Bogleheads® Chapter Series – Q & A with JL Collins

00:00:00.000 | Welcome to the Bogleheads Chapter Series.

00:00:05.700 | This episode was hosted by the Bogleheads Starting Out and Mid-Career Life Stages and

00:00:11.100 | recorded June 15, 2022.

00:00:14.280 | It features a conversation with Q&A on personal investing with J.L. Collins, author of The

00:00:19.260 | Simple Path to Wealth.

00:00:21.880 | Bogleheads are investors who follow John Bogle's philosophy for attaining financial independence.

00:00:26.840 | This recording is for informational purposes only and should not be construed as personalized

00:00:30.880 | investment advice.

00:00:32.400 | Hello everyone and welcome to another Bogleheads Chapter Series event.

00:00:38.120 | Today's session is jointly hosted by the Starting Out and Mid-Career Accumulators Life Stages

00:00:43.840 | Chapters and today's session is being recorded as already discussed.

00:00:49.240 | As most of you know, the Bogleheads are investors who follow John Bogle's philosophy for obtaining

00:00:54.080 | financial independence and a quick shout out, as Miriam mentioned, to Mel Lindauer, who's

00:00:59.840 | in the audience.

00:01:00.840 | Mel is a founder of the Bogleheads and also a co-author of the Bogleheads Guide to Investing,

00:01:07.660 | so it's great to have you here, Mel.

00:01:10.020 | Our special guest tonight is J.L. Collins, author of The Simple Path to Wealth.

00:01:15.160 | J.L. is well known to many Bogleheads and has often praised the work of Jack Bogle.

00:01:21.200 | J.L.'s career is long and varied, and his wisdom is timeless.

00:01:26.240 | His gifts include distilling sometimes complex topics into very digestible, user-friendly

00:01:33.040 | guidance.

00:01:34.440 | His books and blog, including the stock series on his blog, are known for doing exactly that.

00:01:41.200 | And more recently, apart from authoring A Simple Path to Wealth, J.L. published another

00:01:46.480 | book called How I Lost Money in Real Estate Before It Was Fashionable.

00:01:50.960 | We'll touch on lessons learned there later.

00:01:54.640 | You can learn more about J.L. on his blog by googling J.L. Collins.

00:01:59.600 | And a friendly disclaimer before we start, today's session is for informational purposes

00:02:04.040 | only and should not be construed as personal investment advice.

00:02:09.120 | So now back to our program.

00:02:11.080 | J.L., you should know we have a global audience, so if you ever want to highlight a similarity

00:02:16.840 | or difference of living or investing abroad, feel free.

00:02:21.240 | And on that note, we'd specifically like to wish a warm welcome to our Japan Bogleheads

00:02:26.080 | chapter.

00:02:27.080 | And I'll share a quote from a Japan chapter member about you, J.L.

00:02:32.520 | So the quote is, "His book is very popular in Japan.

00:02:36.000 | The number of reviews at Amazon are over 1,000."

00:02:41.600 | We covered Zoom tips, so hopefully folks are good there.

00:02:46.800 | We'll now cover the format of what to expect tonight.

00:02:49.800 | J.L. and I will have a conversation covering a range of topics, including questions submitted

00:02:55.320 | by the Boglehead community via the RSVP survey questionnaire.

00:03:00.680 | Feel free to submit questions via the chat during the meeting.

00:03:04.280 | And later in the evening, probably around a quarter to nine Eastern, we'll pause the

00:03:10.400 | primary conversation and we'll turn it over to Miriam and Lucas to take questions from

00:03:15.920 | the chat.

00:03:17.080 | So one more thing I'll mention about J.L., folks who are familiar with him and folks

00:03:21.800 | who aren't will learn tonight, his voice is incredible, it's mesmerizing.

00:03:26.560 | So this next specific suggestion, it's timeless, but it's specifically relevant these days.

00:03:33.720 | And that is J.L. has a recording on YouTube called "A Guided Meditation for When the Stock

00:03:41.120 | Market is Dropping."

00:03:42.960 | It's just under 11 minutes, it's got over 70,000 views, and I, along with many others,

00:03:49.520 | highly recommend it.

00:03:51.880 | Another note, J.L. has many interviews on YouTube, he's done many podcasts, they're

00:03:58.160 | easily available online, in addition to the content on his blog.

00:04:03.040 | So while we want to make sure tonight's session covers intro material for everyone, we also

00:04:08.480 | want to make sure we cover info that J.L. might want to speak about that he's spoken

00:04:14.640 | about less often, so that we cover a wider range of topics.

00:04:18.680 | In doing so, we'll probably alternate between typical personal finance, and we may go from

00:04:25.040 | practical to philosophical at times.

00:04:27.920 | So with that, let's begin.

00:04:29.360 | Welcome, J.L.

00:04:30.360 | Thank you.

00:04:31.360 | What an introduction.

00:04:32.360 | I hope I live up to your very kind words.

00:04:36.400 | An honor to be here, I appreciate the invitation.

00:04:39.360 | Yes, it's so great to have you.

00:04:41.720 | So J.L., you and I met in Ecuador in 2014 at a Chautauqua, which was a gathering about

00:04:49.160 | financial independence that you helped conceive and host and continue to bring to life.

00:04:54.760 | Interestingly, we had a question from the community about how you got involved with

00:04:59.600 | the financial independence movement.

00:05:01.740 | So it would be great if you could elaborate on what Chautauqua means to you, and how it

00:05:05.960 | helps folks.

00:05:07.320 | And similarly, can you tell us a bit about your own FI journey, financial independence,

00:05:14.160 | and how you connected to the broader FI movement?

00:05:16.920 | Well, you covered a lot of ground there.

00:05:20.000 | So let me start with how I connected, I guess, with the FI movement.

00:05:26.200 | In 2011, I had started writing a series of letters to my daughter, who was then in college,

00:05:34.040 | about financial things, about investing specifically.

00:05:38.320 | Because in my view, if you get that right, your life is infinitely better, and you have

00:05:43.280 | far more options.

00:05:45.160 | If you get it wrong, it's a much more difficult path.

00:05:48.960 | So like all parents, I wanted the best for my daughter, and I wanted to impart this information

00:05:54.160 | to her.

00:05:55.160 | But I started way too early, and I pushed it way too hard, and I managed to turn her

00:05:59.520 | off to all things financial.

00:06:02.840 | So I thought I'd better start getting this stuff down on paper, against the day where

00:06:06.800 | she might be ready and willing to hear it.

00:06:09.360 | So I started writing a series of letters to her, and I shared some of these with a business

00:06:14.120 | friend of mine.

00:06:15.120 | And he said, "You know, this is pretty interesting stuff.

00:06:17.640 | You ought to put it on a blog."

00:06:19.440 | Now, at the time, I'd heard of blogs, but I'd never actually seen one.

00:06:24.200 | And I had no interest in starting a blog, but it struck me as a great way to archive

00:06:29.080 | the information.

00:06:30.680 | So I figured out how to build a blog, and I started putting this stuff up, and as my

00:06:35.360 | friends suggested, I sent it around to my family and friends, and as I figured, none

00:06:42.200 | of them really cared.

00:06:44.200 | But then amazingly, and slowly over time, I started to build this audience that's now

00:06:49.640 | international in nature.

00:06:52.960 | And then around 2012, I started looking around, saying, "You know, I like this stuff, it'd

00:06:57.280 | be kind of fun to speak about it."

00:06:59.800 | And there were no venues in those days, at least none that I could find.

00:07:04.160 | And so I decided to create one.

00:07:06.480 | And what I created was the Chautauqua.

