The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life

I saw JL Collins' The Simple Path to Wealth go by at work, and was curious.  I didn't really read what the book was about (there wasn't actually a synopsis on the back, just a bunch of praise), but a couple of the quotes got my attention, like Paula Pant's "Let's face it: Most investment books are boring. Dull. Uninspired. This book brings managing your money to life."  While I've had a few bonds over the years, I'm a relatively new investor, so thanks to that endorsement, I thought that this sounded like a good place to learn a little bit more.

Collins' approach is pretty simple: he says most people are in either a wealth accumulation phase of their life or a wealth preservation stage (and you can go back and forth between the two as your life circumstances change).  To accumulate wealth, he recommends getting rid of debt (that's a giving), and investing heavily (50% of your income if you can!) in a stock index fund (he recommends Vanguard's VTSAX).  The index funds are a safer bet than trying to predict the outcome of buying individual stocks.  If you're trying to preserve your wealthy, he recommends adding some bonds into your portfolio to smooth out the ride a bit (once again, he recommends Vanguard's VBTLX).  Why the recommendation of Vanguard?  The company was created by Jack Bogle; he believed that an investment firm's interests should be aligned with the interests of its shareholders.  In contrast, many companies' interests do not align with shareholder interests (the companies want to make as much money for themselves as possible).

That is literally his advice.  It is simple, but it takes a lot of hard work - you will have to restrict your spending habits in order to save.  But the end result is worth it.  And you will have achieved financial independence when you can live off of about 4% of your assets (so if you live off of say $20,000 a year, you would need $500,000 invested).

I honestly enjoyed Collins' writing.  Pant really wasn't lying about The Simple Path to Wealth - Collins has made managing money a relatively easy to understand process.  The only major complaint that I had with the book was that Collins is American, so some of his advice focuses strictly on American accounts (and I will admit, when he started getting into the nitty gritty of the various American accounts that were available, I felt my eyes glazing over).  Be that as it may, his advice is still solid, no matter where in the world you may live.  You just may have to use other accounts or funds to grow your wealth.