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It's great to welcome back to the program today,
J.L. Collins, financial author and investor,
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a revised and expanded edition of his
book. The Simple Path to Wealth is out now,
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a book that one of my favorite personal
finance books and it's on the list on my
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website, JL. It's so good to have you back on
Hey, it's a pleasure to be back here with you,
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David. I'm looking forward to the conversation.
So, listen, I mean, I think one of the interesting
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things about the timing of this conversation is
if we think about the last few months and the
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alleged Liberation Day event of April 2nd,
the announcement of and then pause of and
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than reminder that they're still on of these
various blanket tariffs. The point of it all
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is whatever was announced, whatever was done,
whatever it was taken back. It created in the
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stock market. Some ups and downs. And for a period
of time, they were pretty significant downs. The
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many of your expected commentators were saying
it could take 10 years to get back to the
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stock market level where we were just months
ago. Of course, we're back there now. Right.
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And so I think to kind of open the conversation as
the average person is looking at what be political
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and or economic instability and thinking. What do
I need to do right now in the market financially?
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Is the answer once again proven to be figure
out your asset allocation and stick with
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That, that is the answer. And even the shorter
version to what should I do now is nothing.
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You stay the course, which is always the answer,
right? So if you go back four or six weeks, when
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we were in the middle of this downturn triggered
by the tariffs, nobody's certainly, why would
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not me would have predicted that we'd be back in
positive territory already. But the corollary of
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that is nobody knows where we go from here. Right.
Right. I mean, it could be that we're back on the
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way up on a growth trajectory. It could be, this
is a brief pause before we hit something much more
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serious. Uh, for the record, I'm not a fan of the
tariffs. I think they're a terrible and dangerous
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idea, but one of the things that I've learned is
my opinion doesn't matter to Mr. Market at all,
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and it will do whatever it is going to do. Uh
six weeks ago, you know, my social and blog
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we're lighting up with. Predictions of doom. And
you know, what I say all the time is same thing. I
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said COVID is there's always something scary when
the market plunges. That's why it plunges, but it
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never lasts. You know, eventually it turns around
and continues this growth. I don't know if we're
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at that turnaround part now, as I said earlier,
but that's always the trajectory. And if you
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look at COVID, it's even a better example, cause
it's in the rear view mirror and clear. You know,
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COVID killed about a million people, which is
tragic, but in a population of 330 million, it's a
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tiny fraction. So it's not a major disruption. Had
COVID been the black death, which killed 50, 60%
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of the population back in the middle ages, that's
a civilization ending event. I mean, but then
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it doesn't matter where your money's invested.
Right. Having a little gold is not going to make
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a huge difference if that's the scenario.
I think that's an emulation, mate.
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You know, I have friends who I consider
very smart and have sold businesses,
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do high level legal work, high level finance. And
over the last couple of weeks, they look at me and
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they say with total conviction, this is a dead
cat bounce. We're going to see a 30 percent drop
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in the market. They are as convinced as they
are about the sun coming up tomorrow. Or I
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have other friends who say. We got through it.
It's up, up and away from here. Trump's not
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really going to put the tariffs back on. It's
smooth sailing. And to all of them, I say, how
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do you know that? I have no idea which of those
two scenarios is more likely. And I'm building
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my outlook over the fact that I don't know it.
If you don't, know what would it make sense to
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do is kind of my approach. Are are you surprised
by sometimes people who. Clearly are intelligent,
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thoughtful people who seem convinced that they
know it makes sense to get in or get out at any
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particular point in time. I have no idea about it.
Yeah, I know, I'm not surprised by that. In fact,
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you know, at one point in my life, I was probably
one of them. You too. It seems so tempting to
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think, you, no. So we reel back to 2016 when
Trump first won the election, whether you love
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Trump or you loathe them, one of the things that
was common wisdom. And I think accurately is he
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is a disruptive force. And I in 2016 sat back and
I thought, you know, one things I know about the
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market is it hates disruptive forces. It hates
uncertainty. Maybe I should go to cash, which was
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completely against my discipline. And fortunately
I didn't because I stuck to my discipline because
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I recognized while it seems so absolutely clear to
me, what was going to happen. I don't really know
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that that's just my opinion. The market doesn't
care about my opinion or yours doesn't care about
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the opinion of the people who think it's going
down 30%. Doesn't care the opinion that the
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people think it is going up from here. Non-stop
or it may just plateau for a while market doesn't
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care. And when you start thinking, you know, what
the market's going to do, you fall in the prey to
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hubris, uh, nobody can predict it. So you stay
the course knowing that the market will recover.
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What do you say about someone who doesn't take an
extreme perspective, like I'm selling it all and
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going to cash or on the other side, I'm putting
in every dollar I can find into the market because
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I expect it to go up. But for example, I
was listening to Scott Galloway recently,
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who his approach was I think over the next
I'm paraphrasing over the Next 10 to 15 years,
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U.S. Stocks, I believe we're going to be flat.
So I'm still dollar cost averaging. I've still
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got my asset allocations that I'm thinking of
that are appropriate for my situation. But I'm
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moving into I think he said Asian and some other
continental markets. It's a shift maybe in the
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focus, but more or less sticking to the plan.
On the one hand, there's some appeal to that
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intuitively. On the other hand, I ask myself,
why didn't I already? Have those in my asset
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allocation if they were such a good idea? Am
I being swayed by news and the politics of
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the day? What do you say to an idea like that?
Just shift into Asian markets as an example.
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Yeah. So again, you, you think, you know, what's
going to happen in the future and you don't, it
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could be that Scott's right. That's exactly what
will happen. But I remember a decade ago, David,
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uh, all the smart people in the market were
saying, you know, the market is at such a great
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10 year run or whatever, how long it's been.
Just can't expect these returns going forward.
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You should get used for the next decade, which of
course now we've lived through of maybe 4% returns
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in the Well, the markets had a stunning decade. I
mean, a stunning decades of growth. So they were
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all wrong. Uh, now I stayed invested because
that's my discipline, not because I knew the
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market was going to have a stunning desk decade,
but because I knew I didn't know, right? So I have
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no idea what the market's going to do in the next
15 years. For instance, the first part of this
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year, European stocks have absolutely trounced
the U S market. That hasn't happened in 10,
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15 years, Is that the new trend? Cause there have
been historically times when international has
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outperformed us, hasn't been true for the last 10,
15 years, maybe that's the next 10, 15 years is as
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Scott thinks, but I don't know that what I do know
is that the U S accounts for 60% of all publicly
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traded companies in the world. When I invest in
VTSAX, which is a total stock market index fund.
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The large majority of those companies that make
up that fund are international by definition. And
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so assuming the rest of the world, like Asia and
Europe and Africa, continue to grow and prosper
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their markets will do well, but so will my VTSAX
benefit through that. So I don't feel the need
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for international, by the way, that puts me very
much out of step with the vast majority of people
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talking about this stuff, thinking about it. And
so if somebody has said to me, Hey, you know, JL,
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I take your point. Kind of makes sense, but I'd
feel more comfortable with some international. I'd
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say, God bless you. Go for it. Buy a world fund,
a low cost world front from somebody like Vanguard
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and, and call it a day. In fact, that's what I
tell my international, uh, readers, because the
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U S is the only country that is dominant enough
in the markets that you can get away with that,
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that home country bias. So if I were anywhere
else in the world, I'd already be in a world fun.
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I want to ask you a little bit about some of the
more speculative assets where the natural one to
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talk about is Bitcoin and cryptocurrency is more
broadly we talked about it a little bit the last
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time you were on. But now we've seen, you know,
even presidents get involved in mean coins. And
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it's really we're seeing certain things that
I don't know that I would have ever predicted
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five years ago. My view to my audience has
been and this has been my view for 12 years
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or something. I have absolutely no idea what the
future of cryptocurrency or Bitcoin specifically
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is. Once it was around long enough that I said
this might be something I in. I decided two and
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a half percent of my assets felt like a nice
balance where if I lose all of it, I'm OK,
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but I've got some upside exposure. I don't know. I
had zero predictive power as to where it was going
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to be. As it went up. I would sell down to my two
and a half percent when it went down. I would top
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up to two and half percent and I just wait. I
don't know what's going to happen. Where are you
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now with maybe for some people it's two, maybe
it's four percent, some portion of their assets
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in something that is known to be speculative. Is
there what's your guidance on something like that?
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So first of all, let me, let me address that
whole concept of taking a small portion of
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your portfolio and, and playing with it, so
to speak. Cause it's a question I get all the
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time. Is it okay if I take two, five, 10% and
play? It's okay. Uh, but understand that if,
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if you are correct, it's really not going to be
enough to move the needle because by definition,
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you want to put in that is so much, they won't
move the needle if you're incorrect. So that's
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one of the reasons that I don't bother, but
talking specifically about crypto as an example,
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and Bitcoin, my take on it is real simple. It's
way too volatile to actually serve as a currency,
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right? Currencies need stability in order to
function as a means of trade. That's why inflation
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and for that matter, deflation are so terribly
damaging is because suddenly the currency isn't
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reliable. You know, it's either worth less and
less as you go forward in inflation or more and
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more in deflation. And that makes it unsuitable
for a means of trade. So crypto is not at that
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stage yet. Maybe it'll get there someday. So what
it really is, is not an investment in my view,
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but a speculation. Yes. So what do I mean by that?
Well, an investment VTSAX is in companies that are
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actively operating to sell products and services,
to grow their businesses, and hopefully if they're
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doing it effectively to make a profit that we as
owners benefit from. A speculation like crypto or
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gold for that matter, or classic cars or art
is where you're buying something and you're
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anticipating and hoping that at some point in
the future, somebody will pay you more for it
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than you paid for it, right? That's a speculation.
There's no underlying dynamic creating value there
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other than what the world around you continues to
perceive as value. To be clear, if you'd invested
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in crypto 10, 15 years ago, you hadn't held
through the very wild and rocky ride it's been,
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it would have served you extraordinarily well, but
that's the nature of speculation. You don't know.
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There has been, were lots of other speculative
investments you could have made 10,15 years
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ago that crashed and burned. So the question, if
your looking at crypto or Bitcoin in particular,
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now was not that 10, 15 year. Run it's where does
it now it's $100,000 a coin or something. Where
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does it go from here? You know, and, and again,
to your point, nobody really knows. So you're
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two and a half percent investment may do well. It
may not, but it's not going to move the middle in
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your portfolio all that much, probably anyway.
All right. The Simple Path to Wealth in its
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new expanded edition is now available. We've been
speaking with the book's author, J.L. Collins. JL,
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always great to talk to you. Really appreciate it.
It's always my pleasure, anytime, my friend.
