The Simple Path to Wealth

JL Collins’ synthesis of how to achieve financial independence and early retirement (FIRE) is a masterpiece. It’s a book I can’t recommend strongly enough, and should be read by anyone who has even the slightest interest in mastering their own finances - it is relevant for anyone from complete beginners to investing right up to the most confident who have taken control of their finances for years.

Collins portrays the most simple and effective way to build wealth, which he so beautifully summarises in the book:

Stay out of debt - live below your means - invest the difference. Do only this and you’ll end up wealthy - and not just in money.

The last phrase is the kicker. And not just in money. Collins almost takes a storybook approach to personal finance - he cuts through the jargon and tangled language surrounding investing and makes it easily digestible to the beginner. Through using personal anecdotes and sometimes funny stories, he lights up the path to successful investing in a way other investing books I’ve read struggle to.

How to consider valuing the stock market? He likens this to the amount of foam on the top of your favourite beer. Worried about not being able to pick a successful stock? No bother! He states that he can’t either (and he’s been doing it for 50 years). Instead, he illustrates how the stock market always goes up in the long term, and how. Being a successful investor has more to do with how long you stay invested, rather than exactly which funds (or stock markets) you choose to invest in.

It’s a fairly short book too - just a little over 200 pages long, and because it’s written in a colloquial manner with personal anecdotes and the like, I find it’s actually interesting to read (at least for someone like me with a moderate interest in personal finance). Other books I’ve read, like Ben Graham’s The Intelligent Investor I find rather dry and too dense to be actively engaged with all of the time when reading - the mind often wanders off to other things.

So, we have a book which is not too long and actually interesting to read, and one which breaks down the often-touted complex world of investing into simple, digestible slices. What’s more, Collins gives you the motivation and confidence to take on these investment decisions on your own - without the need for costly financial advisors - which he generally despises. He goes on to show how the needs of you and the needs of a financial advisor are rarely the same. They usually have their own financial agenda which differs to yours - i.e. to sell you complicated funds which have high management fees (and commission), which will generally underperform the simple index funds your could buy and manage yourself from Vanguard.

It’s not easy to do this - have the confidence to take on the investing and personal finance work yourself - as I’ve found out when moving pensions and ISAs around to lower-fee providers - everything you read and everyone you speak with seems to suggest that you be very cautious and speak with a financial advisor. Screw that - after reading A Simple Path to Wealth, I feel I have the skills to do this on my own, and the ability to manage my money better than any professional could do.

After all, as Collins so elegantly puts it: it’s your money, and no-one will look after it better than you.

Coming from the UK, there are certain sections WHAT SECTIONS? which are not relevant to the UK’s financial and tax system (the book is US-centric). I skim-read these sections but mostly didn’t find much I could glean from the pages.

I personally agree strongly with Collin’s suggestion to use Vanguard - I use them myself for the majority of my investments. Their fees are low and they primarily have the interests of the investor at heart. The strong advocation throughout the book of the US Total Stock Market Index (VTSAX) is interesting. Ultimately, in exactly which fund(s) you invest in is personal preference and you may have slightly different opinions to Collins. That’s fine - as long as you are benefitting from the broad upswing in the stock market, and using Collins’ philosophy of living below your means and investing the surplus, you are on the track to successful investing and an early retirement should you want it. The key here - don’t worry about precisely where you are invested - just make sure you start and remain consistent.

The Simple Path to Wealth is the first book I’d recommend to anyone with even the smallest interest in investing and personal finance, and it’s quite possibly the best book on the subject I’ve ever read. If you haven’t already, go out and read it now!