JL Collins - The Simple Path To Wealth

[Music] Hey everyone, welcome to the Inspired Fire Podcast. My name is Chris and I'm your host. Today we have J.L. Collins joining us on the show. For those who don't know him, he is the author of the book, The Simplepath to Wealth. He is very well known for his stock series as well on his website, J.L. Collins NH.com. He is the Godfather of investing to the Fire community. That's why I'm super excited to have him on the show. To talk about investing, everything investing as well as how to handle investing during difficult times like we're going through now. Before we get into that, I would like to touch on a couple of things though. I do want to announce two winners for the giveaway. If you follow me on Instagram @inspiredfire, you saw that I'm doing a giveaway of The Simplepath to Wealth book. I'm really excited to get that book into people's hands. Today, I'm giving that book away to two people and the next episode is going to be two or three other people as well. Just get those reviews on Apple Podcasts in. That's how you sign up for the giveaway. Just go ahead and leave your review on Apple Podcasts and send me a screenshot. Without further ado, the two winners is J.F. Meeks and Flex Eat Repeat. Congratulations. I'll be sending your book out soon. The other thing I wanted to mention is that there are awards right now called the Plutus Awards. They're basically like the Oscars for personal finance. I'm up for two categories I really want. Hope that you guys can nominate me for. The first one is Best New Personal Finance Blog. The second one is Best New Personal Finance Podcast. If you can, I'll go ahead and put the link in the show notes and support me in any way you can. That's just by going there and nominating me, putting their inspired a fire. Again, I'd really appreciate your support. Without further ado, let's get into this episode where we talk about investing with J.L. Collins and handling difficult times, recession and bear markets. Hey, J.L. Thank you so much for joining the show and welcome. Welcome to the show. It's a pleasure to be here, Chris, and I'm honored that you'd ask. I mean, I'm super excited to have you on. I highly regard you. I put you up there in terms of Warren Buffett, Jack Bogle, and then comes you. I really mean that when I say that, but so it's an honor to have you on and I'm excited to share with the audience your simple path to wealth and all the essentials that we need for investing and to get it right. Well, that's a lead company you've put me in. I hope I can live up to it with an hour conversation today. I'm sure you will. So what got you started and I think what became very popular for you and on your blog was the stock series. So I think I want to start there. What made you write the stock series and and how did that come about? Well, the whole blog came about his as a way to archive information for my my daughter. So that when the time come came that she had an interest in the stuff that would be available to her, whether I was around to deliver it personally or not. And then the stock series sort of grew out of that. And I think what's interesting about it. It's now up to 30 or 33 or something posts. I originally started it only the first my vision for was only the first five. That's kind of my plan when I was creating the series. It would be a five part series. And I didn't really think beyond that. And the rest of the post after the fifth one came out of suggestions and questions from my readership will evolve my thinking on one topics that they wanted to hear about and that would be work discussing. So that's how we wound up with 30 plus. Yeah, and I mean, they're 30 great or 30 plus great post. So that kind of led to the book is that correct the simple path to wealth, which I want to congratulate you on today's June 2020 and the book just turned four years old. It's made such an impact on so many people. I think you've sold over 50,000 copies if I'm not mistaken. Yeah, I actually actually over 160,000. Wow. This conversation and the books first fourth birthday was June 18th, which I just happened to notice myself a few days before it. So I marked it on Twitter and Facebook and the it to my amazement. It it is sold better. Each year. So each year itself is better than the year before. And I don't really do anything to promote it. I suppose the blog promotes it and maybe having conversations like the one we're having does. But now I'm doing a many real aggressive promotion on it. So I chalk it up to word of mouth and it's gotten really favorable reviews on Amazon. So I think all that helps, but nobody's more amazed at its success than I am. Well, I mean, the simplicity of it is amazing. The content of course is amazing. And you've said that there's nothing really in the book that is not in the stock series. It's just more organized. Is that right? Well, yes, except that it's not just the stock series. There are there are parts of the book that are drawn from the blog other than the stock series. So the core of the book is drawn from the stock series, but it's not exclusively from the stock series. But your point is still correct. There is nothing in the book that you can't find on the blog. The book is more concise. It's better organized. I spent more time polishing the writing. I'll leave it up to readers to decide whether I succeeded or not. But those are the three advantages, if you will, of the book. But by design, there is nothing in the book that you can't find on the blog. And that goes against, by the way, the advice I was given at the time, which was to be sure to put things in the book that are not in the blog so people have to buy your book. And I kind of thought to myself, you know, the only reason that this book exists is that I have loyal readers who have read and supported the blog. I just seem to me to be kind of a crappy thing to do to them to have information that they had to pay for. So that's why I chose not to do it. And interestingly, if you look at my, some of my one star reviews on Amazon or two star reviews, some of the negative reviews, that's one of the criticisms as well. This is just a rehashing of the blog. Okay. I mean, I love it. I think that's very honorable. A lot of people would have chosen the other route for sure. That's certainly the advice that you're given. So let's kind of get into that because my goal is to share with the audience exactly what you're investing advice is why I think it's so important. And really it's, it's one of the pillars or one of the core foundations to the fire community, I think. So let's just, if we can get into some of the background and how you learn to invest, how long have you been investing, where did these things come from? How did you become so knowledgeable on this aspect? So that's, that's a, you cover a lot of ground that question. So let me, let me see if I can remember all of it to respond. And if I don't remind me. We're investing in 1975. And what's mildly interesting about that, at least to me is very coincidentally, that's the same year that Jack Vogel started band guard. And the same year he launched the world's first index fund, which was the SMB 500 fund. And I'm self taught