JL Collins approach to investing and financial independence is almost Zen-like in its simplicity. He wrote the book as if he was giving a financial road map to his daughter, a concept that I love, and I think he did a great job.

The Praise:

Collins’s philosophy is centered around the idea of financial freedom through smart investing, primarily via low-cost index funds. His rationale is sound and backed by historical data: over time, the stock market goes up, and by investing in a broad index, you’re set to capture those gains. I agree with his philosophy here and it underpins my own financial strategy.

His blog and his book, “The Simple Path to Wealth,” have become a common resource for the FIRE (Financial Independence, Retire Early) community. Collins demystifies the stock market and breaks down complex financial jargon into digestible pieces. This is a financial book that is actually readable, and doesn’t get into the weeds. There’s a sense of talking to a wise uncle who’s been through it all and has come out on the other side with pearls of wisdom to share.

One of Collins’s key strengths is his ability to remain unfazed by market volatility. He preaches a long-term strategy and discourages overreacting to market swings, which is a sound approach. For novices, this advice is gold; it instills discipline and a focus on the long game, rather than getting caught up in the short-term noise.

The Criticisms:

The investment strategy outlined in the book is exclusively focused on US stock market investing, specifically in VTSAX or equivalent, a Vanguard Total Stock Market Index Fund. This might be seen as putting too many eggs in one basket, and there is endless debate about how much international exposure one needs. Collins addresses it in the book, but the data seems pretty convincing to me that at least some international is beneficial. Collins wants to keep things absolutely dead simple and reduce mental overhead to as close to zero as possible, which I think makes a lot of sense though.

While Collins addresses bear markets and his strategy tries to account for the varying individual risk tolerances, I really think the number of people who would successfully hold in a bear market with a 100% stock portfolio is extremely slim. People need to be honest about their risk tolerance, but this book came out in 2016 during a huge bull market so I do wonder about the downside of new investors going too stock heavy and being scared away from investing entirely.

The Verdict:

JL Collins offers a compelling, accessible path to financial independence, but it’s not without its gaps. His principles provide a solid foundation, particularly for those just starting out. However, as with any financial strategy, it’s crucial to adapt his advice to your personal financial situation, risk tolerance, and economic reality.

For the seasoned investor, Collins’s advice may seem too simplistic, potentially overlooking other investment vehicles that could diversify and strengthen a financial portfolio. Yet, there is a beauty in simplicity and the realization that for most, behaviors matter so much more than a hyper optimized asset allocation.