BiggerPockets Money Podcast - 20: The Simple Path to Wealth—Index Funds Explained with JL Collins

Episode Date: May 14, 2018

Jim Collins has literally done it all. From busboy, produce, clerk, and gas station attendant, to ad agency founder, sales trainer, radio co-host, and publisher. He is a prolific world traveler, having visited more than 30 countries on five continents via motorcycle, car, train, plane, boat—and even elephant. Jim has lived a very good life. And along the way, Jim has learned that money is a tool that can offer the freedom to live the life you want to live. He’s also figured out that there is a very simple path to wealth. While you can make money picking individual stocks, the index fund is a very easy way to grow your wealth in the stock market without spending time researching companies. This episode truly is the show for anyone who has money or wants to have more. Links from the Show BiggerPockets Forums How I failed my daughter and a simple path to wealth (Article) Stock Investing Series - Part XXXII: Why you should not be in the stock market (Article) Stock Investing Series - Part III: Most people lose money in the market (Article) Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Bigger Pockets Money, show number 20. The beauty of investing is that if you keep it simple, it doesn't have to take up much or really any of your time, very little of your time. And unlike many things in life, the less effort you put into it, once you understand and implement a few basic concepts, the better your results will be. It's time for a new American dream, one that doesn't involve working in a cubicle for 40 years,

barely scraping by. Whether you're looking to get your financial house in order, invest the money you already have, or discover new paths for wealth creation, you're in the right place. This show is for anyone who has money or wants more. This is the Bigger Pockets Money Podcast. How's it going, everybody? I'm Scott Trench. I'm here with my co-host, Miss Mindy Jensen. How are you doing today, Mindy? Scott, I am doing super fantastic. It's a beautiful day out. And I am so excited for today's guest. We have Jim Collins today from J.L. Collins N.H. He has literally done it all from busboy, produce clerk, and gas station attendant in his younger days to ad agency founder, sales trainer, radio co-host, and publisher. He's a prolific world traveler. He's visited more than 30 countries

on five continents via a motorcycle car train, plane, boat, and even elephant. Jim has lived a very good life. And along the way, he learned that money is the tool that you can use to give you the freedom to live the life that you want to live. And he's also figured out the simple path to wealth. Yeah, I was going to say, it sounds like a very complex approach to money in order to kind of sustain that incredible lifestyle. But no, Jim has got a very simple path to wealth. The reason we're saying the simple path to wealth is because Jim is also the author of a bestselling book called The Simple path to wealth, which I think Mindy and I both love and I would recommend. And if you, I would even recommend after you listen to this podcast, if you'd like his voice, you get the audible version

because it's him reading it the whole time and he's got this incredible radio ready voice. Yeah, James Earl Jones-esque. Yes. Yeah. So I want to give a little bit of Jim's background, or I wanted to give a little bit of Jim's background to say, you know, he's done a lot. He has the wisdom to speak from experience and say, I've done a lot of different things. This is the way to go. And today we're going to talk about index funds and how this powerful and super easy set it and forget it investment strategy is what he recommends. Warren Buffett has recommended it. So two of the top investors in the world are recommending this path.

You should take it. Yes. And a quick disclaimer, we talk about some specific. funds on this show. We usually do not talk about specific investments on the Bigger Pockets Money show. We don't talk about buy this stock or buy this property. We talk more kind of in generalities of buy index funds, low cost, that kind of stuff. This show does include some references to specific funds. You've got to invest according to your own strategy and with your own thoughts. We cannot endorse those funds or recommend them as actions that you take. And so you understand

that that is at your own risk if you take any of these specific funds going on in this in this show. As with anything, make your own decisions and accumulate the information and make the decision that works best for you for your long-term strategy. Okay. So we bring in Jim after that kind of dire warning, but yeah. Yes. Well, hey, it's a C-YA thing. But before we bring in, Jim, I want to do two quick things. First, I want to kind of give a shout out here. We have talked a lot about to a lot of people that don't have families, that don't have children. And we're looking, we know that that's a big hole in our plan. We know that there's some disadvantages come financially once you begin having children involved in the picture and that kind of limits your

ability to be flexible with moving locations, maybe jobs. It kind of increases expenses, those kinds of things. We would love to hear from more potential guests that are moving towards fire or have achieved fire and started that journey really started getting serious about it while having a family with children involved. We think that would make for a great guest. So if you know anybody like that or if you are like that, please reach out to us at Scott at Biggerpockets.com and or Mindy at Biggerpockets.com. And we would love to hear from you. Yes. Please send us notes. Also, if you have a delightfully terrible joke, Scott at BiggerPockets.com. Tax season is one of the only times all year when most people actually look at their full financial

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Thank you for having me. Going well. Yeah, me too as well. And I thought we could get started here by kind of quickly asking you about your background as you kind of moved towards fire. Could you give us a little introduction or highlight of how you came to discover the concept of FI and how you began moving towards buyer? For somebody like me, that's actually a really interesting question. So I started, the best way to look at that, I suppose, is say I started investing in 1975. And I always knew I wanted to have enough money to put me in a position of power to make decisions in my life. And at some point, I read James Covell's novel, Noble House. And I came across the concept of what he calls FU money, or actually spells it out a little more explicitly than that,

and I'll leave it to the audience to figure out what the FU stands for. But anyway, I had never heard that term before, but it immediately crystallized what I wanted. So my goal was not FI, which is a concept I didn't hear until after I started blogging back in 2011. So for decades, I wasn't striving for FI. I didn't understand it as a concept. Had I heard of it, it would have been a goal, but I just hadn't heard of it. But having FU money, which is simply enough money that you can be bolder in your choices,

is not necessarily in my mind enough money that you never have to work again, but it is enough money that you can step away for a period of time, which is what I did through my career. And then when I sort of left my last formal job in 2011, I started the blog as a archive of information I want my daughter to learn. And the other thing I throw into that is a common question And like it is when were you FI? And again, understanding, I didn't have a concept of FI.