00:07:08.600 | You attended the second year.

00:07:10.520 | The very first year was 2013, it took about a year to pull it together.

00:07:16.380 | And Chautauqua is our retreats where we, I like to say, we pick a really cool place.

00:07:24.560 | We gather a small group of cool people, and we talk about cool stuff.

00:07:30.120 | And when I put the first one together in 2013, I had no idea if anybody would show up.

00:07:36.760 | But they did, and they all had an incredible time, and so we did again in 2014, and with

00:07:42.760 | a little hiatus because of COVID in the last couple of years.

00:07:47.120 | We are now back this year, and we'll be in Columbia for two weeks, back to back.

00:07:54.320 | Each Chautauqua is a week long.

00:07:56.480 | So I think I covered your questions there.

00:07:58.780 | You did, and that's phenomenal.

00:08:01.680 | So since then, as your own experience in early, in retirement, you mentioned you're nomadic

00:08:10.480 | and you'll be in Florida for a period.

00:08:13.040 | Can you tell us about your nomadic lifestyle, how it's been, what are some examples of how

00:08:18.760 | you spend your time, and maybe some great and not so great surprises from being nomadic?

00:08:26.240 | Well, so we've been nomadic for, I don't know, since about 2016, 2017.

00:08:35.040 | We have a little cottage on Lake Michigan in Wisconsin where we spend summers.

00:08:39.420 | That's where I am at the moment.

00:08:41.840 | This past winter, before we came back to Cabonda, which is what we call our cottage before we

00:08:48.160 | came back to Cabonda, we were mostly wandering around out in the Western United States.

00:08:53.700 | And so we'll be back here for June, July, and August, and then September, we go down

00:09:00.020 | to Columbia for the month, and of course, in the middle of that month are the two Chautauquas.

00:09:05.320 | And then we'll be back here for a month in October, and then we'll go south towards Florida,

00:09:11.960 | the Southeast for next winter.

00:09:15.920 | But at various times, in 2019, I think it was, we were in Europe for the better part

00:09:24.000 | of the year, and we had Chautauquas in the spring and in the fall, one in the UK and

00:09:29.440 | a couple in Portugal.

00:09:31.200 | So that's what drew us there.

00:09:34.320 | And then of course, when COVID hit, that grounded us, as it did a lot of people.

00:09:38.000 | So we spent 18 consecutive months here at Cabonda, but that's kind of what that looks

00:09:43.960 | like.

00:09:44.960 | - Okay, and on the surprise side of things, any highlights, great things that happened

00:09:51.680 | that you didn't expect?

00:09:52.680 | And maybe for folks who are looking forward to retirement or being nomadic, any lessons

00:09:59.240 | learned that you'd wanna share?

00:10:01.320 | - Yeah, well, a couple of things, I think on the plus side, we live in a, just traveling

00:10:08.200 | around in the U.S., which is what we've done the last couple of years, we live in an amazingly

00:10:12.520 | beautiful country, and with incredible people, you turn on the news, and I tend to see more

00:10:19.200 | news when we're at Cabonda than when we're on the road, and it's pretty horrific.

00:10:26.760 | And if you just watched that, you would think that these were not the kind of people you'd

00:10:33.840 | wanna go out and meet, but the truth is, at least our experience, the people you meet

00:10:38.640 | traveling on the road are incredible, and wonderfully warm people, and it's a drop-dead

00:10:46.360 | gorgeous country.

00:10:48.280 | The difficult part of it is, at least as I'm getting older, I don't think I had so much

00:10:52.380 | trouble with this when I was younger, but because we move a lot, every time you're in

00:10:58.520 | a new hotel room or a new Airbnb, you have to learn a whole new series of things, from

00:11:05.840 | anything from how to turn on the television, and how to work the stove, and the heating

00:11:12.000 | and air conditioning, to where the local grocery store is.

00:11:15.920 | So that's kind of a pain over time, so it's nice to settle down for an extended amount

00:11:22.080 | of time, and I think when we go to Florida, as we were talking a little bit before the

00:11:26.200 | show started, we're gonna try to pick one or two places where we settle in and use that

00:11:32.720 | as a home base.

00:11:36.080 | Okay.

00:11:37.360 | Sounds great.

00:11:38.360 | So you mentioned the news and how it can really drive you bananas.

00:11:41.880 | We had two related questions from the community, I'll read them both.

00:11:47.160 | How do I stop my addiction to financial news, and what do you think is a key for tuning

00:11:53.780 | out the noise of the market/news cycle, and what information sources are worth the time?

00:11:59.880 | Well, so I think that breaking your addiction to the news cycle, I guess I haven't broken

00:12:06.320 | mine, because I do still tune it in, I think what I've chosen to do is just create a certain

00:12:13.920 | psychological distance from it, and to recognize how much of it is nonsense, particularly around

00:12:22.520 | financial predictions.

00:12:24.800 | So there's no end of people predicting what the stock market's gonna do, and of course

00:12:31.760 | that's presented as if these people really are clairvoyant, or they really have some

00:12:36.580 | special knowledge base or insights that the rest of us don't have, and of course that's

00:12:42.120 | nonsense.

00:12:43.120 | Now, because there are so many people making so many predictions, almost anything that

00:12:48.800 | the market can possibly do is being predicted by somebody.

00:12:52.800 | So somebody is correct.

00:12:55.480 | Not because they're clairvoyant, but just because somebody has to be correct.

00:13:01.040 | It's kind of like lottery winners, you know, when somebody wins the lottery, we don't all

00:13:06.680 | sit back and think, "Oh, Gorey won the lottery, he's figured out how to pick winning lottery

00:13:12.120 | numbers."

00:13:13.120 | No, we're smart enough to sit back and say, "Gorey won the lottery, he got exceptionally

00:13:18.920 | lucky, he beat enormous odds and happened to pick the right numbers."

00:13:23.880 | When you see somebody predicting what the market's gonna do and they turn out to be

00:13:28.040 | right, that's the frame of reference I think you ought to have.

00:13:32.720 | Okay.

00:13:33.720 | Sounds good.

00:13:34.720 | Any particular trusted sources that you'd like to mention that might resonate with the

00:13:39.360 | Bogleheads community?

00:13:40.880 | You know, for news programs?

00:13:43.680 | Yeah.

00:13:44.680 | Yeah, not so much.

00:13:46.120 | I don't think, you know, I'm always a little struck by the fact that when I watch the news,

00:13:55.640 | and we like Shepard Smith, for instance, on CNBC because we like his style, we like his

00:14:00.880 | presentation.

00:14:01.880 | But when I watch the news, most of it is about stuff that I don't know about.

00:14:07.580 | But I can't help but notice, and I'm not just picking on his show, but in general, that

00:14:11.800 | when they start reporting about things I do know about, how inaccurate they are.

00:14:18.240 | And it's striking to me, as I've mentioned this to friends, that they all say, "You know,

00:14:24.320 | I noticed the same thing when they start reporting on my area of expertise," you know, if they're

00:14:29.920 | a doctor or a lawyer or whatever they know about, how inaccurate the reporting tends

00:14:37.440 | to be.

00:14:38.440 | And I think once you recognize that, then you, I think you learn to take everything

00:14:43.080 | with a grain of salt.

00:14:45.440 | Makes perfect sense.

00:14:46.440 | Thank you.

00:14:47.440 | So, as you know, we have a lot of retirees in the audience in the Boglehead community.

00:14:53.480 | Switching to specific practical insights, and you can approach this in both hypothetical

00:14:59.640 | and actual, so your own practices as well as a broader general application.

00:15:05.720 | Can you share thoughts about rebalancing portfolios in retirement?

