years. I have a bit of a situation that I hoped you could shed some light on. I’d like to start investing in VTSAX while in the U.S., but am planning to move back to Canada within 1-3 years (timeline is really unknown at this point). I can buy an equivalent index fund in Vanguard Canada when I move back, but that would require me to sell all my shares in the U.S. in order to re-invest it in Canada (I think). If what you’re saying above is never to touch the investments, should I wait till I move back to Canada to invest?

    • jlcollinsnh says

      Hi Christine…

      When I say never sell, it means stay the course and avoid panic selling in down markets.

      Selling to roll over into the Canadian version when the time comes is just fine. The only downside is that you might have a capital gains tax, but I wouldn’t let that stop me.

      Enjoy your stay in the US!

      • Christine Ko says

        Really cool! But is there a risk that when I’m leaving the US that it would be a down market? Or is it ok to sell lower than I bought to transfer?

      • jlcollinsnh says

        There is, of course, always that chance. Just as there is that your account value will sometimes drop.

        But, as you are immediately moving into a like fund, the variation is the same.

        Make sense?

  64. Cleo says

    It will run only good for as long as government transfers growing amounts of assets to the public sector as it accumulates obligations. There is a fundamental accounting principle here that some seem to forget–what is government obligation is also public sector asset that works to push up asset valuations. I would not necessarily bet on the private sector getting it as good as it has seen it in the 4 decade long neoliberal age going forward. I think we are at a generational high water mark in that regard. You’d need higher economic productivity from automation or cheaper foreign labor to continue from here.

  65. Wilson says

    Hi Jim, another great post, as usual. I know I’ll be able to stay the course when the next storm comes as I’ve done so in the last 08-09 crash. It wasn’t easy though, to keep investing each paycheck while watching your account balance go down even with new money going in. The next storm will definitely be more difficult to ride out since my portfolio balance is significantly higher than it was before the last crash. However, I have an approach that worked for me during those trying times. During the last crash, each time I invest, I log into my account and try to ignore the portfolio balance. Instead, I focused on looking at my share count go up. Especially during the crash, each time I invest, I’m buying more shares than the paycheck prior!

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