What is the "simple path to wealth"?

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The "Simple Path to Wealth" is an investment philosophy popularized by JL Collins, particularly through his book of the same name. There are key principles that outline this path:

  1. Time in the Market, Not Timing the Market: Emphasizing the importance of staying invested over the long term rather than trying to predict market movements. This approach is consistent and has historically proven to be successful over time 1.

  2. Invest in Low-Cost Index Funds: JL Collins advocates for consistently investing in broad-based, low-cost index funds, specifically recommending Vanguard's VTSAX. By doing so, investors own a small part of almost every publicly traded company in the U.S., thus betting on the overall economic power of the country rather than trying to pick individual stocks 2 3.

    Simple Path to Wealth

    Jonathan and JL discuss the benefits of investing in the market over time and recommend JL Collins' book, "The Simple Path to Wealth." They emphasize the importance of keeping it simple and avoiding attempts to beat the game.
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  3. Simplicity Over Complexity: The philosophy is grounded in simplicity, making it easier for average investors to take action and achieve financial independence. It avoids the complexities of trying to beat the market, which is risky and often unsuccessful 4 5.

  4. High Savings Rate: Combining average market returns with a high savings rate can enable one to retire in under 20 years. Even without high returns, consistent savings and investment can lead to significant wealth over time 4.

The method encourages a straightforward, disciplined approach to investing that focuses on long-term growth and stability rather than short-term gains 6 7.

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