00:15:10.960 | Thoughts on withdrawal rates, and also thoughts on keeping an emergency fund?

00:15:17.360 | So again, that's kind of three things you might, I may need you to help me remember

00:15:22.720 | them as we go along.

00:15:25.400 | So I think the first was allocations, right?

00:15:30.240 | Rebalancing.

00:15:31.240 | Right.

00:15:32.240 | Rebalancing your allocations.

00:15:33.240 | So in my world, when you're working and you have earned income, you should be living below

00:15:39.960 | your means, and that frees up a cash flow that you can channel towards your investments.

00:15:47.960 | And my fund of choice is VTSAX, which I'm, not every group I talk to is familiar with

00:15:54.960 | it, but I'm sure this group's very familiar with it.

00:15:59.200 | And as I tell my daughter, just put in the, your set amount of money every month, don't

00:16:07.080 | pay any attention to what the market's doing.

00:16:09.920 | When you do that, when the market plunges like it has been of late, you're taking advantage

00:16:14.720 | of that drop.

00:16:15.720 | You're buying more shares for that given amount of money, and that of course is helping smooth

00:16:21.080 | the ride.

00:16:22.080 | And I also tell her and people, young people or people accumulating wealth, that a market

00:16:28.840 | drop is a blessing.

00:16:31.120 | It's a gift, as long as you don't panic and sell and continue to invest.

00:16:36.720 | Now at some point when you want to live on the portfolio, it seems to me that you want

00:16:41.180 | something else to smooth the volatility of stocks in the way that earned income cash

00:16:46.320 | flow did.

00:16:48.080 | And that's bonds.

00:16:49.080 | And of course, whatever allocation you choose is up to your tolerance for volatility, with

00:16:56.760 | the understanding that the more bonds you add, the less volatile your portfolio is likely

00:17:02.600 | to be, but also the lowest, lower performance you'll have on time.

00:17:07.140 | So that's the trade off that only you as an individual can decide what the right balance

00:17:13.320 | is, is for your own tolerance for volatility.

00:17:17.300 | With the important caveat that if you let your stock portion drop below 50%, you are

00:17:25.440 | endangering the long-term survivability of your portfolio as you begin to draw from it.

00:17:34.720 | And so rebalancing is just a function of keeping whatever percentage you have decided in sync.

00:17:44.520 | So if you're 75% stocks and 25% bonds, as I happen to be, when stocks drop, as they

00:17:52.540 | have recently, you might shift some of those bonds over into stocks to bring that balance

00:17:58.040 | back into place.

00:17:59.040 | In fact, I just did that myself two days ago.

00:18:04.440 | In terms of withdrawal, there's a lot of discussion, unnecessary for the most part in my view,

00:18:11.960 | around what's come to be known as the 4% rule, and I think it's that word rule that gets

00:18:18.320 | people all concerned.

00:18:21.480 | If you change it from rule to guideline, I think you have a brilliant guideline to inform

00:18:28.000 | your thinking about how much money you need in retirement, or conversely, how much you

00:18:34.360 | can withdraw from your given portfolio and expect it to last.

00:18:40.480 | But this idea that 4%, or any other percent, is something you want to choose and lock in

00:18:46.560 | and have it adjusted every year for inflation and never pay any attention to it is a little

00:18:54.200 | bit insane, in my view.

00:18:56.400 | You're obviously going to want to pay attention to what the markets are doing while you're

00:19:00.600 | withdrawing this money, for two reasons.

00:19:03.480 | One is that, according to the Trinity study, in the 30 years they looked at, while 4% is

00:19:10.480 | an extraordinarily conservative and successful number, in 4% of the time, it fails, it doesn't

00:19:19.880 | last for the 30-year period that they measured.

00:19:23.040 | So you certainly want to pay attention so you don't run out of money, which is everybody's

00:19:27.280 | fear.

00:19:28.840 | But that's actually the smaller of the two reasons, it seems to me, to pay attention,

00:19:33.640 | because it's the one that is least likely.

00:19:36.120 | The one that is most likely, and happens most times when you look at the Trinity study,

00:19:42.140 | is that if you withdraw 4% from a given portfolio over the course of 30 years, at the end of

00:19:49.320 | 30 years, you will have a phenomenally larger amount of money than you started with, because

00:19:55.600 | of the power of the stock market.

00:19:57.700 | So you certainly don't presumably want to just wind up with a whole bunch of money at

00:20:03.680 | the end of that 30 years, you want to enjoy it along the way.

00:20:07.260 | So for those two reasons, I say use 4% as a great guideline, and then monitor it as

00:20:15.440 | you go along.

00:20:17.180 | In the unlikely event you hit a really bad sequence of return here when you first start

00:20:21.800 | out, and you need to adjust, and for the much more likely event that you start accumulating

00:20:28.360 | a lot of money that you could enjoy rather than just let it accumulate.

00:20:35.440 | Great sound advice.

00:20:36.440 | And then the third part of that question was, can you talk about your thoughts on keeping

00:20:40.640 | an emergency fund?

00:20:41.800 | Oh, right.

00:20:42.800 | Thank you for reminding me.

00:20:44.880 | I think emergency funds depend largely on your situation.

00:20:50.920 | I don't keep one myself, because, you know, I only have a small cottage, I have a relatively

00:20:59.960 | new car, I don't have a lot of things in my life that could suddenly cause me a big expense

00:21:06.000 | that I couldn't handle out of the normal course of money flowing through my checking account.

00:21:13.120 | On the other hand, you know, if your savings rate is low, and I doubt that applies to too

00:21:18.760 | many people in this group, but if you're living pretty much paycheck to paycheck, maybe you

00:21:23.920 | have an older house that needs chronic repairs, maybe you drive an older car that might need

00:21:30.600 | unexpected repairs, then I think that's the time when you want to really think about an

00:21:35.520 | emergency fund.

00:21:36.720 | But for a lot of people, and particularly I think people in the FI community, I think

00:21:42.600 | emergency funds are probably less important than they might be for somebody who is not

00:21:50.320 | as fiscally responsible as I'm guessing the people listening to this are.

00:21:56.600 | Yeah.

00:21:57.600 | Okay.

00:21:58.600 | Great advice.

00:21:59.600 | I would also, I think you're spot on in terms of this immediate crowd, but I think within

00:22:03.680 | the Bogleheads community, everyone's got friends, relatives, colleagues who come to them for

00:22:10.440 | advice on saving more efficiently, investing better.

00:22:14.420 | So the broad spectrum of guidance is definitely welcome here.

00:22:19.600 | So you mentioned home repairs as, you know, something a lot of people face, that's a great

00:22:24.180 | segue into real estate.

00:22:26.400 | We mentioned the book you authored on real estate with the funny title.

00:22:31.920 | Can you elaborate on, you know, your thoughts on when you think real estate's appropriate,

00:22:37.240 | when it's not, and your own phrase of wings versus roots.

00:22:41.880 | And how has your philosophy evolved over time, even if it's not in a single direction?

00:22:48.720 | So I kind of cringe at the concept that your personal residence is an investment.

00:22:59.960 | In my view, you are probably, if your goal is to maximize your journey or to accelerate

00:23:09.720 | your journey to financial independence, you are probably better off renting just the space

00:23:15.520 | you need and diverting that money into something like VTSAX.

00:23:23.040 | I think people convince themselves that their house is a great investment because they want

00:23:27.880 | to own a house.

00:23:29.320 | In my world, the way I think about it, and I've owned houses, to be clear, most of my

00:23:34.080 | adult life, but I've never seen them as an investment.