I had left a job in 1989 to do something else for a while, which was sort of part and parcel of the way I conducted my career over those years. And about three or four years in, I was at the end of the year, I was totaling up our net worth and investments and what have you. And I noticed something very interesting. And that was that for that year and the two years prior, we'd live the same life. that we'd always lived. We had the same house, did the same things, paid the same bills. I didn't have a job. I didn't have an income. And yet each of those years our income or our network was higher than it had been the year before. And I knew something remarkable. It happened. It's what we would now call FI, but I didn't have a frame of reference for that. So I knew it was

remarkable, I kind of embarrassingly, I don't think I really appreciated the significance of what it was. So I just sort of said, oh, that's interesting and rolled on living my life the way I always live my life. So that's amazing. A couple of quick phrases I want to point out that you just kind of said in here is position of power in your life, being bolder in your choices. That, I think, is really what all of this is about, is the fact that you can leave and do something different for a couple of years and have those options come into your. life and say F you to those situations that are not in your best interest or that are not making you happy here. I guess moving maybe a little earlier in the journey, what was your career? What were

you doing where you were able to save up and how were you investing your money so that you could get towards this goal you'd even know existed, I guess? Well, again, pretty early on, I had a focus goal of having FU money. But my career was mostly in the magazine publishing business, in business to business magazines. I did, just before that time, I mentioned when I had, in 1989 in the year, just prior to that, I had stepped away from publishing and went into the financial business for a year and so kind of a mid-career change. And then I went pursuing acquiring businesses and then went back into the publishing business. So that's get along and boring. And I think I've sort of lost track of what you were asking me. Well, I'm going to tag on to what you were saying.

you were in the financial business. What do you mean by that? So I ran into a guy on an airplane in a business trip and he was working for an investment research firm. And I was very interested in investing in stocks and I was very active in doing it at the time. So once I understood what he was doing, that was the topic of conversation. And by the time the plane landed, he said, you know, you ought to come and join us. You ought to join our firm. And so a few days later, I had lunch. with the guy who owned the firm, and I wound up making a career change. So I was what you call an investment officer, what they called an investment officer, which was kind of a sales guy. I went out and sold our research to institutional investors.

Awesome. So I guess my question that I was trying to get at was, how were you able to achieve the high savings rate that allowed you to accumulate this FU money? And then how were you investing it on your own in these years, you know, in the years, you know, in the years, up to 1989 when you kind of reached five, even though you didn't know it. Right. So, you know, you have to understand when I was doing this, there was no internet, there was no infrastructure, there was nobody else doing what I was doing. So I was kind of blundering along. But what I knew is I wanted to have money available to invest because I wanted to accumulate this FU money. So I just started saving half of my income. And my income in those

days because I was early in my career was very low, but, you know, I'd lived on less as a college student, so it wasn't any great sacrifice. I was still having a great and enjoyable life. And I had 50% of my income to invest. And I didn't think of this as deprivation, by the way. It's just, it was a different way of spending, if you will. You know, some people, my peers mostly wanted to spend on fancier apartments or cars or whatever, and my priority was a little different. I wanted to spend it on investments. So that was what led to the high savings rate. So that was the very first money I took off the top was for my investments. It was the most important money I spent. As to the second part of it, I initially was buying individual stocks. And then a little later, I was buying actively

managed mutual funds. So I was researching managers. So I was trying to outperform the market, picking stocks myself. And then in addition to that, I was trying to find active managers who could do it. Here's my dirty little secret, and of course, I'm a diehard index investor now, and that's what my book's about and my blog is about. But I actually achieved FI picking individual stocks and, as an extension, picking managers that ran funds picking individual stocks. So sometimes people get confused and they think, well, picking individual stocks or active fund managers is completely ineffective. It's not.

It is not as effective or powerful as index investing, but it got me there initially. Index investing has the advantage of being cheaper, more powerful, and easier, simpler. Okay. And we have talked about index fund investing very briefly in past episodes, but can you just share with our listeners what index fund means? What are you talking about when you say index fund investing?

Well, in a sense, that's two different questions. So an index fund is the idea is simply you find an index that is tracking some group of companies and you buy every company or the fund buys every company in that index. Active managers try to choose the companies that are going to do better or worse and select them that way. An index fund investor basically says, I don't know who's going to do better or worse, So I'm going to buy them all. And there are now index funds for every sector you can possibly imagine, which is why I make that distinction. When I talk about index funds and the kind that I recommend are broad-based index funds, which were the originals that Jack Bogle created.

An index fund that follows the S&P 500, and that's kind of the classic. That was the very first one that Bogle put out. And I think that's a great option, by the way. I slightly prefer the total stock market index fund, which is VTSAX. That's the one I invest in, and that's the one I recommend. But if somebody, for instance, in their 401K as only a S&P 500 fund, that's great. I am not a fan of indexing that just looks at a particular sector. So they're index funds just for financial assets or financial stocks or index funds just for mining

and precious metals. I'm not a fan of those. So when I say invest in index funds, I'm talking only about the broad-based index funds. Okay. Now, all three of us are, I think, on the same page in terms of favoring index funds over actively managed funds

or individual stock picking in the market. But perhaps we could dive into the why behind that. I think you are really a thought leader in why this is such a powerful concept and why index funds are superior. So I guess to start this off, what are the disadvantages, as you see them, to actively managed funds and individual security analysis as you see them relative to index funds? Well, I think the problem with actively managed funds and by extension, by trying to pick stocks, is that it's one of those things that seems that it should be easy to do. And yet people who can do it successfully are vanishingly rare.

You look at it and you say, if you look at the S&P 500 index, for instance, it's very tempting to say, well, in fact, I just saw an article of a guy making this exact point, saying, you know, I can go through that index and I can see companies that are clearly doing poorly. Why not just eliminate those? And if I just eliminate the dogs, by definition, I'll do better than the index. Or correlation, I can go through and just look at those in the index 500 who are doing really well. And just buy those, and by definition, I'll do better than the index. The problem is that things change. Today's dog is sometimes tomorrow's terrific turnaround story. You don't own it, you miss it.

Today's wonderful high-flying stock that's doing everything well and has made people a fortune is tomorrow's crash and burn tragedy. You don't know which they're going to be. And it turns out the research is unequivocal. It is vanishingly difficult for people to successfully make those decisions over time. What makes it seductive is that every now and again you get it right. And I can speak from experience that there are a few thrills in life better than picking a stock and watching it steadily ratchet up. In fact, it's so intoxicating that my observation is it leads a lot of people who do it to kind of forget the ones that didn't work out too well.

And so they have an overstated sense of how successful they've been. The truth is that very, very few people statistically can outperform the market over time. In fact, you go out 30 years and the research suggests that the number of people who can outperform is less than 1%. Statistically zero. So to play devil's advocate here, what if playing the market makes me more, because this is how I started. I started about by picking stocks and trying to beat the market. Mindy alluded to this earlier, but I actually invested in a couple of Chinese companies because, hey, Chinese company has more cash than market value and no debt.

You know, everyone except me seemed to know that Chinese companies don't have audited financials, but that's okay. There's always a catch. But, you know, hey, my desire to invest more and pick stock winners gives me a higher saving rate? Is that an advantage for stock picking perhaps? Well, that's, Scott, that's really interesting. I never actually thought about it from that point of view. I think that if you, if your goal is FI, the most powerful thing you can do is increase your savings rate. So if you said to me, gee, you know, if I just buy index funds and they don't engage me, I'm not going to be motivated to get my savings

rate up, but if I can buy individual stocks, that can be a temptation. The problem is that being successful picking individual stocks, as you just alluded to, can be so treacherous. And I'm hesitating a little bit because, as I said earlier, I actually achieved FI myself picking individual stocks and actively managed funds. But I look back on it and realize that I would have achieved that much more easily, much more quickly had I adopted index funds sooner. So again, it's not a matter of choosing between something that's terrible and something that's great. It's choosing between something that does work and can work depending on how skilled you are at it

and something that is simply superior and easier and more powerful. So I don't know. I think it would depend on your stock picking skills. I mean, some people are better at it than others. If you're really dreadful at it, then it probably would overwhelm your even advantageous savings rate. But, you know, if you're decent added, who knows. But I would just say get over it, get your savings rate where it needs to be an index, at least if you want to be FI. So I don't think there's anything wrong with picking a stock.

I enjoy Diet Coke. It's delicious. I own Coca-Cola stock. It's not, I don't know, own all Coca-Cola stock. I mean, not all of my investments are solely in Coca-Cola. I would like to own all of the Coca-Cola. I was going to say, if you owned all of Coca-Cola, you'd be doing quite well. Have to fight Warren for that.

But that's something, that's a company that I want to support. I think that it's totally valid to choose a company that you want to support and buy their stock. Just don't sync all of your money into it. And you can pick individual stocks and invest in index funds. And I think that that's something that isn't really. discussed in the FI world, it's always index funds are good. Picking individual stocks is bad, and you're a horrible person akin to a child murderer if you pick individual stocks. And that's,

you know, obviously Jim is, well, I guess I shouldn't say obviously. I don't know your sort of details in their background. But you picked individual stocks and did very well. My husband has picked individual stocks and done very well, thanks to Jim. We're now switching over to index funds as we divest ourselves of these individual stocks, but we're still looking at other individual stocks, oh, this is going to IPO or when this does IPO, like when Bigger Pockets IPOs, if Bigger Pockets IPOs, I want to buy that because I support the company.

And I think they're going to do amazing. But, you know, I don't think it has to be an either or. I agree with you. It certainly doesn't have to be an either or. And I, as you've already said, I have the disease, right? I don't own any individual stocks at the moment. It's been a couple of years, and I have kind of resolved that I'm not going to do it anymore because I do think it's a subpar thing to do.

The one thing I would object to in what you said, Mindy, is, you know, Coca-Cola doesn't care whether you own their shares or not. So I don't think you are actually supporting the Coca-Cola company in any significant way. And I think when you mix, so it becomes an emotional decision, you're getting emotional satisfaction from owning Coca-Cola in addition to whatever economic growth you might enjoy. And I happen to be of the belief that you should separate your emotions from your investments. There's a saying that, you know, stocks are never going to love you back. So if you want to pick individual stocks because it's fun and you think every now and again you come across something that will outperform. and your husband Carl has done a remarkably good job of that.

I know him personally and I know some of the things he's chosen. And so by all means, go for it. I wouldn't do it just to say, oh, I want to support this company or that company. I would do it because I say, you know, I think this is a company that has a chance to outperform the index going forward. And I think you should always have that benchmark. One of the things that drives me nuts is when people say, well, I'm going to pick individual stocks and I'm not going to bother to benchmark it because I don't care what the index is doing. I only care about my stocks.

Well, again, taking the emotion out of it, there's no reason to invest in individual stocks unless you can outperform the index. I mean, there's just absolutely no reason to go through the time and effort and work. I suppose you'd make Arringen say, well, if it's something you enjoy doing, but there's no financial reason to do it. So, yeah, I would take the emotion out of it. And then if, you know, you think you see an opportunity better, at least that's how I did it with the individual stocks that I occasionally bought when I was indexing. I discovered indexing about a decade before I finally accepted it.

But once I accepted it, it's some heavy lifting in my portfolio ever since. And the individual stocks have just been kind of a fun distraction because I liked doing it. So the real reason, I think the real power of index fund investing is when you look at wealth, building from a very high level, top down, there's really four things that you need to be doing to move towards FI. You have to spend less money, earn more money actively, achieve high returns or returns on your accumulated assets, and or start businesses or otherwise create assets from scratch. You have to do some combination of those four things in order to go about this. And where active stock selection, picking individual securities is a real bummer. Is it a

distracts you, particularly in those early years when it can't have that much impact on your ability to build wealth from the other things that are more powerful, from focusing on your frugality, from actively earning more income, from actually pursuing something that could produce more sizable investment returns like perhaps real estate or a business acquisition or starting a business. When you have, let's say you have a portfolio of $10,000 and you go through this exercise of picking winners in the market. And instead of getting the average historical 10% return of the stock market, you get 15%, you outperform by 5%. Well, you've just made yourself $500 over the course of a year, right? $500 is immaterial

to your financial position. It's immaterial to the goal that we all have here, and we all share of achieving financial independence. You could have spent that time analyzing those stocks in a more productive way. And that's where I see the big problem with active stocks, or selecting an active manager or something relative to index fund investing is your odds are you're going to underperform or perform at exactly around the average if you just select stocks with kind of a dartboard approach or even if you do your own analysis, which is proven time and again in great books such as what I'm sure we're going to discuss it a little bit to be no more effective than index fund selection. And that is where the real crime is. That's where you're doing

yourself the real disservice. That's where I did myself the real disservice is I wasted so many hours trying to learn about this and did not instead invest in index funds and actually build my financial position in a way that was more predictable. Is that a reasonable analysis in your opinion, Jim? Well, I think people who invest in individual stocks would take issue with it and they would say there's greater potential than you allow for. But I would agree with you because it is vanishingly difficult over time to outperform the index. And so you are very likely to wind up investing a lot of time and effort, analyzing the stocks and looking for them and then once you own them, tracking them and what have you, only to, if you're lucky,

match the index, much more likely to lag the index. And the rarest of circumstances outperform the index. And if you look at professional managers, some of whom outperform the index for some short period of time, they typically are outperforming it by a percentage or two. And then the magic goes away. So I think that, yeah, I would agree with you that it is a lot of sound and fury signifying nothing in the end. And you would be better off just buying the index. I actually, when my daughter was in college and I started writing the blog for my daughter and I wrote my book for my daughter. And so whenever I write anything, I have her and mine.

and she's one of those people who just is not interested in the financial markets and stocks. And I have been trying to, over the years, get her interested in it. She came home from college one day, and I started, as is my one, lecturing about this. And she stopped me and she said, you know, Dad, I get it. I understand this is important stuff. I just don't want to have to think about it all the time. And that was an epiphany for me because I realized, you know, I'm the odd one out. I mean, people like me who like this stuff, we're the odd ones out.

I mean, most people have better things to do with their lives like you were just alluding to. And so that's another powerful incentive for index investing, because if you just get a couple of things right in index investing, it takes up virtually none of your time. You will outperform over the decades, virtually everybody who's picking individual stocks, all the active managers. and you will do it with no effort on your part. And you can go on and focus on your career or your hobbies or other kinds of income generating things. So yeah, absolutely. I think it's a great baseline. All right.