in investing. It's not, it was not my subject of study at university and, and it's been an application rather than a vocation for me, at least until these recent years with the blog. And if I know anything about this stuff, it's because I have made every possible mistake you could make in investing. And so it's, it's that accumulation of, of knowledge. I, you know, I look back and I think, man, I wish I had written this book. People tell me they wish they read the book when they were, when they were 40 if they're 50 or 30 if they're 40 and I'm not all and I wish I'd written it when I was 30. But I wouldn't have been able to write it when I was 30. I don't think I had the knowledge base to write it until one I did. But that's the evolution of it. And then the book itself looks at that microcosm of time between 1975. in 2015, which is really sort of the final stages of writing it for the illustrations, but it's very instructive 40-year period, I think, because the market did very well in that 40-year period, but it also faced major major challenges in that 40-year period. And the point of that is simply that the market does not need ideal conditions in order to rise and rise significantly. Yeah, and like you mentioned, there's been a lot that happened during those 40 years. So you're pretty well known or a lot of people know you to say things like the market will always bounce back or the market always goes up and that could be viewed as pretty controversial at first if somebody tells you, "Hey, this is always gonna go up." But, you know, can you explain a little bit about why you, you know, you say that to your audience? Sure. So that is one of the statements that has gotten the most pushback that I've made and because people delight in saying, "Well, you can't say that anything will always do something well, a lot." And I suppose that's true. So the big caveat in saying the market will always go up is the market will always go up as long as, and I'm talking about the U.S. market now. As long as the United States of America is a capitalist country with a viable economic system and that it exists as a country. So if you don't believe that the United States itself has a future, then you're probably right to be cautious about my statement that the market is always gonna go up. But if you do believe the United States has a future, then almost by definition the market will recover from anything that that fate throws at it. And that is the history of the market and the United States. The United States has gone through some terrible things. We're going through one at the moment and the market always rebounds. The other thing that your listeners should understand is that when the market drops, this is a perfectly natural part of the process. The market is a volatile animal. So when the market drops 10% that's commonly called a correction fairly common event. Drops 20% that's called a bear market. Little rare event, but still common. When it drops 30 plus percent that's a crash. Not nearly as common, but certainly should never surprise anybody. I used to live in New Hampshire and the corollary I draw is that if you live in New Hampshire, you should never be surprised by blizzards and winter. It's just hard of living in New Hampshire. It doesn't mean the blizzards can't be dangerous and doesn't mean that they're pleasant, but they should never surprise you and nobody assumes that a blizzard even at the worst is gonna last forever. As we know from experience, it doesn't. It's the same thing with stock market declines and if you happen to live in Florida, you can use hurricanes as stood-alusars. I just so happen at living Florida, so I will use that. So it's hurricanes for you and blizzards for my old friends and and my parents. And yeah, and you touched on it, we are going through a difficult time as far as the pandemic. And so I kind of wanted to see what your thoughts were on that because I didn't really, I wasn't invested in a lot of people in my audience weren't invested in '08. I hear that '08 was a difficult time of course and I saw it but I wasn't invested so I didn't feel that panic or that fear. But going through this recent market correction or crash, I did get a sense of it but I felt unusually calm through the whole thing. So I'm not sure if that is a true test of what a real bear market feels like or what '08 might have felt like or could it get a lot scarier. So it could definitely get a lot scarier and and we'll talk about I'll talk about '08 in a in a second because this one is currently playing out and might be one of the reasons that it hasn't felt quite as scary as a while it dropped very very sharply. It also rebounded for the most part very very sharply and the '07 '08 scenario was was a little different. I mean it dropped very very suddenly and then it kept grinding on down so to put '08 in perspective the market hit bottom in 2009 in March of 2009 and it hit bottom around 600 and I think was actually 666 was the actual number when it hit bottom but and at that point it had dropped about 50% and so people look back on that and they say well you know could I absorb a 50% drop and not panic and sell and and cut and run and by the way nobody should follow my advice unless they're absolutely certain that they won't panic sell when the market goes down let's say absolutely accept the idea that the market always comes back and that plunges no matter how dramatic they are a natural part of the process because if you panic and sell in the middle of a drop then my advice will lead you bleeding by the side of the road but the perspective that people need to understand is that when the market hit that bottom in March of 2009 nobody knew that that was the bottom at the time and we all know it now but nobody knew it then everybody that I was talking to in March of 09 was predicting that it was going to continue to drop and buy a lot more most of the most common predictions I was hearing from quote unquote the smart people where that it was going to go down another two-thirds now let's put some numbers on what that looks like and how it might feel let's suppose you started before the drop with and I'll make out I'm choosing these numbers to make them at easy let's say you had 1.2 million in your portfolio well come March of 09 you've now got 600,000 in your portfolio it's been cut in half now you've hit the bottom but you don't know that and everybody around you was telling you it's going to go down another two-thirds which is going to take you to 200,000 from your 1.2 million so the question then becomes is how do you feel about it at that point are you really going to stay the course at that point and that's that's what a really ugly market looks like this one at least so far nobody knows you know whether the drop is over and we're going to continue our bullish run or or whether this is what they call a dead cat bounce nobody knows the answer that I know there are a lot of people claiming on the answer with nobody it does yeah well we'll see but but that's sort of the thought process the the mental exercise to go through to evaluate what your real tolerance for these things might be yeah and you're a big proponent of owning VTSAX and having some