00:23:37.600 | I've made money on some of them, but I've always seen them as an expensive indulgence,

00:23:43.200 | something that I only bought when I could easily afford it.

00:23:46.960 | And because I felt for whatever reason at that point in my life, it enhanced my lifestyle

00:23:54.120 | and I was willing to spend the money to do it, like on any other indulgence.

00:24:00.420 | Investment real estate, of course, is a different kind of animal.

00:24:03.760 | You mentioned the second book, which is How I Lost Money in Real Estate Before It Was

00:24:08.160 | Fashionable.

00:24:09.600 | That's the story of the very first piece of real estate I bought.

00:24:15.360 | It's finally, I can see the humor in it.

00:24:18.360 | So it's written to be a humorous story, almost a little bit of a miniature novel.

00:24:25.360 | And you can learn from my mistakes.

00:24:27.160 | The subtitle on that is a cautionary tale, because if you made a list of all the mistakes

00:24:34.080 | you could possibly make in buying real estate, well, I would have checked off all of those

00:24:38.960 | things in this particular purchase.

00:24:41.920 | And for the sake of the story, it has the advantage of having in the process of owning

00:24:47.640 | it, because I couldn't get rid of it, morphing from a personal residence into a rental.

00:24:54.560 | And if you want to invest in rental real estate, that's great, but probably backing into it

00:25:00.800 | because you can't sell your personal residence is not the way to go.

00:25:06.440 | Sounds good.

00:25:08.560 | So you mentioned learning the hard way.

00:25:10.840 | We had a question from the community.

00:25:13.080 | So let's say real estate lesson aside, what are other financial lessons you had to learn

00:25:18.320 | the hard way?

00:25:19.320 | Well, I think the hardest lesson and the one that I wish I had corrected soonest is I was

00:25:31.240 | very slow to embrace index investing.

00:25:36.120 | I started investing in 1975, which of course is a little bit ironically the year that Jack

00:25:43.640 | Bogle brought out the first index fund.

00:25:45.960 | Now, I can't regret not buying that fund, because I didn't know about it at the time.

00:25:51.760 | In fact, it was 10 years before I heard of indexing, and it was introduced to me by an

00:25:59.520 | old college buddy of mine, and that would have been 1985.

00:26:04.280 | And that's when I should have embraced it, and if I were smarter and less stubborn and

00:26:11.400 | what have you, I probably would have, but I was a stock picker, and I was reasonably

00:26:17.920 | good at it, and I was making money at it.

00:26:20.040 | In fact, I achieved financial independence doing that in 1989.

00:26:28.520 | So I was kind of stubborn and a little bit arrogant, I suppose, and so I was very slow

00:26:34.020 | to embrace it.

00:26:35.020 | And there is something, I think, counterintuitive about the power of index investing, because

00:26:41.360 | you think if I only avoid the bad companies, I could certainly outperform the index, or

00:26:46.800 | I just focus on the clearly the best companies, and they'll outperform.

00:26:51.640 | Well, of course, we know that research teaches us that those best companies are sometimes

00:26:57.200 | tomorrow's Enrons, and those dogs are sometimes tomorrow's exciting turnaround stories.

00:27:02.880 | So actually outperforming the index, especially over any period of time, is extraordinarily

00:27:09.640 | difficult.

00:27:10.640 | But at least for me, that felt very counterintuitive, so it took me a long time to embrace it.

00:27:15.440 | And again, I think part of the problem is it's not like picking individual stocks doesn't

00:27:21.680 | work.

00:27:22.680 | Of course, sometimes it doesn't, but it does work.

00:27:26.880 | So you're not comparing something that doesn't work to something that does.

00:27:30.840 | You're comparing two things that work, one of which just works better, and with a whole

00:27:37.480 | lot less effort.

00:27:38.480 | And of course, that's index investing.

00:27:41.040 | So I wish that I had first heard of Mr. Bogle's creation in 1975 and been smart enough to

00:27:53.120 | embrace it.

00:27:54.120 | But failing that, I wish that I'd embraced it in 1985 when I first heard about it.

00:28:00.460 | My investment road would have been easier and more profitable.

00:28:05.160 | Understood.

00:28:06.160 | Yeah, and that definitely resonates with this crowd.

00:28:11.400 | So we had a question about overcoming cognitive biases from the community.

00:28:16.400 | So can we explore a bit more what you just spoke about?

00:28:20.120 | So apart from the kind of intellectual information, like higher probability of index investing,

00:28:26.720 | like you said, can you talk about overcoming cognitive biases in a way that when people--

00:28:33.120 | most people, almost by definition, people don't know when they're wrong, right?

00:28:37.880 | They wouldn't consciously, intentionally have a wrong view.

00:28:41.160 | Can you talk about how folks make this journey, or in your own experience, from having bad

00:28:47.400 | information or being misinformed, transitioning to a better understanding or seeking or embracing

00:28:55.920 | disconfirming information?

00:28:57.600 | Yeah, I'm not a psychologist, so I'm not sure that I'm qualified to talk about that.

00:29:07.600 | My personal observations in listening to people-- I remember in my business career, I had the

00:29:14.000 | occasion to go to Las Vegas on a regular basis for shows and conventions and what have you.

00:29:20.120 | And of course, when people go to Las Vegas, they gamble.

00:29:23.720 | And it was remarkable to me that almost everybody-- and these are my customers and my colleagues--

00:29:30.120 | would report that they made money in the casinos, that they won on a consistent basis.

00:29:36.600 | And I'd look up at these billion-dollar casinos and think, wow, there are a whole lot of people

00:29:41.320 | who are smarter than I am, because I didn't win in the casino.

00:29:45.080 | Now, to be clear, occasionally I did, because the casinos are set up so that people do win

00:29:51.320 | on a regular basis.

00:29:53.540 | But nobody, I think, wins consistently.

00:29:58.960 | But they fool themselves, because the sensation of winning is so intoxicating that you tend

00:30:06.400 | to block out the times when you lost.

00:30:08.720 | I think that's true of picking stocks.

00:30:11.480 | In fact, for me at least, it was even more true than-- casinos have never particularly

00:30:15.800 | appealed to me, because it's so biased in favor of the house.

00:30:21.300 | But there is nothing in my experience, or very few things in my experience, that are

00:30:26.060 | more intoxicating than researching a company, deciding that, yeah, this is worth buying

00:30:35.680 | the stock, and being proven right, and letting it ratch up.

00:30:41.040 | So I think I'll take some pride in the fact that I was always clear-eyed enough to recognize

00:30:47.480 | my mistakes, and to realize that even though I picked some winners-- and maybe I can even

00:30:54.080 | go so far to say the winners did better than the losers, because as I say, I did make money

00:31:00.520 | doing it-- but I was always aware of the drag the losers represented on my portfolio.

00:31:06.040 | And sometimes when I talk to people, whether it's about their gambling in Vegas or their

00:31:10.720 | stock portfolio, I wonder about their memory.

00:31:16.800 | Makes sense.

00:31:19.000 | So on a related note, within financial independence-- and you spoke about saving, and investing,

00:31:25.000 | and doing well with stocks ultimately-- Jack Bogle famously wrote a book called Enough.

00:31:30.480 | Can you share with us your concept of enough?

00:31:33.520 | We have a lot of people who work indefinitely, they save and invest indefinitely, they may

00:31:39.960 | have trouble spending and not working.

00:31:44.880 | Can you elaborate on your idea of enough?

00:31:47.120 | Yeah.

00:31:48.120 | So I might, at least to some extent, fall into that category.

00:31:54.020 | And I'm not sure that-- I don't say that in that it's a good thing, necessarily.

