What do cupcakes, frosting, and financial independence have in common? This week in the basement, Stacking Benjamins welcomes legendary personal finance thinker JL Collins, author of The Simple Path to Wealth, to connect the dots between simple investing and sweet, stress-free success.
In a lively conversation with Joe Saul-Sehy, OG, and Mom’s neighbor Doug (who may or may not be launching a frosting-themed protest movement), JL shares timeless wisdom on avoiding complexity, embracing low-cost index investing, and why FU money is more than just a clever phrase—it’s freedom in a bank account.
You’ll hear JL’s take on portfolio allocation, debt’s sneaky impact on your future, and how to survive volatile markets without sacrificing your peace of mind. If you’ve ever felt stuck in a soul-crushing job? JL’s got some perspective you’ll love.
Then, in the second half of the episode, Joe and OG shift gears to answer a listener question from Mike. He’s wondering about the efficient frontier—yes, we’re getting fancy now—and wants to know how to move beyond the Simple Path. Joe walks through the different asset classes he thinks about when crafting a diversified portfolio, while OG shares how to think through asset allocation as your wealth and confidence grow. Whether you’re curious about real estate, international investing, or just how much to hold in bonds, you’ll walk away with a clearer picture of what your portfolio could look like after “graduating” from JL’s foundational advice.
- Why keeping it simple beats chasing trends
- What “FU money” really means—and how to get it
- The truth about withdrawal rates and why they matter
- When debt becomes a dream killer
- Tips for navigating market downturns without panic
- How to find freedom without spending a fortune
- JL’s surprisingly profound parable about a monk, a minister, and money
- Doug’s hot take on the great frosting vs. cake debate
- A deep dive into the efficient frontier and how to set up your asset allocation beyond VTSAX
- Joe Saul-Sehy and OG’s thoughts on portfolio construction for seasoned investors
JL’s insights have inspired millions on the path to financial independence—and now it’s your turn. Tune in, take notes (or don’t, we’ll recap it in the 201), and remember: sometimes the sweetest success starts with doing less.
Deeper dives with curated links, topics, and discussions are in our newsletter, The 201, available at https://www.stackingbenjamins.com/201
Enjoy!
Monday Mentor: JL Collins
Big thanks to JL Collins for joining us today. To learn more about JL, visit Homepage – JLCollinsnh. Grab yourself a copy of the book The Simple Path to Wealth (Revised & Expanded 2025 Edition): Your Road Map to Financial Independence and a Rich, Free Life.
Doug’s Trivia
- Who is Jackie Collin’s famous sister?
Better call Saul…Sehy & OG
- Stacker Mike has a question about how to best allocate his portfolio to maximize growth with a timeline of 20+ years.
Have a question for the show?
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Other Mentions
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Tune in on Friday when we’re chatting with our roundtable about what makes an affordable AND memorable vacation.
Written by: Kevin Bailey
Miss our last show? Listen here: Make Your Next Theme Park Experience Worth the Money (with Theme Park Insider’s Robert Niles)
Episode transcript
[00:00:00] opener: And now we’re pleased to bring you our feature presentation [00:00:17] Doug: live from Joe’s mom’s basement. It’s the Stacking Benjamin Show.I’m Joe’s mom’s neighbor, Doug and mom’s set out the fine. China. Joe and OG are in their Sunday vest, and everyone’s all smiles because we welcome the author behind one of our favorite books about money. Yes, it’s Neighbor Doug’s Guide to Facebook Marketplace. I’m just kidding. It’s JL Collins. Everybody.
JL Collins is here. He wrote Simple Path to Wealth. It’s one of our favorite books. You are gonna love it. Plus, you know my thing about Facebook marketplace. Anyway, we’ll also answer questions from Mike who’s wondering about the efficient Frontier. We’ll talk modern portfolio theory and good money management in the second half of today’s show.
Of course, halfway through this extravaganza, I’ll be sure and carefully apply the icing on this podcast. Goodness, with my well-reasoned and informative trivia, Joe’s shaking his head when I say, well-reasoned like what? And finally. And now two guys we trust with money talk, but who still can’t be trusted around the frosted cookies upstairs, it’s Joe and oh, ju ju GI
[00:01:39] Joe: think Doug, we’ve made a pact, haven’t we?You take the cookie. I take the frosting. Is is that the pact? No. You don’t want the cookie?