bonds as well on the side just so depending maybe what would you suggest I forget 25% or so well I think it depends on the where you are in your life so I kind of divide our financial lives into wealth accumulation and wealth preservation and in the old days it used to be that that was also largely age-based right so you know you worked for you for 40 years or whatever until you were 60 65 and then you retired and so that was your wealth building phase and then when you were old you were in the wealth preservation phase but in the financial independence movement of course you know there are a lot of people who are retiring a lot younger than that a lot of people who achieve financial independence who might wind up going back to work after a while or or founding a business and earning money again so you might go in and out of those or back and forth between those two phases so basically what I say is when you're in the wealth building phase by that I mean you're earning money you have an income either from a job or a business or you are in some fashion trading your labor for money and so you have a steady cash flow coming in and in my world you take a fairly significant amount of that cash flow and you set it aside you live below your means to free up that capital to invest and that stage I encourage and this is the stage my daughters in my way I encourage her to be a hundred percent in VTSAX which is the total stock market index fund that Vanguard puts out low cost owns virtually every publicly traded company in the United States what that ongoing cash flow from your work provides is a smoothing effect on the volatility of the market for instance and I think it was April when you she made her monthly contribution to her BDSAX account, I noticed that it bought 19% more shares than the one the month before, because of course the market had plunged. That's another key point, by the way, when you're young and you're building your wealth, a market drop like the one we've had this spring is an absolute gift because as long as you stay the course and keep investing, you are now buying those shares at a lower price. So that effect of having that money going in every month smooths out the volatility of the market. Now, when you stop working and that cash flow from your labor stops and you're living on your portfolio, you're gonna want something else to smooth out the right. At least most people are. Some people are gonna say, well, I don't care about that and the research indicates that 100% stocks long term gives the best performance. I'm just gonna say that route. Nothing wrong with that as long as you understand you've picked a volatile road. But most people want to smooth it out a little bit and that's the role bonds that provide. So if you add bonds to the portfolio, then you have a counterbalance to your stocks. You also have a supply of capital to invest when your stock part of your portfolio drops. And you'll do that by bringing your allocation back into line. Now as to the question is to what percentage ought to be in bonds, that really depends on how much you value performance of your portfolio over time against how much you value reducing the volatility and maybe sleeping better at night. So anytime you add bonds, you reduce volatility but long term, you also reduce performance. Anytime you add stocks, you increase performance long term but you also increase volatility and it's very individual choice is to which of those things is more important and that will determine your asset allocation between stocks and bonds. The one caveat I put on that is that if you let your stock allocation drop below 50%, the 4% rule begins to not work anymore. And we can talk about the 4% rule later if you'd like. Yeah, definitely. I'd like to get into that. But while we're on the topic of VTSAX and smoothing out the ride, et cetera, I think it's important, like you mentioned, it is personal. So you do have to see what your risk tolerance is. At least for me, from a personal point of view or my opinion or what I've gone through is, I owned a stock called AMD when I first started. And I thought that that stock was going to go just keep going higher and higher. And then one day it dropped by 25% in a single day. And luckily I didn't have too much money in it. But that's when I realized that I can't stomach stuff like that. And for a single stock, there's too many thoughts that go into my mind, which is that company, that one single company is going to could go to zero. And I could lose it all. But so one thing that gave me comfort with VTSAX and just a stock market index fund is that not one single, if one single company or two goes to zero, the index has a hole still survives and you call it self-cleansing. So I thought that that was very powerful because it gives someone confidence to see a dip or a correction and not feel that it's going to zero. Because you know that all the companies within the index is not going to go to zero. I mean, that would be apocalyptic. Is that-- is that what you might gather from the VTSAX? Like do you think that that would help individual investors do it on their own? I think you're absolutely right, Chris. And I think that's very well said. I take great pride in that term self-closing, by the way, which I create it. So let me elaborate on that a little bit because I don't think I can add anything more to what you said so well. But by self-cleansing, what I mean is the index, as you point out, holds a lot more than one company. As I mentioned a moment ago, it holds every publicly traded. Virtually every publicly traded company in the United States. That's around 3,600 companies. Now, some of them, by definition, because our capitalist business system is a dynamic system, some of them are going to fall by the wayside. They're not going to succeed. They're not going to work. They might succeed for years and then fall by the wayside, which we've seen as the economy changes. And those ultimately, they won't even go to zero for our purposes, because they'll fall off the index before they get there, but they could drop dramatically. And of course, I suppose, in one sense, it's a bad thing. It's healthy for the economy. But the other side of that is there are companies that will do spectacularly well. And while the worst thing that can happen to a company is it goes completely out of business, goes to zero, loses 100%. Well, the upside is unlimited to 100%. So in a sense, you have a positively rigged system. The worst that can happen to some of the companies you own in the indexes that lose 100%. The best is they'll gain 100%, or 200, or 500, or 10,000. So there's literally no upside. And it's that constant self-clensing of the index that gives me the confidence to say, the market will always go up, even though it'll have dramatic drops periodically, which is we discussed are perfectly natural. The market, as long as there is a United States with a viable economy, the market will always recover from those things and always go up. Because for BTSAX to go out of business like your one company would require basically the United States to go out of business. And as we said at the beginning of the conversation, if you believe that's going to