00:32:03.480 | But personally, I've just never been enamored with owning things.

00:32:09.960 | I guess I've never been particularly materialistic.

00:32:12.760 | So in my business career, when I wasn't driving as fancy a car as my peers in the business

00:32:20.800 | world were driving, sometimes for the sake of my career, I thought that was a mistake

00:32:26.420 | on my part.

00:32:27.420 | But that's just not something I wanted.

00:32:30.640 | We lived in a very nice house, but it wasn't necessarily the fanciest house that we could

00:32:35.720 | live in, or the house that my peers in my business career were living in at the time.

00:32:43.760 | So I was a little bit always out of step with that.

00:32:46.320 | I always liked work.

00:32:48.480 | And to this day-- and I think that's one of the reasons I'm very grateful that I found

00:32:53.240 | this FI World, and that I just by happenstance started this blog, and then the Chautauqua's,

00:32:59.600 | and then wrote the book.

00:33:01.280 | I find work extraordinarily satisfying.

00:33:04.280 | I am, frankly, better at work than I am at play.

00:33:08.760 | And that caused a little psychological stress at times, because there is a drumbeat that

00:33:16.600 | you should prefer play and relaxation.

00:33:22.400 | So you combine those things, and you do wind up accumulating money.

00:33:28.400 | My solution is to give it away, which is satisfying in and of itself.

00:33:34.120 | But I think that-- I'm not recommending this path.

00:33:38.600 | I think the better path would be to have more balance than perhaps I've had in my own life.

00:33:46.560 | And recognizing that there is a certain point where, depending on your own particular situation

00:33:53.840 | and needs, and how you feel about things, where you have enough money, and accumulating

00:33:58.000 | more money doesn't add anything to your life.

00:34:02.760 | And as the old saying goes, you can't take it with you.

00:34:06.600 | So I am absolutely a believer in the concept of enough.

00:34:14.240 | And I think it's a healthy way to look at things.

00:34:18.120 | Excellent.

00:34:19.120 | All right.

00:34:20.120 | So we've spoken about retirees a bit.

00:34:22.200 | The crowd here also has some newcomers to the space.

00:34:26.760 | So they're just beginning their journey.

00:34:29.400 | Thinking about the title of your book, "The Simple Path to Wealth," can you elaborate

00:34:33.360 | on this idea that the simplicity of it has its own appeal, but it's not just the simplicity

00:34:41.360 | of it that's the appeal, the powerful result of being simple?

00:34:48.640 | That may not be intuitive to folks new to the space.

00:34:52.080 | Right.

00:34:53.080 | So as I mentioned, I think, earlier in the conversation, I basically wrote the book for

00:34:59.960 | my daughter.

00:35:00.960 | And she came home from college one day, and of course, I was still trying to engage her

00:35:07.640 | in conversations about these things, even though I managed to turn her off to it, pushing

00:35:15.120 | too hard previously.

00:35:16.120 | And at one point, she said to me, she said, "You know, Dad, I get it.

00:35:19.840 | I understand this is important stuff, but I don't want to have to think about it all

00:35:27.360 | the time."

00:35:28.800 | And that was an epiphany for me, because I realized that I love thinking about this stuff

00:35:33.120 | all the time.

00:35:35.240 | But she, like a lot of people, had more important things to do with her life than think about

00:35:40.240 | investing in money.

00:35:43.240 | And the wonderful thing about investing is the truth is that if you do the simplest things,

00:35:50.220 | you will get the more powerful results.

00:35:54.320 | And if you identify those few simple things, and you put yourself on that path and set

00:36:00.920 | it on autopilot, and then otherwise forget about it, that's a superpower.

00:36:07.680 | My daughter, for instance, probably doesn't even know the market's down 20% because she

00:36:12.280 | just doesn't care.

00:36:14.080 | But she's on the path.

00:36:15.680 | She puts money into BTSAX every month.

00:36:19.840 | And that's her superpower.

00:36:23.240 | Her lack of paying attention to it is going to keep her from panicking and selling.

00:36:30.280 | It's going to save her from the temptation to constantly tinker.

00:36:35.160 | And if the research is indicative of anything, it's that the more you tinker with your investments,

00:36:40.000 | the less well you will do.

00:36:42.520 | It's kind of remarkable when you think about it, because I don't believe there is anything

00:36:47.600 | else in our life where if we put in less effort, we get a better result.

00:36:53.580 | If you want to be a woodworker, the more effort you put into it, the better woodworker you

00:36:58.320 | will be.

00:37:01.280 | That's true of almost anything we can think of.

00:37:04.200 | But with investing, the more you tinker with it, the worse your results are likely to be.

00:37:10.840 | I liken it to, imagine if you had a banquet table that was just filled with all kinds

00:37:16.980 | of exotic dishes on it, and in one tiny corner of that table were the core nutritious foods

00:37:23.960 | that you really need that are good for you, that your body needs.

00:37:28.800 | What's analogous to all of the investment products that Wall Street offers, a lot of

00:37:33.720 | them are extraordinarily exotic and difficult to make, and of course, that's by design.

00:37:40.320 | So you're driven into their arms for high fees to sort through all that stuff.

00:37:45.640 | Well, the truth is, just like with the food on the table, you can put your arm down in

00:37:49.600 | front of those handful of very simple foods.

00:37:53.940 | And sweep everything else onto the floor because you don't need it.

00:37:56.920 | And you can do that, the same thing in the world of investing, and sweep everything onto

00:38:03.560 | the floor except for broad-based, low-cost index funds.

00:38:09.880 | Which is the great gift that Jack Bogle gave us, and it's the reason that I call him a

00:38:15.800 | fiscal saint.

00:38:16.800 | Jack Bogle has done more, and I know I'm preaching to the choir with this group, but Jack Bogle

00:38:22.140 | has done more for the average investor than anybody before or since because he created

00:38:30.840 | the only thing that we really need to get outstanding results, and ironically, with

00:38:42.240 | the least possible effort.

00:38:45.440 | It is amazing and ironic.

00:38:47.840 | So I want to be sensitive of your time and the audience's time so that we wrap up this

00:38:54.040 | portion of the session with one more question from the community, and then I'll turn it

00:38:59.780 | over to Lucas and Miriam, who have consolidated some of the common theme questions from the

00:39:06.140 | chat from the live audience.

00:39:08.060 | So that last question, you mentioned the market went down.

00:39:13.100 | So the question is, what are three of the biggest financial challenges you see facing

00:39:18.700 | retirees today?

00:39:20.540 | Well, I think that the biggest one, at least for anybody who is going to follow my approach,

00:39:29.020 | the simple path to wealth, is staying the course.

00:39:33.120 | When I started writing in 2011, the market really has done nothing but march straight

00:39:40.420 | upwards.

00:39:41.420 | You know, it dropped a little bit in COVID, but it recovered almost instantly.

00:39:47.500 | This drop that seemed to have everybody in a panic is, you know, it's 20%.

00:39:54.720 | It's a very mild bear market, at least so far.

00:40:00.100 | And I think that most or a lot of investors out there really haven't experienced a sharp

00:40:06.820 | decline.

00:40:07.820 | And they don't perhaps fully appreciate the fact that nobody can predict them with any

00:40:12.680 | accuracy and that they are a very normal part of the process.

00:40:16.780 | If you are going to reap the benefits of investing in stocks, then you have to accept the fact

00:40:23.140 | that periodically the stock market is going to plunge.

00:40:26.860 | It's a volatile, it's not a smooth ride, it's very volatile.

00:40:31.140 | And you have to stay the course.

