DIY Investing Resource #1: JL Collins’ “Stock Series”

ID-10048604

As we discussed over the last two posts, the biggest challenge that we faced in our financial lives was figuring out how to invest.  As promised, over the next few posts we are going to share and review a few very focused resources that we have found immensely helpful to educating ourselves on the topic of investing.  The first of these resources is a series of 27 (and counting) posts found at Jim Collins’ blog jlcollinsnh.com, categorized as the “Stock Series”.

Start Here First

While I am trying to help the readers of this blog sort through the vast amounts of information out there on investing by providing specific, focused and valuable resources, I am finding myself a bit sidetracked already.

Before starting on the “Stock Series” I would be cheating you if I did not recommend that you read another post from Jim that is not a part of the series, “How I failed my daughter and a simple path to wealth.”  This post exemplifies everything that I love about reading Jim’s blog.  It is written as advice for his college-aged daughter about why money is important and what it can (and can’t) do for you.

It is sincere and without the conflicts of interest seen in so much of the financial literature.  It recognizes that most people simply don’t care about investing and personal finance, and so he lays out 9 steps for a simple path to wealth.  This is the basis for the “Stock Series”.  Hopefully it will get your attention as to why this is so important and why anyone can do it.

Making the Complex Simple

The thing that we most liked about the “Stock Series” was the way that topics that had always seemed so complex were made simple.  For example, we explained in this post how we held 15 different mutual funds when investing with our advisor, in the name of diversification.  After reading parts I-VI of the “Stock Series” we realized that all we held were domestic stocks and bonds which could be held with an equal amount of diversification (or more) in a portfolio containing 2 funds, VTSAX and VBTLX.

This simple two fund portfolio recommended throughout the series is far cheaper, more tax efficient, and over time almost guaranteed to outperform the 15 funds we owned precisely because of the significant cost and tax advantages.

Why don’t advisors tell you all of this?  The idea of complexity makes a lot of money for the financial industry.  In many ways making the simple complex is why advisors have a job and Wall Street always wins.  The “Stock Series” explains that investing should be simple and low-cost.  Understanding this will make you far more money in the long run.

A Wake-Up Call

Reading the “Stock Series” opened our eyes to how superficial our knowledge of investing was while working with a financial advisor.  Through disciplined savings we had managed to accumulate a substantial investment portfolio.

While we were very good savers, we had no idea how the funds we were invested in actually made us money and what the risks of the investments were.  Our level of knowledge prior to reading the “Stock Series” was:  “Bonds are safe and stocks are risky.”

Our eyes were opened widely in Part XII-Bonds when we learned about default risk, interest rate risk, and inflation risk.  All of this without even mentioning the biggest risk of all (weaved in throughout the series), the risk that we were holding a substantial portion of our portfolio in asset classes (bonds and cash) unlikely to get us to our goals of building wealth to achieve early retirement, all in the name of “safety”.

Simple, But Not Too Simple

I decided to feature this series as my first resource because it is very beginner friendly.  Throughout the series, Jim uses some really effective one liners and analogies to explain key concepts effectively.

He comes blaring out of the gates in Part I with “Toughen Up Cupcake” to explain the importance of staying the course through market ups and downs. He then in Part III uses a great analogy comparing the stock market to a glass of beer to explain why stock prices vary widely and do not necessarily reflect the value of the underlying assets. (He had me at beer!)

While the information is written in a way that is accessible to beginner investors, it is not just catchy sayings and oversimplifications.  Jim explains in Part III how and why most people lose money investing in the market.  In Part VIII, he introduces the complex topics of using tax advantaged and taxable accounts as different “buckets” in which different assets are more tax efficient

He has two excellent posts on using the 4% rule:  first to determine how much money you need to be financially independent in Part XIII, and then how to practically apply this knowledge to live in retirement in Part XXVI.  He also tackles the conventional wisdom behind dollar cost averaging with an excellent post in Part XXVII.

You Must Understand Yourself

In addition to explaining technical concepts in really clear ways, Jim does a great job at getting into behavioral aspects of investing that cause most investors to greatly underperform the market.  This goes far beyond the simple “Toughen Up Cupcake” mentioned above.  It is best exemplified in my mind in Part XVIII-Investing in a Raging Bull when he takes on a reader’s question and turns it into a full post that explains how many people’s fear and greed drive them to make poor investing decisions.

Getting Some Help From Friends

As good as Jim’s posts are, I have to recommend that as you work through the series you also take the time to read the comments.  Jim responds to almost every comment with well thought out responses that really clarify topics.

He also has many knowledgable readers whose comments add greatly to the original posts.  There is also a full guest post in the series by the Mad Fientist, who we consider the master at tax planning for early retirement.  His guest post in Part XX was instrumental in developing our saving/investing strategy of maxing out tax deferred accounts as we outlined here.