happen, and there are people who believe that, then you shouldn't be investing in the stock market. And you shouldn't be following me or my simple path to wealth. You should probably be stocking canned goods and ammunition. Yeah, building a bunker somewhere. Yeah, I think it's important to try to decide how you're going to invest based off of the odds. What is most likely to occur? And like you said, over the last 40 years or plus, we've gone through a lot of different things. And some things I didn't witness, and I don't know how bad it was. But wars and inflation, et cetera. So if we've gotten through that and the market is only abroad higher, just by a percentage, is I'd rather be on the side that the United States and capitalism will survive. I'd rather bet on that horse than on the black swan, cryptocurrency, I guess, possibility. Well, I think again, you're right. Black swans do happen. But by definition, black swans are very, very rare events. And by the way, black swans, and you might say the COVID-19 is a black swan, don't necessarily destroy the system. I mean, they can create havoc. The economic collapse in '07 or '08 was a black swan in a sense. But we survived it. The market always goes up. And that 40-year period, by the way, in your show notes, you might want to link to the post I wrote called Time Machine and the Future Return of Stocks. And basically, it was all thought, exercise. I had fun with. And so to imagine, we were all together back in 1975 when I first started investing. And that was in the age of stagnation, which has certainly been the worst economic thing in my lifetime, which was in the '70s, into the early '80s. If you were all speculating, well, what do we do? Should we invest in the stock market? And that was a really long, bad stretch for the stock market. And then the thought exercises, well, I just came back from 2015 and my Time Machine. And I can tell you what happens in the next 40 years. And I go through the litany of all the terrible things that happened in that 40-year period. And of course, my little group in 1970, if I say, man, I'm not going near the stock market, no one all that. Well, the stock market posted almost 12% annual gains on average during that horrible 40-year period. And if you go back even further, I just picked that 40-year period because that's what I started investing. But the stock market has survived world wars and great depression and has survived the civil war for that matter. So there are a lot of horrible things that the market has survived. Certainly impacted the market at the time. But as I say, and I think it's part two of my stock series, the stock market always goes up. And so once we establish that BTS, SAX is the way to go, or our FSMP 500 index fund with low fees is the way to go. I mean, the ideal scenario would be to just invest regularly, make it automatic, if possible, and just never to look at it, never touch it. And in 20 to 30 years, then you can take a peak and then be very, very happy with your results. So that's the ideal. But then there are people who, like myself, for example, see a recession or see a crash and want to take advantage of the lower prices. What I found myself doing during this crash is waiting. I had a little bit of money and I waited for it to continue down, continue down. And in each tier, I invested to a certain point where I didn't have any left and then it kept going lower. So I had to, so I wrote a post and I would love your thoughts on it, but I kind of thought that it would be a good idea to put in a system during those times because although we're not going to sell, that would be the worst idea. There's not much written about how to handle investing when it's falling like that. Do you have any thoughts on or suggestions? What do you think when it comes to doing that? Should you just continue? Should you push it all in and just say, you know, we can't time the market so we don't know. What do you think? Well, I would probably say exactly the last thing you said, we can't time the market, we don't know. So what the market is doing has no influence in my investing. You know, I think the time to invest is when you have money to invest. And I paid no attention to what the market is doing, whether it's going up or whether it's going down. I understand the impulse to try to do what you're describing, particularly when it's going down. And to do that, though, by definition, it means that you have kept money to the side to have dry powder in order to do that. The problem with that is the market goes up much more often than it goes down. So I have an article about why I don't like dollar cost investing. That dollar cost investing is different than the kind of routine automatic investing we talked about from the cash flow you have coming in from your work, right? And I guess that's kind of a dollar cost, dollar cost investing thing because you're putting in an amount every month on a reliable basis. But you're doing that because you don't have any other choice. Dollar cost investing at lump sum is where I don't like it because market goes up three out of four years. Now, probably, of course, it doesn't go up three years in the down a year and then up three years. It's not that regular. But on average, it's 75% more likely to go up at any given period of time than to go down. And by the way, you can't predict there is no market timing that. So the fact that the market may have been going up and up and up for a long time is it had been until the beginning or into the beginning of this year doesn't mean that it's about to go down. It could just as easily continue to go up and buy the same token when the market began to plunge. A lot of people commenting on my blog and the comments when I was writing posts saying, well, obviously, the market because COVID is, you know, it's different this time. And obviously, the market is going to go down much more than 30% that it's already down. Well, of course, market didn't do that. It turned around and marched probably back up some wag once said the market will do whatever it takes to embarrass the largest number of people. That's probably a really reliable thing on it. So I don't think you can predict anything about what the market's going to do. I certainly can't. And the problem with strategies trying to do that means that you have to hold capital to the side in order to have it ready to invest. And the problem with that is that that's unproductive, capital that 75% of the time would be earning you a better rate of return. Yeah. And thank you for pointing that out. I agree. The right decision is that, of course, it's just so interesting how behavior affects, you know, our decisions and investing. And I mean, I obviously know that it's not a good habit to watch CNBC every morning at 930 when they ring the bell. But I still do it anyways. I don't know. It's very bad. Yes. There really is. It's very dangerous to your well. But yeah, we've established we cannot time the market. And it's a losing bet to try. You have to be right twice, as you've mentioned in your articles. You know, in the midst of the COVID plunge, I was just seeing so many people comment about with absolute certainty about how much further the market was going to go down. I put a tweet up at the time saying, I've noticed there's a new symptom of COVID, clairvoyance. Because everybody suddenly seemed to think, well, not everybody, obviously, but so many people seem to suddenly think that they could see the future as it happened with the stock market. Yeah. Of course, the stock market, true to its ethic of embarrassing, the largest number of people didn't do what everybody expected it to do. And then what was really interesting to me, by the way, is all those commentators were scratching the head and scratching their heads and talking about how the market was wrong to be going up. Right. So it's not, I mean, that's like saying, the blizzard is wrong to be dropping snow. It doesn't care what your opinion is. The market doesn't care what your opinion is. Whenever the market does is what the market does, it's not by definition, it's not right or wrong. It's just as where it is. Yeah, we clearly saw that. I mean, there was so many signs pointing for it to go down and it just defied all that and said, we don't, you know, the market didn't care. And now it's back up. We'll see where it is. We all think it might go up or down and it'll do the opposite. So I think what's important too is to build these type of obstacles to, you know, because it's human nature, I think you've mentioned before, we're kind of designed to not do the right thing when the market is going up or when it's going down. We kind of are natural instincts are to do the wrong thing. So having these barriers in place is important. And one barrier that I've put for myself is the market crash meditation video you made. So I'm going to put that in the show notes because I want the audience to check that out. I mean, that is like right there on my favorites so that if there's ever the time that I want to sell, I know I have to watch that video first. Well, that's probably, I had fun doing it. That came out of a suggestion from one of our Chicago attendees. And yeah, so that was, that was a lot of fun to put that together. And I, we put it together last summer when the market was of course rock and rolling and there was no end in sight. But, you know, I, again, I can't predict the market other than I know it's volatile and I do it some point. That video would, would, would have a reason to exist. Yeah, it's, it's great. So like I said, I think everybody should check it out and have it there just in case. So, so jumping into a couple of other posts that you have that are very popular. So, you know, pretty controversial as well is the house, a house is a terrible investment. So can you explain why you wrote that post? What do you, you know, I read it and I tend to agree, but you could just explain your, your point of view. What's interesting about that post to me is it is the single most popular post that I've ever written based on a number of views that it's had. It's the post that's gotten me the most love and it's supposed to be the most hate. So, home ownership is, as I say at the beginning of that post, James Altiger once said that home ownership is the American religion and, you know, criticize the American religion without generating a fair amount of hate. What's interesting to me is I kind of did that post a little bit tongue in cheek. It was one of the easiest posts in terms of time and effort that I've ever written. I mean, that was just kind of, this is a little bit fun. It came out of a conversation I had at some event I'd gone to with a woman who was encouraging her young son to buy a house, you know, and he had no, you know, he wasn't married in at kids, you know, a young single guy that, I don't know, I just seem to me there's no particular reason on a house at that stage of your life. And so I just went through the litany of, again, tongue in cheek of what the worst possible investment, if we were to sit down and think about what are the characteristics of the worst possible investment. And then you list them and of course, they're all characteristics of buying a house and we'll let people repost and decide for themselves. But I hasten to add that I am not against owning houses per se. I've owned houses for much of my adult life, what I am against. is the real estate industry propaganda that it is a good investment, or that it's commonly a good investment, because it's not. It's a lifestyle decision. I never bought a house deluding myself that I was making a good investment. I was making a lifestyle decision. I bought houses because that was the lifestyle I wanted to have at the time. And I bought houses that could easily afford. And I think that's critical is to buy the least house that meets your needs. And again, I shouldn't even say needs, to meet your wants, because houses don't fill needs, they fill wants. And that's great if you can afford it. And buy it from a position of what I call a position of power, which means that it takes up the least amount of your resources to buy the house that you need. So I've always bought less house than I could afford. And it's always been because it served the lifestyle I wanted at the time, and I could easily afford it. And if from that measure, by all means, if you want a buy house, buy house, just don't fall prey to the propaganda that you're making some great investment. You make it lucky. You know, there are times when certain neighborhoods, and certain parts of the country, the housing market explodes. And of course, you hear all those stories from people who have benefited from that. But then, you know, there are stories like Detroit, where everything collapses totally. And, you know, buying a house means you lose everything. So, and you tend not to hear those stories so much. People don't brag about that, the cocktail parties. Yeah, yeah. It's a question is not anti house, which is a cautionary tale. And I think I think that's great advice for for anyone, because I mean, maybe I need to stop watching TV, but I love HG TV. I see too many young couples getting into a larger house than they should. But, but you know, you're brought up to believe that renting is, I was told at a young age renting is throwing my money away, or, you know, it's giving money to the landlord when you could be, you know, paying off the house yourself. So, I think that that propaganda, like you said, is rampant. And it's the American dream to own a home. But sometimes you have to, like you said, think about whether it makes sense for you. And it does put you down, it roots you into a specific location where, you know, maybe you needed or found an opportunity somewhere else. You really can't take advantage of that. Well, when you buy a house, you give up a lot of flexibility that you have when you're, when you're renting. But I think, you know, one of the most common pushbacks that I get, and people, if they, if they go to that post that we're describing, they read it, and there's a, there's probably more comments on that post, and anything else they've ever written. And, you know, you hear the both pro and con. And the people arguing in favor of houses, one of the most common arguments they make is, well, owning a house has to be cheaper than renting, because your landlord is building all of his costs into what they're renting to you, and plus a profit for him or herself. And therefore, by definition, it has to be, it has to be more expensive to rent. And that's simply flawed thinking, because rents are not set by a landlord's costs. Rents are set by the market. And if you talk to real estate investors, one of the thing that know what they're doing, one of the things that they will tell you, is you make your money when you buy the property, you have to buy a rental property very, very carefully. And then only certain areas, because there's only certain moments and places where owning rental real estate is profitable. And there are many people who don't follow that. And there are many opportunities. You can go to Toronto now. And rent beautiful condos for a fraction of what it would cost you to buy them. You can go to a lot of major cities where the real estate market is dramatically inflated, prices and rent space for dramatically less than you would pay for it. So this idea that by definition, it's going to be more expensive to rent, because landlords build all their expenses into it is just nonsense. I mean, absolute utter silliness. And, but it's sort of, I don't know, I guess it's, it's appealing thinking, but it's, it's shallow. And it doesn't take into the account the simple fact that rents are not set by landlords. They're set by the market. Yeah. And, and your primary house or primary residents shouldn't be treated as an investment. But getting into, to actual options for possible investments, you mentioned rental incomes or rental properties. Just wanted your quick thoughts on what you thought about reeds or gold. Because you hear a lot of talk about them and then hedging versus inflation and things like that. What are your, what's your perspective on that? Is there room for gold or reeds in a portfolio? So before we go on to that subject, let me make one last comment on housing and what have you just to be clear to it. It was listening. There are way, there's a thing called house hacking, which there are many ways to get into a house that can be profitable and house hacking, simply mean you're by house and you run out some of the rooms or what have you. So there, there's strategies to work, but now you're turning it into an intentional investment that makes all the difference. Anyway, having said that, I used to own read when I first started reading the blog, reeds were part of my portfolio. I held them as an inflation hedge and with the idea that in periods of high inflation real estate is one of the things that tends to go up. But as I looked at it more closely, real estate is actually not that great inflation hedge. It's not bad, but it's not great. And it's no better really than owning stocks in general. And of course, when you own something like VTSAX reeds are part of what you own. By the way, read is danced for real estate investment trust. So it's simply a, it's like a little mini mutual fund that invested some kind of real estate. It might be residential real estate, might be commercial, might be a combination of those things. And anyway, it allows you to own real estate without the headaches of having to manage it yourself. And I owned it for the inflation hedge, but the more I looked into the more I realized that wasn't that great inflation hedge. And I already had that inflation part covered with my basic stock portfolio. So at that point, I dropped reeds and I actually have a post on the blog if you use the search function of my blog, you put it in the show notes called Why Stepaway from reeds that goes into that in detail. As for gold, I've never, you know, I've never particularly, I've never owned it as an investment. I guess I understand the appeal, but gold is dead money. I mean, it's, you know, you're, it's a classic case where you are buying something, hoping that somebody will pay more for it in the future. And I just, I don't see any great benefit to it. I've never seen anything to convince me that it's a great inflation hedge. Sometimes it works. Sometimes it doesn't. And you know, and there's two kinds of buyers of gold. They're people who buy it in a portfolio to sort of balance out the volatility of the portfolio. And they may hold gold stocks, for instance, to do that or things like that. And then they're, and there are people who are worried about Armageddon or, or the total financial collapse of the economy. And they're, they're buying gold to have something tangible to, to all their wealth and, I think the problem with that is that if, if we really have an event like that, that's going to be very hard to use your gold as a, as a commodity for purchasing things that you might want or need. And if we have a really major collapse, then the people with the guns are just going to take your gold away from me if it has value. So, yeah, I've never, I've never held it and I don't, I don't see a great, I think it's, it's a kind of thing that you buy because you are guessing that sometimes in the future people are going to pay more for it than you paid for it. And that's kind of like predicting what an individual stocks going to do, you know, it might be right, you might be wrong. So, yeah, I definitely, I wanted to propose it because I've heard it thrown out there a lot and I kind of wanted your thoughts and kind of almost a debunk it. I don't know how to believe her in gold myself. I agree. I think that it doesn't produce any value, at least with the stocks, your owning companies that earn profits, and they pay dividends, et cetera. The gold isn't really, I think Warren Buffett mentioned it as well, he'd rather own a farm than a gold, because farm can actually produce something, but the gold just sits there. - Yeah, I would agree with that. And I think that, you know, sometimes, people who are making the case for gold, point, you know, they express concern about the dollar, and they point to our enormous national debt, and, you know, the possibility of the dollar dramatically dropping in value, being devalued, and I think that's a genuine concern. I mean, that's something that genuinely makes me nervous, is this enormous debt that we're piling on. And what it might mean for the dollar going forward, but I don't think gold is necessarily the solution for that. I would rather own stocks. If I'm worried about cash dollars, I'd rather, as Warren Buffett said, own farm land. I'd rather own companies, and I, of course, when you own VTSAX, you're a piece of actual operating companies. That's what I would rather exchange my dollars for than some metal that is going to sit in the vault somewhere. - Yeah, thank you for bringing that up because that's something that, I mean, I've worried myself, and I just don't understand, you know, I feel like there has to be a tipping point with our national debt and with the Fed's involvement. I mean, with the pandemic, you know, I don't know how many millions or billions were pumped into the market. So you hear things like that, and it's concerning, but I think you hit it right on the head when you said, if you own stocks, that's one of the best ways you can, you can just prepare, I guess, for that. - Yeah, I think so. And I think, you know, if people want something to worry