[00:01:48] Doug: Well, yeah, but I’m not, we’re not sharing like that. No, no, no. I mean, look, I’m gonna scrape the frosting off and throw it to the side. What you do with it? I don’t care. But I’m not [00:01:57] OG: like we, we were just having this discussion, my wife and I.’cause she made a cake for Alex’s birthday. And it had so much frosting on it. And I was like, why do you, why is there so much frosting on this? And she’s like, everybody loves frosting. No. I’m like, you don’t say, Hey, what kind of frosting do you want for your birthday? You say, what kind of cake do you want?
The main event is cake. And it’s okay to not even have, I think
[00:02:16] Joe: cake is an excuse to eat frosting. [00:02:19] OG: Ugh. Frosting is so flipping nasty. Yeah. Oji [00:02:21] Doug: and I are on the same page in this. I don’t like a lot of frosting. I like, I [00:02:24] OG: like any frosting. Yeah. I will scoop it off of everything. [00:02:27] Doug: I will usually scrape off the thick parts and it’s enough for me to have whatever the residual is when you take it off.And that middle layer of frosting, that just adds so it’s not super dry, but that’s all the frosting I want. Keep
[00:02:37] OG: like what kind of cake do you want for? I just want a cupcake. With no frosting on it. That’s called a muffin. No, it’s a cake. [00:02:45] Doug: And those are healthy. So you should be like, get the frosting off of a cupcake.It’s a muffin. And we all know that’s all you gotta do. Those are healthy. Just
[00:02:53] OG: take the frosting off. Like this is special frosting. It’s got blah, blah, blah, blah, blah, blah, blah, blah is like fondant. And this, it took me forever to make. And it’s like, okay, great. Wow. It still taste like crap. It’s going in the garbage disposal.Sweetheart. Welcome
[00:03:06] Joe: to the Frosting Trauma podcast everybody. [00:03:08] OG: Have you seen the bit from Parks and Rec where he’s at the grocery store and the guy goes, would you like some vegan bacon? He’s like, yes, please. And he takes it just immediately throws it in the trash, [00:03:16] Doug: right? [00:03:17] OG: It’s so good. And then he keeps doing it.Like that’s what I do with frosting. I’m like, oh, oh, oh. It’s a double. It’s a double decker Fondant frosting. Oh, right in the trash. I’d like more, please. Yes, yes.
[00:03:30] Joe: How much more is there? I don’t know if you guys want to keep going or not, but believe it or not, jail Collins is upstairs. Is that amazing? The j Collins From The Simple Path to Wealth.This gentleman wrote a book initially for his daughter. He didn’t think that there was going to be, he didn’t really think about the audience. They, he had an audience of one. And this book has been read by, I think Money Geeks the World Over talking about really reframing your life. This is a great time to talk about the simple path to wealth because of the fact that, you know, with all the graduations going on right now, it’s a great way to start out all this talk about, um, you know, starting out with a target date fund og or starting out with a RoboAdvisor.
Start out with very simple V-T-S-A-X shovel money in. And, uh, that’s not all he talks about. We’re going to deep dive with JL Collins here in just a few minutes, but before we get to JL Collins, we have a couple of sponsors that make sure that we can keep on talking about frosting and you don’t have to pay for any of that goodness, or j Collins.
So we’re gonna hear from them. And then finally on the Stacky Benjamin Show, I can’t believe it took us this long to have j Collins on j Collins coming down to mom’s basement, a sentence I’ve been wanting to say for a long, long time.
And I am super happy. We’ve got this. It’s about damn time we got in here. J Collins coming down the stairs to mom’s basement. It’s about damn time. I got to
[00:05:03] JL Collins: see this [00:05:03] Joe: basement I’ve [00:05:04] JL Collins: been hearing about. [00:05:05] Joe: Yeah. And it’s wonderful, isn’t it? It’s just gorgeous. [00:05:07] JL Collins: It is [00:05:08] Joe: everything I [00:05:09] JL Collins: hoped it would be. Hey, before we started recording, you mentioned that we had met years ago at at FinCon and uh, I was giving you a hard time that Oh, I guess I didn’t impress you enough back then that you had me to the basement, but I’m, I’m glad I’ve, I’m glad I’ve made [00:05:25] Joe: it.We saved the best for later I could. We saved the best. We, we have to wait to get the audience for the J Collins experience. Right. There you go. But it is strange. I mean, the reason why we’re, we’re finally meeting jail is that 10 year anniversary. Like, can you, can you believe I. 10 years since Simple Path, the wealth came out.
[00:05:46] JL Collins: I’m stunned. Time flies. And uh, I would kill to be that age again, by the way, but Me too. But yeah. But I’m also stunned at how well it’s done, how well it’s been received. You know, I wrote this book for one person, my daughter, and I’m grateful to say that she finally got it and embraced it, and it’s made a difference in her life.But I’ve always been kind of amazed that it’s resonated with so many other people around the world. I’m gratified, but I just never expected it.
[00:06:16] Joe: Well, I was telling you, I go on stages and I was just at UC Santa Barbara, and every time I talk to a college student, don’t start with a target von start here.Start, start with this. But you know what’s funny about the book though, JL, is that you know, people that haven’t read it, of course you’re known as Mr. You can get by on one fund, but that’s not really what simple path is about. I mean, you don’t start there. You start with a parable about these two guys, about the monk and the minister, and I think that’s kind of the tone of the entire book.
[00:06:44] JL Collins: Well, that’s the reason the book starts with that parable. And, and just for those who haven’t read the book, it’d be the parable goes, they’re these two boy who had friends and they grew up and go in their separate directions. And one becomes a very prominent, wealthy, uh, minister to the king. And the other becomes a humble monk who wanders around with his begging bull.And at one point they run into each other as, as adults and, and they’re catching up a little bit. And the king’s minister sort of takes pity on, on his shabby monk friend. And he says to him, you know, if you could learn to cater to the king, you wouldn’t have to live on rice and beans, to which the monk replies.
If you could learn to love on rice and beans, you wouldn’t have to cater to the king. And to me that’s sort of the essence of freedom. I mean, money helps, but your mindset helps even more. And reaching financial independence isn’t just about having a certain amount of money. It’s however much money you have against your needs or what you perceive your needs are.
It’s that balance. So the lower your needs, the less money you need.
[00:07:54] Joe: Uh, just revisiting this book, I also look at second layers and third layers, and I think there’s even a deeper layer jail that resonates not just here, but throughout a lot of your work, which is this idea of, because the monk can live on very little, I feel like every single thing that happens then in the monk’s life, you’ve gratitude for like this idea of being grateful for the little things and appreciating the little things is much easier to do and you can subsist on very little.Than if you need to be at the Ritz Carlton to make you happy.
[00:08:28] JL Collins: You know, I, I think that’s a great point, and one of the things that I’ve noticed in the FI community in recent years is there is kind of this drumbeat that once you achieve financial independence or even when you’re on the way to achieving financial independence, stop being frugal.Spend the money. Spend the money. You know, I, I have an issue with that. I mean, my first issue is the idea that you can’t be happy. You can’t enjoy life without spending money, and that spending money leads to happiness because it simply doesn’t. Now, to be clear, if I’m looking at somebody or talking to somebody who is financially independent.
And there are things that they would like to have, that they would like to buy that would make their lives better, and they are not spending the money out of fear or old habits, then absolutely. I think that’s a problem. Spend the money. My wife and I do that my fly first class, for instance, because flying first class makes flying slightly less awful.
Okay? Only slightly, but it does make it
[00:09:37] Joe: war. Warm nuts change the game. [00:09:39] JL Collins: It makes it slightly less awful, and I can easily afford to do that at this stage of my life. But on the other hand, I don’t drive a luxury car, which I could also easily afford. Why don’t I drive a luxury car? Because luxury cars today.It’s a matter of having lots and lots of gadgets. You know, in the old days it was a matter of better engineering, better materials, better finishes, better quality, but that’s not true today. It’s all gadgets. And I have an aversion to gadgets. So when I buy a car, I buy a very modest model. Well, I drive a Subaru Forester and I buy the cheapest, lowest spec in the range simply because it has less of the, the crap on it that I don’t want.
[00:10:24] Joe: Isn’t that funny? It isn’t about the money at all. No, it’s about buying what you want, which is I want less technology in this vehicle. [00:10:31] JL Collins: Exactly. And I frequently thought, you know, I’m at an age where I’m not collecting social security, which turns out to be surprisingly generous. Much, much more generous than I thought it would be.My wife and I stripped out the travel that we do and we don’t do so much of it anymore simply ’cause it doesn’t intrigue us. But if we stripped out that and a couple of other things and we wound up at the finish line with a paid off house that we do have, and just social security, we’d be fine. I mean, we’d have a few less things but wouldn’t make us unhappy.
So there you go.
[00:11:09] Joe: I think that for a lot of people when they hear about you, if they’ve never heard you before, if they’ve never read the Simple Path or any of your other works, that they don’t realize that this finish line of financial independence. So we saw in the early days of the hardcore financial Independence jail people that were rice and beans until they.Quote, got there, and then to your point, there’s gonna be unicorns and rainbows. And sadly, I still show up and I’m the same miserable person, so nothing changes when I get there. But what they, they don’t realize is this is not about retirement at all. And that literally is how you start the book. This is not about retirement for you.
You write that you were intrigued by, I don’t Was it a book? Was it? It was a book or a movie? I don’t remember.
[00:11:55] JL Collins: Well, would you be thinking of how I found freedom in an unfree world? It was a book called Noble House. Oh, noble how? That’s where I first came across the term F you money. [00:12:04] Joe: Yes. Yes. You were inspired.B. B. Because truly fu money is several milestones below. Financial freedom forever. It’s just enough financial freedom for tomorrow, for right today for,
[00:12:18] JL Collins: well, to be clear, different people define it differently. The way you just defined it is the way I define it. But I have heard lots of people define FU money as exactly the same as being financially independent.But in my view, and evidently in yours, FU money is the transition period, if you will, right? So from the moment you start saving and investing, you have a little bit of FU money. And of course the more you have, the more power you create. And then when you get to that point where you investments are throwing off enough, enough to supply all of your needs and, and then maybe a little more, well that’s at the point you’re financially independent.
But when I started this journey, I had no concept of financial independence. You know, there was no internet. I didn’t hear about financial independence actually until after I started writing my own blog in 2011. So the idea of retiring early, frankly never occurred to me. I, when I first realized that I had enough money that was paying all of my expenses was throughout my career, I was taking a sabbatical away from work.
It was like a five year period, the longest I ever did. And I was in the middle of it. And my wife also had stopped working for a variety of reasons. And at the end of every year, and this is when I was still doing things by hand, you know, before computers, or at least before computers. For me, I totaled things up at the end of, I think it was the third year, and I noticed something remarkable.
And that was that we were living in the same house, eating the same food, spending the same amount of money. And at the end of the year, I had more money than I started with. And I knew something remarkable had happened, right? And then I got curious and I went back and I looked at the year before and I had noticed, but that was true the year before and the year before that.
I thought sort of, this is a little embarrassing to admit. I thought briefly, well, this is kind of remarkable. And then I went on with my life without thinking about it again. It never occurred to me that this meant you never have to work again. I mean, I, you know, and sometimes I wonder what I would’ve done if it had occurred to me, if I would’ve done things differently.
But I always enjoyed working. And so I don’t know that I would’ve
[00:14:36] Joe: I love that. I love the, oh my goodness, I’m financially independent, Jill. Yeah. But I, but I love that for our younger stackers out there. I love, so you’ve your first job and uh, the way you write it is you had made 10,000 and you save $5,000 to that, which is kick ass.And you go to your boss and you tell him, yeah, I wanna take a couple months off. Like I could just imagine one of my interns here. I. Like coming up to me and going, yeah, I wanna take, I wanna take a couple months off. Like this to me, shows me that even if you’re 25, a little bit of money can be fu money.
Oh yeah. Ab, do you mind telling the rest of that story about First Job?
[00:15:15] JL Collins: Sure. So first of all, because it’s relevant, you have to realize this was 1975. The idea of taking sabbaticals or taking any extra time off beyond the normal two weeks was just unheard of not [00:15:30] Joe: happening. [00:15:31] JL Collins: Nobody even broached the question as far, at least as far as I know.And when I got outta college, which was 1972. It was bad economic time. I mean, most people probably don’t listening to us, don’t realize that was the year of stagflation, which lasted for a decade.