If Only…

I will make the bold statement at this point to say that if my own parents had given me the advice that Jim gave his daughter and we had followed it, we would already have comfortably achieved financial independence and be retired by now.  (And what teenager doesn’t hang on their parents every word and listen to everything they say?)  The information held in the stock series is that powerful.

We would love to hear thoughts from anyone else that has read the “Stock Series” or feels that there are other helpful resources for beginning investors to develop investing knowledge.  Please share in the comments.

 

*Image courtesy of worradmu at FreeDigitalPhotos.net

Elephant Eater

Sign up to receive our posts!

Sign up now to receive our posts via email. Just enter your email address below to begin following us on our journey to financial independence!

12 comments on DIY Investing Resource #1: JL Collins’ “Stock Series”

  1. I will definitely need to check out JL Collin’s website. I have heard him on a couple podcasts (He is the F You Money guy, isn’t he?).

    F You money is really the reason for me to pursue FI at an early age. I don’t necessarily want to quit working but I want leverage if I am frustrated with my employment situation at any given moment.

    1. I found JL Collins through this interview on the Mad Fientist podcast which may be what you are referencing.
      http://www.madfientist.com/jlcollinsnh-interview/
      If not (and for other readers who haven’t heard this) check it out.

      Jim has a great blog overall and an interesting perspective on life. I focused on the “Stock Series” specifically to help new investors get some perspective to get started investing but his whole blog is excellent and worth reading for those with the time.

      1. Ya, I think that is where I heard him for the first time. I think Mr. Money Mustache mentions him a few times too. I really like the MF podcasts. I listened to them early on in my education related to FI, etc.

  2. Excellent review, EE!

    I think you captured the essence of my blog perfectly.

    If after reading it, someone finds it appealing, they will very likely enjoy the blog itself.

    By the same token, if after reading it, the reaction is, “This doesn’t sound right for me,” it very likely isn’t.

    And that’s what a review should do for the reader!

    Thanks for taking the time and for suggesting it is worthwhile.

    1. Thanks for taking the time to comment and thank you for all that you do to help simplify a topic that prior to reading your work we would have never had the confidence or knowledge to tackle on our own. Hopefully I will be able to steer some new readers your way with this post as a thank you to you for writing a blog that has truly changed our lives for the better and a way to pay it forward to other future D.I.Y. Investors.

      Cheers!
      EE

  3. Charles Schwab doesn’t allow individual investors to buy VTSAX.
    I have an individual account on Fidelity. Same problem, I get this error when I try to buy VTSAX:
    Error: (010952) The mutual fund you requested to trade is an Advisor Fund and is not available for retail trading. For more information, contact a Fidelity Representative at 1-800-544-6666.

    Any suggestions?

    –Thanks,
    Anna Linetsky

    1. VTSAX represents an admiral share of this fund with the lowest cost available to retail investors. This requires you to invest at least $10,000 initially. If you click on the link in the post you can see that there are also other share classes which represent a slightly more expensive investor share (minimum investment of $3,000) or an ETF version of the fund. If you’re having this problem with various brokerages, you may not be eligible to buy this particular fund, possibly b/c of this minimum requirement???

      I would contact the provider of your brokerage account and/or Vanguard directly as I am not in a position to advise you on these funds.

      Hope that helps.

      EE

  4. Schwab has a few wonderful ETFs. SCHB equivalent to VTI / VTSAX and SCHD for those interested in dividend income (better than VIG / SDY). Minuscule fees and if purchased @ Schwab, commission free.

    1. Agree that there are some individual products out there better than the Vanguard equivalents if you are willing to put in the work to find them. However, no other company is structured like Vanguard and therefore no one else puts client interests first as consistently.

  5. VTSAX is my main choice. It is a mutual fund with a minimum required to start of $10K. It is a total stock market fund. Another option, if you don’t have that much saved up initially is VOO. It is an ETF and can be purchased in smaller amounts, with no minimum required to start. Expense ratio for both is .04%. VOO only covers the S&P 500 stocks, so is less diversified. VOO contains 507 stocks, VTSAX contains 3,599 different stocks.

    The returns on both are comparable in todays market, if you are investing at Vanguard (which I recommend), both are excellent places to start until you do more research and might decide to diversify more.

    May people only invest in either VTSAX or VOO. Both keep pace with the S&P 500 index which is reported widely. I have chosen to diversify a little more since I’m already in retirement and want to keep a little more safely invested. Still 80% in VTSAX though.

    I spent years with a “financial advisor” and always trailed S&P 500 by almost half. I’m happy with keeping up with it.

Leave a Reply

Your email address will not be published. Required fields are marked *

%d bloggers like this: