JL Collins, The Simple Path to Wealth | Afford Anything Video
JL Collins doesn't know what the efficient frontier is, and he doesn't care. The "Simple Path to Wealth" author admits this upfront when we challenge him with advanced investing concepts.
We skip the basics and grill him on whether his simple approach actually beats sophisticated strategies. His answer might surprise you.
Collins concedes that complex portfolios probably outperform mathematically.
But execution trumps optimization every time. Most people can't stick with complex strategies for 20 years, especially when they require selling winners to buy losers – something that goes against human nature.
He calls index funds "self-cleansing" because they automatically rotate out failing companies while rotating in the new winners. You don't need to predict which companies will dominate next – you'll own whatever rises to the top.
But what happens after you've reached financial independence? Collins says it depends entirely on your spending rate, not your net worth.
Someone with $5 million spending $100,000 per year can stay aggressive with stocks.
Someone spending $200,000 needs bonds to smooth the ride.
Collins walks through his withdrawal strategy using his daughter as an example.
She stepped away from corporate life in her early thirties with an 80-20 stock/bond allocation. She pulls dividends covering 2.5 percent of her 4 percent withdrawal rate while Vanguard automatically sells shares for the rest.
Collins calls the 4 percent rule extraordinarily conservative. Research shows 5 percent withdrawals succeed 86 percent of the time. He'd take those odds to escape a soul-crushing job.
We discuss the tension between frugal habits that build wealth and learning to spend money once you have it.
He explains why financially independent people often stay engaged with work — the problem was never work itself, but working without agency.
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