about and want something to action on, or I think our national debt is, where young people should be focusing their attention. It's amazing to me that there is not a single politician who even talks about it. And it's very rare that you see interviewers when politicians are talking about various spending programs. And, you know, COVID was, I think, $2.2 trillion that packaged that they put in place for COVID. And they've been talking about additional packages for trillions more. I think I read somewhere that the debt this year alone is gonna be $10 trillion added to the national budget. And, you know, I've heard people advocating for these things saying, well, this is an emergency. And, you know, now's not the time to worry about the debt. Now's the time to deal with the crisis. And okay, get it. But I would like to hear a little more about how you're gonna deal with the debt. And especially for people in your age group. And it was the same thing, by the way, they, you know, the government threw a ton of money at the problem in '07, '08. And then we had, you know, from that time period until the beginning of this year, a terrific run. And we ran up more debt. I mean, we went deeply into debt to finance World War II. But when World War II ended, and the good times came back again, that debt was paid down. Well, in '07, '08, we put a lot of money into solve that problem, probably the right thing to do in my opinion. But then we had a decade plus of wonderful times and we did nothing but spend more money. And now we're in another crisis. And it's just, yeah, I'd like to see politicians being asked a whole lot, we're intense questions, about how are you gonna pay for all this. And now, you know, what is gonna, how is this gonna be handled going forward? And it's not a matter of matter to me, I'm an old guy, I'll be dead. But it's gonna matter to you, Chris, and a lot of your listeners, I would think, and those are the questions I'd be asking the politicians. Definitely, I think it's important. And for politicians to be fiscally responsible, I mean, I know it's not what necessarily gets votes, but it's what's right. So. And reason doesn't get votes is because I think voters don't see the problem. And, you know, they're not financially savvy enough to see the problem. And, you know, politicians know that they'll get more votes by promising programs that give you stuff. - Right. - And, you know, any financial responsibility. So, you know. - Well, yeah, we'll see what happens with that. And I think switching topics to something a little bit more uplifting, I wanna talk about FU money, because you have brought FU money to the forefront in the fire community. That's where I originally found it. And you made a video on it as well, which is like, I think you should. What do they give Oscars or Grammys? I. (laughing) You deserve one, because that was amazing. - Well, thank you. That was an enormous amount of fun to do. And also, that also came out of Shutakwa. The. When I saw that movie, The Gambler, and which stars John Goodman, by the way, it's not a very good movie, but there's this wonderful scene and it with John Goodman, where he's talking about FU money and in my post when I did my version, I have his version there. For a very moment, I saw that. I knew that I wanted to rewrite it a little bit to my ethic, but that I wanted to record it. But I didn't know anybody at the time who knew how to make films and went to one of our Shutakwa's, which are these annual financial retreats that we hold. And sure enough, there was a couple who were filmmakers who attended, and I was living in New Hampshire at the time, and they were down around Boston just an hour away. So they graciously came up and made it happen. It was a lot of fun. - Yeah, yeah. - Not suitable for work as the saying goes, by the way. - Yes, exactly. And I almost opened it up at work, but I said, "Let me listen to it at home." And I was laughing so hard, so that was a good one. And you brought up Shutakwa. What can you give the listeners and the fire community an update or what's going on with that this year? Or if there's. - Yeah, so maybe I had a real briefly tell your listeners what it is, 'cause it's very possible. There are people out there who are wondering, what's the Shutakwa he keeps referring to. - Yep. - So Shutakwa is an event I created back in 2012. We held the first one in 2013. We've done it every year since until this year. We've had a put it on IATIS for because of COVID for this year. But basically, we go to some miconset behind it, was to go to a cool place, hang out with cool people and talk about cool stuff. - Sounds cool. - And that sounds cool. And that's, by the way, all three of those things are my definition of what a cool place is. Who cool people are and what cool stuff is. It's a very selfish kind of thing. But fortunately for me, I was talking by partners, Alan and Katie, who helped run it. And they were telling me that we now have 4,000 people on our mailing list for this. - Wow. - And what's interesting about that is one of the parts of the magic you should talk was we limit the attendees to 30 people with any one event. And we only do two or three of them a year when we're doing them. So less than 100 people a year get to go on these. And it's just first come first serve. But now we go to some cool place. We are currently scouting Croatia for next year. - Nice. - Yeah, if we can find the right venue, the right cool place, then we'll go there. And by definition, Štakova seems to attract cool people. And it attracts, and I've written a lot about Štakova over the years and you know, you can find that on my blog. There's a little subject thing on the right hand column. And Štakova's one of them. But one of the cool things about it is you could not ask for a more diverse group of people based on any kind of diversity measure you want to look at. I mean, certainly by gender, men and women, by sexual orientation, by race, by religion, by age, by wealth, we've had some extraordinarily wealthy people. We've had some people who are just at the beginning of the journey. And but they all come together and get along famously 'cause they all have this FI thing in common, whether they've achieved it or they're just beginning or they're somewhere out in the journey. And it's a really cool thing to see. And it attracts really, really interesting people. And so, Christian Bryce, who are another part of the team and speakers at it every year, they write millennial revolution and they're nomads. And their life now, because they've been part of this, or they came on board, I think in 2017 maybe. There were life revolves around visiting Shatakwins that they've met and out as they travel around the world. So yeah, it's a really cool thing. And everybody who's ever attended has told me that it's either one of the best weeks of their life or the single best week of their life, which is very gratifying. And the coolest thing about it is from what they tell me is they get for maybe the first time to meet and hang out with the people who get it. They don't have to explain themselves. - Yeah. - And most of us on this FI journey are not supported by the people in our day-to-day lives and don't really understand it, don't appreciate it. So there's something very gratifying to come to a place where everybody already gets a conversation to start immediately at a different level. - Yeah, that's definitely on my list. I wanna definitely make it out one of these years, hopefully next year. And yeah, I think it's been amazing to people that you meet in the FI community. Everybody has been welcoming and genuinely nice. So that's one thing that I love about our community aside from all the amazing personal finance tips and life changing advice that you get. - Yeah, it crosses barriers that we don't typically cross in our day-to-day life, whether they're their age or race or that, I mean, it's just, you know, the FI community in general is an amazing community in every yard. And Shatakwa is, hey, I'm fond of saying the only group of people who don't come to Shatakwa bigots. (laughs) Because if you're bigot, you're not going to want to be a Shatakwa just to agree that it's a very diverse experience. But that's literally the only group who don't come. - Yeah. - And I'm okay with that. - And I'm okay with that too. And by the way, that's not political. I mean, we have people who have come or very far on the right side of the political spectrum on those who've very far on the left and everywhere in between. Everywhere in between. But yeah, the only people don't shop for bigots. - I love it. Yeah, let's leave it at that. - I'm alright with that. - Well, so to conclude, I think it'll be important to, kind of, we covered a lot of ground and we kind of touched a lot of basis. So I think what I want to conclude with is leaving the audience with your nine basic principles that you have on your blog. And this is something that I think you wanted to make sure your daughter understood is that right? Because you realize that she's not very into personal finance like we might be and we are the weirdos, not them. So you realized, okay, we gotta make it simple and just, you know, you created these nine basic principles. So I'd like to go over them and leave the audience with that. And then if you want any thoughts, you can try them at any time. - Yeah. - So the first one is avoid physically irresponsible people. Never marry one or otherwise give him access to your money. And I love how I said him. Oh, so you're writing for your daughter. - Right, right. I mean, yeah. So it's important to remember that all, everything I write is aimed at my daughter. And I'm fine with saying, I've only ever tried to convince one person of this. And that's my daughter. And the fact that other people have found it useful and helpful and life changing is very gratifying. But by the same token, when people come along and want to argue with me about it, I don't care. (laughing) If what I say doesn't resonate with you, that's fine, don't do it. - Right, right. - And go do whatever it does resonate with you. I'm not the least bit interested in trying to persuade anybody of anything other than my daughter. And by the way, job done. She is, she is solely on the path. She's still not, as interested in this stuff as we are. But, you know, she knows what she needs to know to make it work for. And that's what the simple path is all about. If you get a few simple things right, then you don't have to spend all your time worrying about money and thinking about money. I like thinking about money. And you like thinking about maybe a lot of our listeners do. But to be successful, you just have to get a few things right. - Perfect, yep. The second one here is avoid money managers. It's your money and no one will care for it better than you. The third principle here is simple, avoid that. The fourth principle here is save a portion of every dollar you get. So paying yourself first. The fifth principle, which I love, is the greater the percentage of your income, you save and invest, the sooner you'll have a few money. Try 50% with no debt. This is perfectly doable. Six is put your money in the Vanguard total stock market index fund or VTSAX. This is the fund you already own. Talking to your daughter. So just keep adding to it. Seven, realize the market and the value of your shares will sometimes dramatically drop. People all around you will panic. They'll scream, sell, sell, sell. Just ignore this, even better, buy more. Number eight, when you can live off the dividends of VTSAX, that VTSAX provides, you are financially free. And number nine, the less you need, the freer you are. So those are the nine basic principles. And I think that just like your daughter, living based off of that, I think the audience can totally, I mean, that's all you really need, I think. - Yeah, and in many ways, the blog and the book is just an elaboration of those concepts. And not surprisingly, you know, I've, there are several of them that I've gotten pushed back on because this is a path that just doesn't resonate. With the average person. So, you know, you save 50% of your income to the average person who doesn't have any context for this and their headaches floats. - Correct, right. - Yeah, so you stay at to the average FI person and they say 50%, I'm shooting for 80%. (laughing) - Overachievers, of course. - Exactly. All right, well, Jail, thank you so much for joining. I wanna end with just a question. If there's anything that you have coming up or you'd like to share with the audience, anything new or interesting by all means, I would love to hear it. - Well, so anybody who's interested in the blog and go to JailCollinsNH.com, that's the blog. And there's a link to the book on Amazon there if they're interested in the book. The only thing that occurred to me is I was, it was just, and this is the first time I've mentioned this in public, it's literally a conversation, I just had a couple of days ago, with Alan and Katie, my Chicago partners, we talked about a moment ago, we're not doing Chattacqua this year because of COVID, but they had suggested maybe we do some, many kind of Chattacqua online for the 4,000 people who have, are on the mailing list. And even if we're doing Chattacqua, 'cause so few, we have so few available slots, most of those 4,000 would never be able to come. So if any of your listeners rather are interested in getting a taste of Chattacqua, sign up on the mailing list, and we might well be doing, I don't can't promise it, 'cause it's still just a thought at the moment, but sometime this year we might be doing something virtual, that won't be the same, but it'll be a taste. - Yep, no, I highly encourage it, like a lot of things in this world nowadays, it's going virtual, which is exciting. And I'll be signing up, so I hope everybody else does too. - Well, good. Well, don't sign up unless it really appeals to you, but if it does, yeah. - Well, Jail, thank you so much for joining the show once again. It's a pleasure, and I hope the audience got just as much value from this show than as I did. So thank you again. - Well, I appreciate the invitation, and it's been a lot of fun chatting with you, and like you, I hope your listeners enjoy it as well. - All right, take care, Jail. - So I hope this episode was as useful to you as it was for me. 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