So you mentioned a couple of key things to do while your index fund investing. Let's move on to those. What are the key things you need to keep in mind when you are looking to invest in index funds and be successful over the long term? I think the beauty of index funds is that you don't have to try to figure out which companies are going to outperform which other companies. So when you buy the total stock market index fund, VTSAX, which is the one I have a preference for, you own virtually every publicly traded company in the United States. And so basically what you're investing in is the United States. And if you believe the United States is going to continue to do well and prosper, that's the bet you're making.

Now, if you don't happen to believe the U.S. is going to do well and prosper, then maybe you want to rethink it. You are also betting on the world because the top U.S. companies are by definition international companies. So as the world is growing, as China, for instance, is growing, as Asia is growing, as Europe's growing, as Africa and South America are growing, even though you're focused on U.S. companies, you're benefiting from that growth. So you're betting also on civilization around the world continuing to grow and prosper. So I think for my approach to make any sense, you have to buy into those concepts. I think civilization is going to continue, and I think the United States is going to continue for all of the problems that we have, is going to continue to be a major economic force in the world.

The beauty of indexing is something that I call self-cleansing. So what happens is unlike buying an individual stock or even a collection of individual stocks, the index fund by definition is always changing, small changes, but always changing. As companies fail and begin to drift away, they fall off the index because you have, the company has to be of a certain size to be on the index. So the losers tend to drift away. At the same time, new companies are always being formed. Mindy mentioned that Bigger Pockets might IPO at some point.

Speculation. Speculation. Speculation. But if that were to happen, then that's another publicly traded company in the realm. And I don't have to guess whether Bigger Pockets is going to do well or not if it IPOs. I'll be along for the ride. And if it explodes and becomes the next Google, I'll benefit for.

from that. If you guys don't and you fade away, then that's okay. Now, here's the beauty of this. The companies that fade away can only lose the maximum of 100%. That sounds like a lot. But on the other side of things, if bigger pockets skyrockets, its growth isn't limited to 100% or 200 or 500 or a thousand or 10,000 percent. So you have a rigged game in the sense that the winners have no limit to the upside and the losers do. So that's what I mean by by self-cleansing. Well, so we have a couple of key assumptions to your this philosophy, which is one that, you know, you're betting on civilization to continue to grow and prosper. You understand that, hey, these companies can only lose 100 percent of their value and they can grow at multiples of that. What if you think that civilization is

going to grow and prosper, but not for the next five to seven years. Should you stay out of the market and wait, or what's your kind of timeline that you have for investing in the next funds here? So here's the thing. If you, and I get this question on the blog all the time when, and especially in times like these when the market has been doing well for a number of years. And if you think the market is, is not going to do well for the next five to seven years, then sure, you should probably stay out of it. It's your choice. It's your money. I would suggest to you that you really haven't got a clue because nobody has a clue because nobody can predict the future. I have no idea what the market's doing right now, for that matter, or tomorrow, what it's going to do tomorrow or next week

or next month or next year or even the next five years. I'm fairly confident if you go 10 years out will be rewarded for holding the index. If you go 20 years out, it is a very rare 20-year period where you are not rewarded. So if you look out in the long term, investing in the stock market works out very, very well. And that's the only way, by the way, you should consider investing in stocks. If you are investing in your thinking that you're going to need the money in five years or seven years, it probably doesn't belong in the market. So nobody can predict the future.

I think it's great. And I think that the key there is, yeah, if you're not investing for the long term, which I almost consider it to be an infinite time period that I'm investing for. Because you alluded to this, what you're saying, the longer the time period you hold, the more statistically certain you can get that you're going to be rewarded with the long-term market average return historically, right? If that's 10%, then you're projecting something out, well, it's almost impossible to project out three to five, seven, even 10 years. But as you get farther and farther out, that trend line, I, you know, mathematically, I can be more and more certain. that I'm going to be close to that long-term historical average, which kind of gives me

an interesting philosophical bent on investing in terms of risk because I actually perceive having bonds as risky in a long-term portfolio because they lower the total return that I might get from my portfolio over a 30-year period, kind of in the similar vein to what you're talking about here. Do you agree with that assessment? Am I off track here? I agree absolutely with everything you said, word for word. So first of all, my holding period for VTSAX is forever. The only time that I ever sell shares is now that I'm living on the portfolio. I pull the dividend end out of it and then I sell a few shares to make up the whatever I need to spend.

But other than that, I'm never going to sell VTSAX. and it is going to pass on to my heirs intact and with the recommendation that they never sell it. So it is truly something. And so I invest, by the way, not for my own lifetime. This is another area where the advice I give diverts from what you might typically hear. Because I'm not investing just for my life. I'm investing forever and for hopefully multiple generations that will just continue. And as long as civilization continues, and as long as the U.S. is an active and viable part of that civilization in the world, VTSAX is going to do well.

I'm never going to sell it because it drops temporarily, which just doesn't make any sense. So I agree with that. On the question of bonds, you're also absolutely right. Bonds are simply there to smooth the ride because stocks are extraordinarily volatile. So there are times when stocks plummet, and sometimes they plummet brutally, as we saw in 2008, 2009. And that is gut-wrenching. And bonds smooth the ride. Now, when you're young and you're working and you have a high savings rate and you have that cash flow going in, I don't think you need bonds because that cash flow allows you to take advantage of those periodic drops.

you should welcome them. For people your age, you should be looking for the market to crash because it's nothing but a golden opportunity as long as you don't lose your nerve and as long as you keep investing in it. So that cash flow from your earned income is how you smooth the ride. When you give up earned income because you retire, whether you retire early or later or whatever time, you don't have that cash flow, then maybe you want to consider bonds to smooth the ride.

And then when the stocks plunge, you have bonds that provide a source of capital to take advantage of those lower stock prices as you rebalance. So that's the role bonds have. One of the questions I get every now and again on the blog, for instance, is why do you recommend the total bond market index fund, VBTLX, which is what I recommend, when this bond fund did better. It's got a higher yield. Well, if I'm, bonds are not in my portfolio to enhance.

my performance. They're there to smooth the ride. If I want to enhance my performance, I simply adjust my allocation and have more stocks. Because as you pointed out, over time, stocks are going to dramatically outperform bonds. So when you buy bonds, you have to understand that you are buying a ballast, if you will, that will smooth the volatility of stocks, but you are paying a price for that, and the price you're paying is a lesser performance over the decades. Does that all make sense? Oh, I think it's fantastic. Yeah, I agree completely.

And that is exactly how I'm approaching my own personal portfolio. Yeah, well done. Okay, I want to go back to something you just said a moment ago. You said at your age, you should hope for the stock market to crash, which is not common advice that you hear from people. Gosh, I hope I lose a lot of money. You wrote an article called How I Failed My Daughter and a Simple Path to Well. I love the title, but it makes me kind of sad. Like, you didn't fail your daughter, but the article is really fantastic.

And we'll link to it in the show notes at biggerpockets.com slash money show 20. In this article, you give your daughter the simple path to wealth, nine basics. And one of them is realize the market and the value of your shares will sometimes drop dramatically. People all around you will panic. They'll be screaming, sell, sell, sell. ignore this. Even better, buy more shares. I have a friend who worked for a company that was acquired by Google in 2006. And he was there for a few months. He was let go after that. And with some weird thing, he pulled all of his money out of his investment funds and it was just sitting there

like in a savings account or something. It wasn't a savings account. But it was like not gaining any money, but 2007 happened, the stock market went into the toilet and he lost out on all of that drop. He didn't put it back in the market. So when the market started going back up, he also lost out on all of that growth. And in 2008, 2009, I guess a little bit later than that, 2012, the stock market really just went through the roof and losing out on all of that, that growth really hurt his portfolio. And I think that a lot of people see the, you know, oh, it's, it's down. I should sell.

No, it's not down. You should buy more because now stocks are on sale. Yeah, absolutely. I think stocks are on sale. I think one of the critical things, and this actually goes back to a question that Scott asked, and I only answered part of it, but one of the critical things you need to understand if you're going to be in the market is that the market is volatile and periodically it does plunge. And unfortunately, whenever that,

happens, the media just goes absolutely nuts. And it's, it's, you would think it is the end of the world. I have a post I put up a couple of years ago now when the market went down 10%. 10% is what's called a correction. I mean, it's, it's a small bump in the road. It's perfectly natural, even welcome. And the headlines that I was seeing were bloodbath on Wall Street. I'm like really bloodbats. So that's the title of the post. Maybe you can put it in the show notes. But it's amazing to me how insane the media goes when the market drops a little bit.

And you would think that it's truly the end of the world and it's certainly the end of the stock market. And it never is. And someday maybe it will be, but then where you're invested won't matter because it will be the end of the country or the end of civilization. The market always rebounds from those points. plunges, but you would never know it listening to the media because there's panic everywhere. And you just have to ignore the noise. If I could leave one message for our listeners who decide to invest in index funds, as I recommend, it would be that market drops are normal.

They are absolutely normal. I guarantee you, as I think I said in that post you're referring to, I guarantee anybody listening to this that over the next 10, 20, 30, 40 years, the market's going to plunge 10% on a regular basis, 20% on a pretty common basis. And that's considered a bear market, by the way, at 10% is a correction, 20 plus percent is a bare market. It's going to plunge a few times in that 40-year period by 30, 40, 50%, 50%. That's considered a crash.

This is normal. This is normal. And if you are going to panic and sell when that happens, then my advice, is going to leave you bleeding by the side of the road. In fact, the most recent edition of my stock series, which I just put up about a month ago, is why you shouldn't be in the stock market. Because if you panic and sell when it drops,

if you listen to the noise and all the panic, then you would have been better off not being in the market at all. So I think you need to fix in your mind, as I say in that post, you need to tie yourself to the mast. And you need to fix in your mind that selling is just not an option when the market drops. Because if you do that, then it's game over. And that's how most people wind up being losers in the stock market. And that I think is the third post in my stock series is why most people lose third or four somewhere in there. Why most people lose money investing in stocks. Because they

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registered agent.com slash money free. So this brings up kind of an interesting kind of dilemma. So I have the good fortune of starting basically from scratch, which is a big advantage. A lot of people start with debt and all that kind of and a lot of student loan debt or whatever. I started pretty much from zero with a college degree because I'm very fortunate. Now, when I began investing, I would put in chunks of money into the index fund. I have consistently over the years and I will continue to consistently do so. And that's a form of dollar cost averaging.

I'm not really dollar cost averaging, which I think the strict definition is putting in the exact same amount of money over a very consistent time period. Mine's just more like every time I've excess cash, I throw it into an index fund or my real estate savings for my next property. But suppose that I had accumulated $500,000 in lifetime investable assets. And I'm listening to this podcast. I'm like, hmm, I really want to move that all into index funds away from these hodgepodge individual stocks and other and actively management. funds I've accumulated. Do you do that all at once? Or do you have a strategy for folks that have already accumulated a stockpile of money and how they should get into the market? Because it seems like it would be a shame. I don't want to time the market, but it would be a shame if I put all

of that money in the market right now and then it crashes 50%. That seems like it would be like a little too much for me to handle kind of mentally. So is there kind of a strategy for that type of person to kind of dip their toe in and get all that money invested eventually? So you covered, as you tend to in your question, Scott, you covered a lot of grounds. Sorry. No, that's okay because it's all good stuff. It's just hard for me to remember it all as I'm responding. But starting at the last part first, this post I have about why you should not be in the stock market,

which is the most recent one on my blog and the most recent one in the stock series, talks about exactly that. But you started out by saying, so you said a little bit of two different things. So you started out by saying, well, what if I've been investing in actively managed funds in individual stocks? And I've got a bunch of those. And I have come to the decision that indexing is really the better way to go. How do I, how do I do that?

And that, by the way, reflects exactly what I went through because, as I said earlier, I'd been investing in individual stocks and mutual funds. And finally, after 10 years after first becoming aware of index funds, I finally accepted how incredibly powerful they are. At that case, you can move it almost all immediately because you are going from one kind of stock investing to another. So you're not at all involved in that overall market risk that you were referencing. The only caveat to that is if you own these things in taxable accounts, and you've had them for a while and you're sitting on significant into capital gains, by shifting things all into an index fund, you may trigger a very large capital

gains tax. And so you're going to want, and there's no pat answer for that, but you're going to want to have to, you're going to want to be aware of that and think through how you do that. So that might imply that you move some things gradually over time to keep that capital gain from bumping you into higher tax brackets and that kind of thing. But that's a, that's a tax issue we've spent a lot of time on. But the more common part of the question you were asking are people who, for whatever reason, are sitting on a large chunk of cash.

And they are concerned, they say, hey, I kind of like this index idea. But the market's been doing nothing but going up since 2009, which is true. And, you know, I don't want to invest and have it fall 50% the next day. And, of course, obviously, you're going to be, that's going to make you nervous. But I would suggest that you think about it. So the solution to that, by the way, is frequently classic dollar cost averaging. So let's say you got to make the math easy. You're sitting on $120,000 and that's a lot of money to you.

And you say, okay, I'm going to put in $10,000 a month over the next year. And dollar cost average my way slowly in. And that way, you know, I don't get hurt if it drops tomorrow. Well, that only works if, in fact, the market drops. over the next 12 months. Because otherwise, you're simply going to wind up buying your shares at higher and higher costs month over month if the market continues to go up. And by the way, the market goes up three out of four years on average.