00:40:32.460 | I tell people, when the market drops, and it will, if you panic and sell, you do not

00:40:39.980 | want to be following my advice, it will leave you bleeding by the side of the road.

00:40:44.940 | You have to stay the course.

00:40:48.340 | And so I think that's probably the biggest obstacle as to whether people can just hear

00:40:53.980 | somebody like me say that and take it to heart and endure the volatility, which, of course,

00:41:00.900 | is very unpleasant.

00:41:01.900 | It's very scary.

00:41:03.820 | Or whether they actually have to live through panicking, selling, watching the market turn

00:41:09.180 | around and leave them behind and having to get in later.

00:41:14.060 | But I tell people, it's like living in Florida and being surprised when hurricanes come.

00:41:21.220 | Hurricanes are unpleasant, they're potentially very dangerous and destructive, but you shouldn't

00:41:26.860 | be surprised that if you're going to live in Florida, that you're going to have to deal

00:41:30.580 | with them.

00:41:31.580 | It's the same thing investing in the stock market with bear markets.

00:41:35.740 | So that makes sense.

00:41:36.820 | Before I turn it over to Miriam and Lucas, let's explore that a little more.

00:41:40.220 | Because I think intellectually, people can hear this, that table stakes, the price of

00:41:44.780 | entry is the roller coaster.

00:41:47.300 | But if all folks have experienced overall is the upward trending market, like you described,

00:41:54.060 | it's natural that they might think their actual risk tolerance is higher than it really is.

00:42:00.420 | How do you suggest people learn their true risk tolerance to the extent they can in advance

00:42:07.540 | of a market correction?

00:42:08.860 | Yeah.

00:42:09.860 | So I don't know that I have the answer to that question.

00:42:12.860 | That's kind of what I was saying or trying to say is, I don't know how many people can

00:42:20.540 | read about it and take it to heart.

00:42:23.780 | And I think you're correct that a lot of people, especially when all you've experienced, and

00:42:30.180 | there are a lot of adults that have come of age and only experienced this last 10 years,

00:42:38.700 | I think it's one thing to intellectually say, "Well, of course I can handle when it drops."

00:42:43.380 | But it's one thing to know it in your head, it's another thing to know it in your gut.

00:42:50.460 | And I think what it requires, I mean, the advice I would give to people is to really

00:42:55.020 | sit back and think about it, and I think a lot of people don't, they kind of dismiss

00:43:01.700 | and say, "Okay, I can handle it."

00:43:04.060 | For instance, if you go back to '07, '08, '09, that debacle, I remember, of course we

00:43:12.900 | know historically that the market hit bottom in, I think, March of '09, if I'm not mistaken,

00:43:20.980 | and it was at 666, which is a memorable number, of course, and it had lost, I don't know,

00:43:30.180 | 50% of its value at that point.

00:43:33.100 | So it's easy for people to look at that and say, "Oh, okay, well, I think I could handle

00:43:37.140 | losing 50% of my value, the value of my portfolio."

00:43:41.300 | Wouldn't be happy about it, but I think you can tolerate that.

00:43:44.420 | But now understand this, that in March of '09, all of the smart people I was talking

00:43:51.140 | to thought the market was going to go much lower.

00:43:54.820 | I mean, they were talking about it dropping another two-thirds.

00:43:59.140 | Nobody that I heard was saying, "Oh, now we're at the bottom."

00:44:04.300 | So think about it this way.

00:44:05.540 | Let's suppose that you had started with a portfolio of a million two, and in March of

00:44:11.980 | '09, the market's been cut in half and your portfolio is now 600,000.

00:44:19.280 | What you're hearing is not, "It's the bottom, it's going to turn around and get better."

00:44:22.940 | What you're hearing is the market's going to continue to go down another two-thirds,

00:44:28.740 | which means your million two is potentially going to be $200,000.

00:44:35.740 | Walk that scenario through your head and say, "Would I stay the course?"

00:44:39.460 | And I think maybe that's the only sobering way I can think about looking at this, short

00:44:48.500 | of going through it yourself.

00:44:50.660 | Okay.

00:44:51.660 | Thanks for that.

00:44:52.660 | A great exercise.

00:44:53.660 | So, as mentioned, I'll turn it over now to Miriam and Lucas, who will share questions

00:44:58.860 | from the chat.

00:44:59.860 | Jim, we'll reconnect and close the meeting later, but before turning it over, I want

00:45:05.980 | to thank you again for sharing your incredible insights and timeless wisdom.

00:45:10.300 | I appreciate it.

00:45:11.300 | As I said at the beginning, I appreciate the invitation.

00:45:15.320 | You asked some really interesting questions that I haven't gotten before, so I thank you

00:45:19.900 | for that.

00:45:20.900 | Sure.

00:45:21.900 | And they're largely sourced from the Bogleheads community, so thanks for the feedback.

00:45:26.340 | So Miriam or Lucas, I'll turn it over to you.

00:45:30.140 | Sure.

00:45:31.300 | So I'll ask the first question.

00:45:34.700 | JL, Collins, thanks for coming on, by the way, big fan.

00:45:39.260 | So the first question we had was from Garrett, and these are in the chat, by the way, and

00:45:48.420 | this is a question for mid-career folks.

00:45:53.180 | And the question is, "When do you stop living like in your 20s, which is spending very little

00:45:58.300 | with lots of delayed gratification, and start 'living' like you want to?"

00:46:04.460 | I'm always torn between being frustrated for delaying gratification for 10-plus years now,

00:46:13.620 | but also worrying if I start spending that something will go wrong, example, a recession

00:46:19.660 | leading to a job loss.

00:46:22.700 | So any thoughts on that?

00:46:24.540 | Yeah.

00:46:25.540 | So I think that, again, is going to be a very personal decision for each individual.

00:46:31.900 | So probably the best way I can talk about it is how I did it.

00:46:38.580 | And remember, when I started on my journey there, I had no concept of financial independence.

00:46:45.500 | I was wandering in the wilderness, if you will.

00:46:49.260 | But for whatever reason, I decided that financial, I wanted to have, I'd come across the concept

00:46:57.260 | of having a few money, which was not enough money to never work again, but enough money

00:47:02.820 | that I could make bolder decisions, that I could always leave the job if I wanted to

00:47:07.740 | go do something else, or if I just didn't want to work for that company or that particular

00:47:13.060 | boss.

00:47:14.180 | So that was the goal that I had, such as it was.

00:47:18.940 | So I decided out of college, when I got my first professional job, I was going to live

00:47:23.660 | on half of my income, and that's what I did.

00:47:26.500 | My first professional job paid me $10,000 a year, and I lived on $5,000 a year, and

00:47:33.980 | I invested the other $5,000.

00:47:38.100 | But then as my career progressed, of course, I started making more money, but I kept that

00:47:43.500 | ratio the same.

00:47:44.980 | So my lifestyle did inflate.

00:47:48.820 | So in a few years, when I was making $20,000 a year, well, now I'm investing $10,000,

00:47:54.940 | but I'm living on twice what I was living on before.

00:47:59.620 | And that worked out well for me, and right up the march where I was making $30,000, $40,000,

00:48:04.220 | $50,000 into six figures, I was still doing the half and half thing, and my material life

00:48:13.500 | expanded with it.

00:48:14.500 | But again, this is coming from somebody who never has had a very high regard for material

00:48:22.060 | things other than travel is, I guess, where I spend money the most.

00:48:29.780 | But I also kind of cringe at this idea that you're not living your life if you're not

00:48:38.380 | spending money.

00:48:42.420 | I never felt deprived when I was going through this.

00:48:46.140 | I think most people would say, "Well, if I'm not spending, there's half of my money, my

00:48:51.660 | income that I'm not spending.

00:48:52.980 | That feels like deprivation."

00:48:54.300 | It never felt like deprivation because, again, when I came out of college, $5,000 a year

00:49:01.820 | was a lot of money, and then it kept growing on the spending side.

00:49:07.260 | So I think if there's somebody listening who thinks that there's no satisfaction to be

00:49:13.420 | had in life unless they're spending as much money as they possibly can, I would urge them

00:49:19.580 | to think about that a little more deeply.

00:49:21.980 | Great.

00:49:22.980 | Great.

00:49:23.980 | Thanks.

00:49:24.980 | Would you like to read the second one, Ma'am?

00:49:28.500 | Yes.

00:49:29.500 | We have a question about bonds, and the question is, "Why bonds as a ballast when the return

00:49:36.940 | is so poor, not much better than cash?

00:49:40.780 | Is there some alternative you would recommend instead of bonds to use instead?"

00:49:47.660 | And then I have an additional question to that because I understand that you recommend

00:49:54.060 | mostly stocks for young people.

00:49:57.540 | When would you add bonds to the portfolio?

00:50:02.140 | What thinking would you have in relation to this question, bonds as ballast versus bonds

00:50:07.580 | as return?

00:50:09.300 | Right.

00:50:11.100 | So bonds as ballast has not been working out real well in recent history, as I think we

00:50:16.940 | all know.

00:50:17.940 | I mentioned earlier in this conversation that a couple of days ago I just shifted some money

00:50:23.020 | out of bonds and into stocks, and I don't remember the exact numbers, but the bond portfolio

00:50:30.620 | was down 10%, 11%, but the stock portfolio was down 22%.

00:50:37.300 | So would I have preferred that the bond portfolio was up a little bit, which would be the ideal

00:50:43.260 | situation with ballast or even flat, obviously.

00:50:47.260 | But we're in kind of a unique economic environment, and right now bonds are getting hammered at

00:50:53.620 | the same time that stocks are, but not quite as hard, and so I still think of them as being

00:51:01.500 | ballast, although it's not performing as well as I would like, because in terms of what

00:51:08.060 | else to use, I honestly don't know the answer to that question, considering that I believe

00:51:15.100 | in playing the long game.

00:51:17.320 | So in the long game, if you owned bonds in BBTLX, the total bond market fund that Vanguard

00:51:24.180 | offers, it's, of course, gotten hurt pretty badly, but what you need to understand is

00:51:30.020 | that's a portfolio with thousands of bonds in it of all different maturities, and at

00:51:35.820 | any given time, some of those bonds are coming due, and that money will be reinvested in

00:51:42.380 | new bonds at higher interest rates.

00:51:44.860 | So slowly but surely, that bond fund, along with all bond funds, will be paying more and

00:51:50.820 | more interest, and it'll recover in that fashion.

00:51:54.720 | So I kind of see it as a rockier road than I would have hoped for with bonds.

00:52:01.540 | If you told me that we were going to have the kind of inflation we're having a few years

00:52:04.860 | ago, I would have said, "Yeah, that's the road that bonds have ahead of us," but I don't

00:52:11.980 | have a crystal ball.

00:52:14.700 | In terms of when to add bonds, again, this depends a little bit on someone's risk tolerance.

00:52:22.280 | So personally, when I stepped away from the workforce in 2011, that's when I added bonds.

00:52:30.540 | Now the risk to that, of course, is the stock market could have immediately tanked.

00:52:36.740 | My timing could have been very bad, and then I would have had to use depressed stock prices,

00:52:45.220 | sell stocks at depressed levels, to buy those bonds.

00:52:49.420 | But the truth is, the market doesn't tank aggressively all that often, so I was willing

00:52:54.980 | to roll those dice.

00:52:56.980 | If someone is less willing to roll those dice, then what I would say is, "We'll start edging

00:53:02.020 | into whatever bond position you run over the course of five years before you're going to

00:53:07.220 | be needing to live on in the portfolio."

00:53:12.220 | Great.

00:53:13.220 | Thank you.

00:53:14.220 | Okay, so the next question that we had is in regards to mutual funds versus ETFs.

00:53:22.500 | So earlier, you were speaking about the bonds mutual fund, the total bonds mutual fund,

00:53:28.780 | and then also VTSAX versus VTI.

00:53:31.940 | Advantages, disadvantages, what are your thoughts there?

00:53:36.300 | So I'm an old guy, and when I started investing in these things, there were no ETFs, and so

00:53:42.820 | I think in terms of VTSAX, I think in terms of the mutual fund.

00:53:50.860 | I was a little resistant to ETFs when they first came out because there were some trading

00:53:55.820 | costs associated with them.

00:53:58.020 | And my understanding is they were created specifically to make trading these assets

00:54:04.820 | more easier and more effective, and I'm not a trader.

00:54:09.580 | I mean, when I buy VTSAX, my holding period is literally forever.

00:54:14.060 | I mean, the only time I would ever sell it is to sell off a couple of shares, perhaps

00:54:20.380 | to make ends meet if I'm living on the portfolio.

00:54:24.660 | So I see absolutely no value in trading, and I have no need for it.

00:54:29.900 | So the ETFs, there was never any reason for me to switch to them.

00:54:36.380 | Now having said all that, the trading costs have come way down, as I understand it.

00:54:41.780 | You can, of course, if you're new to the game and you have relatively little money to invest,

00:54:47.580 | I think the minimum on VTSAX is $3,000 these days.

00:54:53.300 | You can get into VTI with the cost of a share.

00:54:57.620 | I have no idea what a share of VTI costs these days, but considerably less than $3,000.

00:55:02.980 | So perhaps it's a little easier entry point.

00:55:06.820 | I guess the bottom line is it doesn't really make any difference, as long as you're going

00:55:12.860 | to hold either one for the long term.

00:55:17.220 | Whether you own VTI or VTSAX, you have exactly the same portfolio, and bottom line is that's

00:55:23.780 | what matters.

00:55:24.780 | Great.

00:55:25.780 | Great.

00:55:26.780 | Thanks.

00:55:27.780 | Miriam, did you want to ask another?

00:55:34.500 | We have another question from the chat.

00:55:36.380 | It is, "Should we be doing anything different in anticipation that the U.S. may experience

00:55:43.220 | an extended period of high inflation, for example, 10 years of 8% to 10% inflation?"

00:55:53.740 | And may I add that I'm an old lady, and when we first bought our first house, my husband

00:56:00.060 | and I, our mortgage was about 16%.

00:56:05.780 | And my first IRA, I opened in 1981, and I put it in a regular money market fund, and

00:56:14.380 | it was paying about 16%, 17%, 19%.

00:56:19.300 | Right.

00:56:20.300 | Well, I lived through those days as well, and I remember those money market fund rates

00:56:28.940 | and those interest rates, as I had both of those myself.

00:56:34.280 | You know, I think not.

00:56:38.380 | I think that, you know, if you're in this for the long term, and in my view, that's

00:56:45.540 | the only way you should be investing in stocks, and as I've said a couple of times now, I

00:56:51.660 | own VTSAX forever, you know, once stocks get through the shock of the Fed raising interest

00:56:59.980 | rates and the potential that that will trigger a recession, which it probably will, and that

00:57:07.740 | will slow down the economy and slow down the sales and profits of companies.

00:57:13.660 | Once companies get past that, just like once the bonds get past the shock of the fast rising

00:57:22.300 | interest rates and begin to buy the new bonds with the higher rates and provide those higher

00:57:28.380 | interest rates on the fund, you're going to find that stocks are actually a pretty good

00:57:34.500 | inflation hedge, because you're not just buying pieces of paper or bits on a computer that

00:57:39.940 | are just there to be traded.

00:57:41.340 | You are, in a very real sense, owning pieces of real, genuine, active businesses that have

00:57:48.580 | assets, that have products, that have services, that have pricing power, that can serve you

00:57:55.140 | well in keeping pace with inflation.

00:57:58.460 | So I look back in the 1970s, which is when I came of age and first began investing, and

00:58:06.580 | that was a very difficult time for the market.

00:58:09.540 | It was a time of very high inflation, as Miriam was just pointing out, but it was also a wonderful

00:58:17.180 | time to be adding to something like VTSA, which VTSAX didn't exist in those days, but

00:58:24.980 | adding to the S&P 500 fund that Mr. Vogel had first created would have been a wonderful

00:58:30.860 | time to be accumulating shares.

00:58:35.060 | As the old saying goes, you want to be buying when there's blood in the streets, and there

00:58:38.660 | was certainly blood in the streets in those days.

00:58:41.460 | You had, I think it was business week in 1978, had a famous cover called The Death of Equities.

00:58:49.460 | And if you ever see a magazine cover like that, I think you could be pretty sure you're

00:58:54.580 | near the bottom of whatever terrible thing is going on.

00:58:58.580 | So no, I'm very comfortable continuing on the same path that I've laid out and that

00:59:06.340 | I've been on for decades.

00:59:07.340 | And in fact, if anything, over time, I think it'll be even more powerful because this is

00:59:14.100 | a wonderful time to be accumulating shares in VTSAX.

00:59:18.940 | Thank you.

00:59:23.260 | And along those lines, that segues into a question from one of our friends over in France.

00:59:30.580 | So what, in your opinion, is the best way to attract younger people in their 20s and

00:59:37.100 | 30s to more of a saving mentality?

00:59:41.060 | And this is asking for a friend.

00:59:44.020 | Yeah, so I don't, again, I think that's a question that's kind of above my pay grade.

00:59:53.280 | I don't know.

00:59:54.280 | I don't quite know how to do that.

00:59:56.340 | I think that it is remarkable to me watching what has happened in the FI world since 2011

01:00:06.900 | when I first launched my blog, and then with Bogleheads, the sources of information that

01:00:12.740 | are available are just extraordinary.

01:00:15.020 | And, you know, I think about when I started my journey and I was kind of wandering in

01:00:22.860 | the wilderness, and frankly, it all felt wrong.

01:00:25.500 | It felt like I was doing things wrong because everybody else was living paycheck to paycheck

01:00:31.020 | and spending all their money.

01:00:32.420 | But now, if you have any inclination to consider a different way of living, a different path,

01:00:42.220 | the amount of role models you have out there, the amount of information that you have out

01:00:46.900 | there is really unlimited.

01:00:49.260 | So I suppose if I were trying to persuade somebody, and I'm notorious for saying I've

01:00:54.860 | never tried to persuade anybody but one person, my daughter, of anything along these lines.

01:01:01.660 | And by the way, I've succeeded, so I feel good about that.

01:01:05.900 | But if I were trying to persuade somebody, I suppose I would, and I'm going to be self-serving

01:01:11.820 | here, is steer them to my blog, to the stock series, and/or to the book.

01:01:19.180 | But at that point, it's going to be up to them.

01:01:22.940 | But yeah, I'm certainly not an expert in trying to persuade people.

01:01:26.500 | I think the people who I've influenced are people who have come to my work and for whom

01:01:32.980 | it's resonated, and they've continued on on their own.

01:01:39.220 | Great.

01:01:40.220 | Well, you've influenced me, I'll tell you that much.

01:01:43.900 | Well, there you go.

01:01:47.100 | Any others?

01:01:48.100 | Miriam, did you want to ask any others from the chat?

01:01:51.220 | Yes, we can.

01:01:52.220 | We can also open it up to questions for the raised hand.

01:01:56.580 | Let me see on the chat, we have a question about IBONs and whether you own IBONs.

01:02:06.220 | Would you add those to your portfolio?

01:02:09.220 | So it's interesting, I fielded that question on, it must be on my Facebook today, and maybe

01:02:17.540 | a week ago, I fielded it on my Twitter account.

01:02:22.660 | IBONs pay an extraordinarily high interest rate, they're government issued bonds, just

01:02:27.100 | so everybody knows what we're talking about.

01:02:30.340 | But you can only buy $10,000 worth of them.

01:02:33.280 | So my answer to the question is, it depends on how important or how big a portion of your

01:02:40.380 | portfolio $10,000 is.

01:02:43.740 | If it's a meaningful portion of your portfolio, then by all means, it's you're not going to

01:02:49.460 | get a guaranteed 9% or whatever it is elsewhere.

01:02:56.020 | But if you're further along in your journey, then $10,000 is probably a rounding error.

01:03:01.680 | So for that, I think you need other tools for your heavy lifting.

01:03:05.780 | Then of course, no matter where you're on your journey, I suppose, if you want to make

01:03:10.500 | the effort, even for $10,000, why not?

01:03:16.020 | Great.

01:03:19.980 | There was another question that we received in the chat.

01:03:24.780 | You mentioned giving your money away.

01:03:28.660 | What do you choose to donate to, to give away?

01:03:34.980 | Well, I don't know how deep we want to go into that, and I kind of consider it a little

01:03:44.140 | bit private, but interestingly, I did another interview earlier today and was asked the

01:03:53.420 | same question.

01:03:54.420 | Maybe Jim, I'll insert just to clarify, and I respect that you're keeping the details

01:04:01.980 | private, but if you can talk about how you make philanthropic decisions, because I think

01:04:06.500 | the crowd here as retirees, that's a growing interest for them.

01:04:12.460 | Well, I'm happy to talk about this one particular charity because I did in this other interview

01:04:18.180 | earlier today.

01:04:21.660 | There's a charity based in Salt Lake City called Adopt a Native Elder, and most of their

01:04:28.220 | work is done on the Navajo reservation.

01:04:32.620 | Poverty levels on reservations are by and large extraordinarily high.

01:04:39.260 | It's one of the most impoverished groups in the country.

01:04:44.180 | The elderly on the Navajo reservation tend to be deeply in poverty.

01:04:49.420 | They tend to be living far out in rural areas with very little access.

01:04:56.540 | They tend not to have running water or electricity or things like that.

01:05:02.460 | This organization reaches out to those people with things like food and firewood and water,

01:05:13.300 | and also materials.

01:05:16.860 | They can be wonderful craftspeople, and so yarn for weaving rugs that then the organization

01:05:22.820 | will help the market and create a little bit of cash flow that way.

01:05:28.100 | It's a charity that I'm very fond of, and I put a fair amount of support behind.

01:05:35.660 | Interestingly enough, I started supporting them a number of years ago, and they were

01:05:41.500 | not rated on any of the charity rating organizations.

01:05:47.940 | It was a little bit of a gamble, I guess, for me, because I'm the kind of person who

01:05:51.820 | likes to analyze everything to death, and so I was a little uncomfortable that I couldn't

01:05:57.740 | find them on any of those organizations, but I chalked that up to the fact that they were

01:06:02.340 | pretty small and probably didn't have the resources to go through the paperwork.

01:06:06.900 | I just liked the way they talked about the work that they did.

01:06:10.900 | Well, now they are rated on Charity Navigator and have been for a few years, and I was delighted

01:06:16.700 | when I first saw that because they have absolutely top-notch ratings when it comes to efficiency

01:06:22.100 | and what have you, so if anybody is looking...

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