[00:15:47] Joe: Were we at lines at the gas pump [00:15:49] JL Collins: yet? That was 74 as I recall. Later recall, yeah. Yeah, yeah, yeah. That was the Arab oil embargo.Yeah. Yeah. So that was yet to come. Yeah. It didn’t
[00:15:57] Joe: get any better. The seventies, [00:15:59] JL Collins: right? Well, yeah, it got, well, eventually it got better, but sure. When I graduated, it was sort of u getting uglier, but it took me two years to get my first professional job. I was doing landscape work to keep body and soul together.So I liked this. It was in publishing, which is where I spent my career, and I, I really liked the job and they paid me $10,000 a year, which adjusted for inflation is, I don’t know, maybe 50,000 equivalent today. And I looked around and I, I thought, well, you know, I, I want it to have the security that having extra money.
Would provide. I didn’t know the term fu money at the time, so I kind of arbitrarily said, you know what, I’m gonna save half of my income because I knew I could live on $5,000 a year. In fact, $5,000 was a whole lot more than I’d been living on, uh, doing landscaping a whole lot more than I’d been living on in college.
So that was a big lifestyle improvement for me. So, uh, that’s what I did. And then after a, a couple of years, I, I, uh, was well established in the job. They liked me, I liked them. Uh, and I had accumulated this $5,000 you mentioned. And in those days, that was enough to go to Europe for a year. And so I was thinking, do I want to quit this job?
That was hard to get, that I really like and go bummer around Europe for a year or. Do I wanna just state what I’m doing? And at one point I came across a, a special airfare from, I forget which airline it was, but it was a four month period if you left on a certain date and came back on a certain date in four months.
It was like a really cheap airfare. And I thought, well, that’s kind of a compromise. So I went to my boss and, and, uh, I, I, I said, uh, you know, I I I, I’d like to disappear for four months. Do you, do you mind if I do that? And then I’ll come back to work? And his name was Carl. He is very nice, older gentleman.
And he looked at me like I had two heads and he, I was say,
[00:18:01] Joe: Carl’s thinking the ball’s on this kid. [00:18:03] JL Collins: Well, or, or, or the lack of sense. Right. You know, I mean, or, or, or something. I, I didn’t realize we hired somebody who was, who was sort of mentally deficient. I, I mean, he was, he was kinda stunned, you know? And, and so he said, no.In those days, I had no idea things could be negotiated. So I said, okay. And I went back to my office and I said, well, now I have a decision to make. Do I quit or go to Europe or do I stay? And I wrestled with that for about a week and I finally decided, you know what? I really wanna go to Europe. So a week later I went into Carl’s office and I resigned again, no animosity here.
And this was not a negotiating tactic on my part ’cause I didn’t even think that way. He said, well, why are you resigning? And I, I said, well, you know, I really wanna go to Europe and I think I’m gonna do that for a year. And he said, well, wait a second. Don’t do anything hasty. He said, this is a very small company, by the way.
He said, let me, let me talk to the owner. And the pre Carl was the president of the company. So IW now I, it’s my turn to be stunned, right? And I said, well, well, of course. Sure. And I go back to my office and a couple days later, Clark Carl calls me into his and he says, uh, if you can, uh, promise us you’ll be back after four months, uh, you know, we’ll go ahead and do that.
Uh, but what we’d really like to do is, is offer you a month and, and make that every year. And I said, well, how about six weeks for the first year? ’cause now I’m learning that these things could be negotiated, right? I’m slow, but I’m not entirely stupid. And he said, sure, absolutely. This was only from his point of view, instead of four months is only six weeks.
And so then, you know, I got a month off going forward and, and, uh, the six weeks I spent riding my bicycle around, uh, Ireland and Wales and wonderful last week in London. And, uh. Following year. I bummed around Greece for a month. So yeah, it was a nice compromise. Power of fu money. We’re headed to Greece this summer.
Ah, it’s wonderful.
[00:20:06] Joe: Oh, I can’t wait to go. Never been. But I love that point though, because I think people are looking at this finish line and, you know, people fight me on emergency funds, on cash reserves, OG and I, they’re always like, well, I got credit cards. I don’t need emergency fund. I’m like, oh my goodness.If you just have this money in the bank, like the leverage you had already, you, you can not only leverage that, you can leverage your insurance policies by raising your deductibles. If you choose, obviously that’s money’s gonna come outta your pocket, but you can start insuring yourself. You can bet on yourself more.