So the odds are much higher that you're going to be invested dollar cost averaging into a rising market than into a collapsing one. But secondly, even if you do that and 12 months later you're fully invested, who is to say the day after you send in that last. check is not the day that the market drops 50%. And the point is that if you're invested now today and it drops 50% tomorrow, you're going to have the same kind of pain. So when people ask that question, and I make this point in the post I just put up,

what it really tells me is that they're not psychologically ready for the roller coaster ride of volatility that the market is. because it doesn't matter if you're sitting on cash or if you're sitting on $120,000 worth of VTSAX, the risk that it's going to drop 50% tomorrow is exactly the same. And if that risk keeps you up in night, then you probably shouldn't be investing in stocks. Does that make sense? Yeah, absolutely. Mathematically, you're saying that you're better off statistically on average in the long run

of investing all of that cash at any one point in the market rather than, than spreading it out because the market is going to be consistently rising throughout that whole period. So every day you wait, you're giving yourself slightly lower odds of accumulating more wealth over time. So invest it all immediately and move on with it. Counting for tax advantages is kind of what you're arguing. And I kind of agree with that assessment, except for the, like, with a slight caveat of a psychological thing, which maybe I'm not ready to invest in the stock market, where if that is all of your lifetime accumulated assets and you can't afford to lose that for whatever reason in the short run, then your financial position is not capable of sustaining a loss in those.

If you're dependent on those resources to make it through some short period of time. But if I can interrupt you there for say, if that's the case, then definitely you shouldn't be in the stock market. Again, the only way, the only way to invest in the stock market is for the long term. So any money you have that you're going to need in the next five years, say, I mean, clearly you shouldn't be investing that in the stock market. But the point is not that at any given point in time, the odds are that the market is more likely to go up than down because it goes up more often than it goes down.

But that doesn't mean, I mean, at some point it will plunge. It could be plunging as we're talking now. I don't know. At some point it could plunge, and there might be somebody who invests a large lump sum of money the day before and hits that proverbial drop. But I would suggest that person is no worse off than the person who invested a year ago and now is sitting on $120,000 worth of, where the VTSAX suddenly gets cut in half. if you're invested in the market, you just have to be prepared psychologically to wake up on any given day and see that your holdings are worth less than they were the day before. But you have to realize that you still own the same percentages of all those companies. You still own the same piece of the rock as the insurance company used to say, and that hasn't changed.

And now you have an opportunity to buy more of it at lower prices. So, yeah, my advice, I have a post, maybe we put it in the show notes along with the most recent one, something effective investing in a bull or in a raging bull, which was a response to a question I got very much along these lines based in 2013. They said, you know, there's no way the market can continue to go up from here. It's been going up since 2009. Well, here we are. And by the way, I didn't know that, you know. And as I say, over and over again, I don't know what the market's doing.

today or tomorrow or next year. But since you don't know that, it can't inform how you go about investing. Okay. So you've said a couple of times, if you need this money in the next five years, you shouldn't be in the stock market. Where should you be? Well, it depends on what you need the money for. And I wouldn't make an entire sweeping generality along those lines. So let's look at us at an example, if you will. First of all, if to answer your question more directly, you can be in a money market funder or savings account if you definitely need the money in the next five years.

But let's suppose you came to me and you said, you know, Jim, I'm saving money for a down payment on a house. And that's what I was going to say because that's, we're a real estate site and a lot of people ask about what should I do with my money while I'm waiting to grow it to a down payment. which is why I chose that as our example. Like you're a mind reader. Oh, maybe you can predict the market. Well, no, it's just that I know a little bit about what bigger pockets is all about.

So you come to me and you say, hey, Jim, I'm saving money and I'm saving for a down payment on a house and I want to buy this house in five years. And my current savings rate, I'll have the down payment I need. And should I put this money in the market? And I'm going to say, basically, no, you should have that money. a savings account. Then you might say to me, well, yeah, but Jim, I don't earn anything on the savings account. The market does so well, and I'm willing to take a chance. Then I'm going to say to you, well, Mindy, here's the deal. If you can certainly put money in the market for your down payment, and you just have to understand that the wind might be in your face, and you might not be able to

buy the house in five years. On the other hand, if the wind's at your back, maybe you're you can buy it in three years. And it really depends psychologically on how important that five-year goal is to you personally. So if you say to me, you know what, if I couldn't buy it after five years, you know, I had to wait for seven or eight years, I'm okay with that. And they'd say, sure. Maybe you should put some of it in the market. Maybe you can do a 50-50 blend with stocks and bonds, which isn't as aggressive and volatile as all stocks. But it'll give you much better potential return over five years than just a money market fund or a bank account. So you can play with that depending on your own needs and your own and your own psychology.

But fundamentally, if you say to me, no, I want to have that house five years. That's really important to me. I'm going to say, well, then you just need to give up returns and focus on just saving in the bank. So can I put a spin on that question? What if I said, Jim, I'd really like to give myself the best odds at being able to purchase that house as quickly as practical. Would you then change your advice to, yeah, invest that money into the index fund and sell it and pull it out when you're ready to buy that house? Well, Scott, I would have to respond with a question and say, well, how heartbroken are you going to be if the wind winds up in your face and it takes you eight years instead of five or three? And if you say, well, gee, Jim, that's intolerable.

I'm going to say, well, you know, but if you say to me, well, you know, that's all right. I mean, you know, I'm willing to risk maybe it taking eight, 10 years if I can get it done in two or three. So, you know, it's, do you feel lucky, punk? Well, do you? I think it's more like, I suspect you're kind of, you're similar to me in a way like this. But I always look at things in like, okay, I made the correct method. mathematical, logical choice. And I can live with it if it happens to not work out in my favor, as long as it's not a devastating, you know, as long as it doesn't wipe me out. Bankruptcy is a

kind of intolerable possible outcome. So I try to stay as far away from that possibility as possible. But if I have to delay something for a few years, that's the risk in exchange for getting it sooner, I tend to take that. And that's why for several down payments, I actually did invest that money into the index funds. And I knew that exactly what you were just talking about was a possibility, but I was willing to live with it and live with myself. And it took me a lot longer to get to my goal because I thought, hey, the math is on my side in terms of helping me get to this goal sooner if I approach it this way. Yeah. No, I think, and the fact that you said multiple down payments also indicates that you were in buying investment real estate. And so that is probably as more

flexibility perhaps than saying, gee, you know, in five years, my kids are going to be entering grammar school and I want to be in a certain school district, so I want to buy a house. And that's, that's a much harder deadline than saying, well, if I can only accumulate this investment real estate in eight years instead of five, that's not the end of the world. The only caveat, Scott, that I would put out there is that for most of the people listening to this podcast, the volatility that we have seen in the stock market, while some of it's been brutal, like in 0809 or even 87, it's been fairly short-lived. That's not always how things evolve. There are times when the market goes down and it stays down for years on end. It takes a lot longer. So you have to

understand that if you're going to do what you did and invest in the index fund with an idea of accumulating a down payment, that it's not just a matter of it may take you a couple of years beyond your five. It may take you considerably longer. It may mean that you're not going to own a house in the next decade or so or plus. So there's always that possibility that we could get a long protracted drop in the market as you saw in the late 60s and through the 70s or just a flat market. It's great perspective. Yeah. The market is fundamentally it's a long-term game.

If you invest in broad-based index funds, which is what I recommend, as we talked about earlier, your holding period mentally should be forever. I mean, that's, you know, and investing in it to help you get to another short-term goal, I'm not entirely opposed to. It depends on how much risk you're willing to take. but it's a different bit of analysis before you pull the trigger on that.

I think it's great. I think this is fantastic. Jim, thank you so much for taking the time to share this with us. You've given some real solid reasons for investing in index funds over picking stocks. And I think that I really like your quote,

oh, my daughter said, Dad, I don't have any time for this. She is the norm. Nobody has to. time for this. Nobody cares. Like, it means so much to me and nobody else cares. They're like, oh, you can watch their eyes glaze over as you start talking about interesting things. And by the way, thank God for the benefit of the world. I mean, you know, my daughter's going on doing much more important things, making the world a better place. Most people, you know,

they have bridges to build and companies to run and diseases to cure and scientific breakthroughs to come through and podcasts to put out, you know. But the beauty of investing is that if you keep it simple, it doesn't have to take up much or really any of your time, very little of your time. And unlike many things in life, the less effort you put into it, once you understand and implement a few basic concepts, the better your results will be. Jack Bogle is famous for saying, you know, what you should do is just buy the index and forget about it. And then 20, 30 years later, he said, don't even open your statements. And 20, 30 years later, when you open your statement, make sure you have a cardiologist standing by because you're going to be shocked at how well you've done.

So anyway. Well, we just have a few more questions for you before we let you go. We have taken up quite a bit of your time today. And I could talk to you forever because I really enjoy listening to you. And I could talk to you guys forever. This has been a blast. And this has been really informative. I hope everybody listening has gotten as much out of it as I have.

I'm probably still going to buy. We had fun. Yeah. But, you know, if they had fun too. I'm probably still going to buy Coca-Cola, though, even. I'm not going to take the emotion out of it. But that's a good point. We have a few more questions for you that we ask.

These are the same questions we ask everybody. We call them our famous four because there's five. Okay. Question number one. is what is your favorite finance book? And I would like to say that I think it's two episodes ago The Mad Scientist was on and he recommended a little book called The Simple Path to Wealth. I've heard great things about that one. I've heard great things too. Well, assuming that you don't want me to recommend my own book, I think one of my favorites

is actually the richest man in Babylon. I hesitate recommending it. it because it's a very small book. It's very short. It's told as a parable of not surprisingly the richest man in Babylon who basically is explaining to some of the Babylonians who decide, hey, we want to be rich, so maybe it makes sense to talk to the guy who is rich. My hesitation is that the lessons in it are so simple that, and the book itself is so small and short and easy to read, that people might not understand how profound it is. So it's a book I highly recommend, but it's a book that will take you very little time to read, but should take you a lot of time of reflection once you've read it. So I actually like that it's a short book.

It's a good introduction, although I do want to say that it's written in King James Bible version, Shakespearean language, which I love, so I enjoyed the book very much. I thought it was unbelievably profound because it was written 100 years ago and they're saying the same things. Spend less than you bring in, invest with people who know what they're doing. Pay yourself. Pay yourself, yes. Like all these things that everybody's telling you now and they were saying this 100 years ago. Like it's not hard to figure out money. As the book implies, they were saying it 5,000 years ago. Right. I mean, so that's a great point, Mindy. This is not new stuff. I mean, what we, what we talk about in the FI community is things that our

grandparents sort of new, be frugal. Don't spend money you don't have. I mean, how basic is that? How bizarre is it that we live in a culture that takes as normal the idea of spending money we don't have, credit cards, varring money? I mean, that's a bizarre new concept. That's, you know, your grandparents would have would have been horrified at the idea of spending money you don't have. I'm horrified at it. And yet you're saying it is weird. You're bringing this up. How weird is this that it's okay to do in this society?

Yeah, why would you even think about that? That's just the norm. Right. Now we're the odd ones out. But yeah, this is not the basic concepts, which are safe part of what you earn, live on, spend less than you earn, invest the difference. I mean, that's, you find this in the Bible. This goes back thousands of years.

And that was the point that, I forget the name of the guy who wrote the richest man in Babylon, but that was the point he was making is this is, it wasn't new 100 years ago when he wrote the book. I love it. I also love that book. And I've read it probably like three or four, maybe five times. Yeah, exactly. Just because it's so easy to read. It's so perfect. I mean, it bears.

The only thing that I object to in the book is he recommends saving 10% of your income. And I think that's too low. 50%. 10% is better than nothing. Absolutely. And it's certainly better than going in debt and paying 18% of the credit cards. All right. What was your biggest money mistake?

Well, there are so many from which to choose. But I would say if my single biggest money mistake was that, as I alluded to earlier, it just took me a disturbingly long time to see the full value of indexing. The great irony is that I started investing in 1975, which as it happens is the same year that Jack Bogle founded Vanguard and came out with the first widely available index fund. And so theoretically, I could have been indexing. from the very beginning of my career. And my life would have been so much easier

and I'd be so much further ahead of the game. But I didn't hear about indexing in 1975. I did hear about it in 1985. And even if I'd embraced it then, I'd be far ahead of the game. But as I said earlier, it took me a good decade plus to really accept the value of it. And this is an important point because I think there are a lot of people today who are resistant to it.

And it seems so counterintuitive, as we talked about earlier, that you can't outperform the market simply by avoiding the dogs or focusing on the high performers. But the research is definitive. I mean, trying to outpace the market just doesn't work over time. So that's my biggest mistake. I wish I'd embraced indexing much, much earlier. I love how it's an opportunity cost rather than a, I bought this fancy doodad that I shouldn't have.

It's, hey, I invested suboptimally, and that's what cost me tons of money. Well, that's part of it, Scott. But the other part of it is that because I wasn't indexing and I was investing in other things, I have a whole litany when I said there's so many to choose from. I have a whole litany of like Mariah International, my gold mining company. You know, I mean, so not my Chinese fruit juice company. You like your Chinese fruit juice company. Yeah, so not indexing gives you all kinds of opportunities to make financial mistakes.

That's awesome. What is your best piece of advice for people who are just starting out? Oh, hold on. I'm going to look into my crystal ball and say invest in index funds. So it's interesting. When I was at Chautauqua last year, which is the annual event we put together, we put together, and we take people to an interesting place and I give a talk there. Somebody had asked me a question earlier along those same lines,

as you know, how would you sum up your philosophy in a sentence or two? And what I came up with and what I introduced at my talk at Chautauqua was basically, when you go through my blog and my book, the fundamental message is buy VTSAX, buy as much as you can, whenever you can, and hold it forever. And that's actually what Scott was saying earlier. He does. He buys indexes. I don't know if he buys VTSX or not, but he buys whenever he can as much as he can, and he holds it forever.

VTSAX, by the way, is Vanguard's total stock market index fund. And that's what I'm probably going to start switching to, but I have in the past been buying VOO, which is their S&P version. Yeah, which is fine. I mean, the S&P 500 is Jack Bogle himself owns the S&P 500 fund. And so the S&P 500 makes up about 80% of VTSAX. So if somebody says to me, I own the S&P 500, you're doing great. Don't lose any sleep. Yeah, it's been good.

So it's been a good couple of years here. Yeah, exactly. All right. This is the most difficult question of our famous four slash five, which is what is your favorite joke to tell at parties? So do you want a short joke, a normal joke or a shaggy dog story? How about a really long, really long joke? Scott is underestimating the amount of time Jim can talk.

Yes, absolutely. Well, when I say shaggy dog story, we're talking about a 10-minute commitment. Let's pull our users real quick. they're all saying short to medium please short to mediums all right fine Mindy this morning actually I was I was listening to the beginning

of your of your interview with Alan Donagin and I heard you recite the terrible joke of I just flew in and boy are my arms tired and Scott didn't even get it that took me a minute so that is a terrible joke but along the lines of a of a short joke of that kind, I will tell you the world's perfect joke.

This is the world's perfect joke and has the benefit of being very short. There are two muffins and they're in an oven and the oven is starting to warm up and the one muffin says to the other, man, it's getting hot in here. And the second muffin says, holy crap, a talking muffin. Perfect. Perfect joke. Perfect joke. That was a delightful joke. Thank you for not making it a pun. Every once in a while our guests don't have jokes, so I always have one prepared.

And this week it was going to be about a pizza, but I'm glad I didn't have to tell it because it's kind of cheesy. Well, sometime when we're on a... Oh, no. I'll tell you the 10-minute moostered pie joke. Oh, moose-turred pie. Well, I am going to go on vacation with you this year, Jim, and I am going to make you tell me that joke in Greece. That sounds good. That sounds good.

It is a joke best told in person. Moostered pie. Well, I can't wait. That sounds awesome. Jim, where can people find out more about you? Well, I don't know anybody wants to find out more about me, but my blog is at J.L.Collinsnach.H.com. And if you go to the blog, you'll find everything I've written. And there's a button at the top titled Stock Series. and that's what the blog is most famous for. And I think there are 32 now, if I'm not mistaken, articles in the stock series. And then I list some other posts that are relevant to that that people can look at. And once you're on my site, you'll see a link to my book, The Simple Path to Wealth.

And if somebody is interested, they can go and do that. I always tell people that there is nothing in the book that is not on my blog. And that's very intentional. So you don't have to buy the book to get the information. information. The book is better organized and it's more concise and the writing. I won't say the writing is better, but it is more polished and that I spent more time polishing it. But yeah, when I was writing the book was kind of interesting. People were saying, be sure you put things in the book that's not on the blog. So people have to buy your book. I thought, well, that's kind of

crappy. I don't want to do that to my faithful blog readers. You know, I mean, the book in large extent exists because I had an audience for the blog. And so anyway, that's... And I'll chime in that there's an audio version of the book as well, read by the sky with a very soothing, deep voice that puts James Earl Jones and Mufasa from the Lion King to shame. So you can also check it out on Audible. Well, yeah, it is read by me. And when the Audible people say, suggested that I read it. I said, well, I'm happy to do that, but I'm not a professional narrator. So, you know, understand I don't, I've never done this before. And they were like, no, no, no,

people want to hear it in the author's voice. And I said, okay, so we did it. And if it sounds good, trust me when I tell you what the credit belongs to the editors. Because what I actually recorded was one hot mess that they had to sort through. But I haven't, I haven't listened to it myself. I had enough of it recording it. No, this has been fantastic and awesome. We really appreciate you coming on and sharing this stuff. I mean, we had such a great discussion here. Love it.

I hope that people go and check out your blog and your book because of the show and do the right thing, which is invest in index funds for the long term. Well, first of all, I had a blast hanging out with you guys. I am truly honored that when Mindy sent me an email asking me if I would do it. I was, I was thrilled to get it. And it's, it's an honor. And it has been just so much fun hanging out with you. So thank you. I was very honored when you said yes. We were honored when you said yes. I'm sorry, we were honored. Yes. I like to exploit my friendships and say, hey, can you come on my podcast? But I'm always a little nervous. Now, I don't do those. I'm not,

I don't have time for your little piddly, nothing. And oh, okay, this is awesome. Jim said yes. not little piddly. It's amazing. Best show ever is what I think I've heard. And Mindy, you know I will always say yes to you. We'll see you next week. It'll be the Jim show. That works for me. No, I would be happy to do it again. Maybe you probably don't want to inflict us on your audience next week, but give them a few months to recover and we can do it again. That'll be awesome. Okay. Jim, thank you so much for your time and we will see you again soon. I will look forward to talking to you again and to listening to this when it comes out. Okay. Good luck to your editor. We have a great editor. Dave, shout out to Dave for

making us sound beautiful. Well, you're going to need him for this episode. Okay, Jim, I hope you enjoy your day and we will talk to you later. Always a pleasure and enjoy your celebration this afternoon. Oh, thank you. Congratulations. Congratulations. Thank you very much. All right. Bye-bye. Bye-bye. All right, that was Jim Collins. Indy, what did you think of that episode? Jim blows my mind. All these people try to game the system, beat the market, and you can't do it. Jim's like, look, just set it and forget it. Well, Jim did game the market, right?

What I think is fascinating about Jim is Jim did game the market. He did try to active pick active the end of the front. He did try to pick the winning stocks. And he succeeded. in achieving financial freedom in doing so, yet has the wisdom to go back and be like, you know what, I actually slowed myself down a bit. I could have done it faster if I just stuck to this very fundamental passive boring index fund strategy. I would have been in the exact same position even sooner. Well, so in that respect, then he didn't beat the market. He just did well. Yeah. Well, I think it speaks to the fundamental that achieving financial independence is first and foremost a function of your savings rate and not your investment.

strategy, which I think is kind of a powerful insight. Your investment strategy is secondary to that savings rate. As long as you invest in something that has a potential to help you grow fairly quickly, be it real estate, be it stocks, be it bonds, be it actively managed funds with high fees. You will build wealth over time if you have a high savings rate and continuously invest in something that has a reasonable shot at upside. But you can do it faster and better and easier and more passively with index funds, I think is Jim's point. And the point that you and I would agree with. That's a really great place to leave this. I think that's a really great place to leave this discussion, to end this discussion, Scott, because Jim just dropped knowledge bomb after knowledge

bomb and that's pretty much sums it up. You can do it in a multitude of ways, but you can do it faster and cheaper and easier with an index fund. Yep, love it. All right, for episode 20, of the Bigger Puckets Money show. This is Mindy Jensen over and out.