You can take sabbaticals, you can do so many things. It’s incredible. You, you write that there were three big linchpins. To your success. You, you, you write, you made a ton of mistakes, but because you’ve never wavered on these three, you were fine. Which also gives us confidence. ’cause we all make mistakes, but number one is, are on wavering.
50% savings rate. Second, avoiding debt, never had a car payment ever. And finally, embracing the indexing lessons Jack Bogle perfected decades ago. Those three things. It’s not rocket science jail.
[00:21:07] JL Collins: That’s it. And if you follow those three things. Not only will you be rich financially, but you’ll have a much richer life as you just alluded to.Because when you have these financial resources, when you have the FU money, and ultimately financial independence, just so many more avenues are open to you, so many more choices are open. Uh, you said earlier, I’m, I’m not sure if it was in our conversation before we started recording or, or not that, and now I just lost my train of thought.
That’s alright. But, but uh, yeah, I do that
[00:21:42] Joe: every four minutes. [00:21:43] JL Collins: Yeah. Just went right, right outta my head. And, but it was something really significant you said, I wish I could remember it. My wife says that too. Your, your life just has so many more opportunities available when you have that kind of freedom and it, it just makes it for a richer life, which of course is the subtitle of the book. [00:22:02] Joe: I’m focusing on some of these things because of the fact that everybody I think that knows, you, knows the investing part of the book, which is funny because you don’t even begin with investing. You began with debt. You’re writing this to your daughter. Why do you begin the book? Really hammering and talking about debt first before you get into investing or lifestyle stuff, [00:22:23] JL Collins: I guess basically, because you’ll never be financially independent if you carry debt.Debt is, uh, my friend, uh, Mr. Money mustache says it’s like having your hair on fire. And I, I think that’s not strong enough. I mean, debt is a ball and shame that you drag around with you. And what really disturbs me is that in our country, in our culture, the vast majority of Americans accept carrying dead is normal.
This is just the way things are. Of course, I’ve got credit card debt, of course I’ve got car payments, so, you know, you can’t live without doing these things, and that’s just utter nonsense. It’s, it’s like being covered with leaches. And saying, well, I’m okay with being covered with these blood sucking leeches.
And I say, no, that’s not, you shouldn’t be. You should take your sharpest knife out and start scraping the little blood suckers off. It’s insane. Now, the only debt I’ve personally ever had is the mortgage. And even that, I’m a little, you know, there’s this concept of good debt and mortgages fall into that, and I’m sort of okay with that until it becomes, well, you go to the bank or you go to the real estate agent and oh, we’ve run the numbers.
We looked at your income and you can afford to borrow this much, and that means you can buy this much house. And people go out and do that, and suddenly they’re a slave to their mortgage and they’re what’s called house poor. You shouldn’t be buying the most house that you can possibly afford. According to the real estate agent bank.
You should be buying the least house that meets your needs if you’re gonna buy a house at all. But carrying debt, you know. Uh, car payments. I just, I remember my dad was the one who taught me this. He bought a new car every five years. The moment he bought that new car, he started making car payments to himself, to his bank account.
He flipped it. He flipped it. So while he was still making those car payments, he was being paid the interest rather than paying out the interest. And then at the end of five years, he would buy the next car for that, with that cash. Now of course, the obvious question becomes, well, how do I buy the first one?
You know? And the answer to that is you buy, you buy a junker for as little money as possible, and then you begin making payments for five years if you even care about a new car. A lot of people are more comfortable buying junkers. ’cause you know what? There’s less to worry about. You don’t care if they get dents and, and what have you.
But if you wanna buy a new car, that’s the way to do it. So yeah, the idea that you have to go into debt to do these things is nonsense.
[00:25:02] Joe: Some of the chains that you talk about. I think the people don’t, much like the FU money advantage begins early on the downsides of debt. I think also begin early on you write that, number one, your lifestyle’s diminished ’cause you’re paying for yesterday’s fund.Second, you’re enslaved to your income streams. You gotta go to work the next day. You can’t negotiate to take six weeks off or a month off every year or or four months or anything else. Yeah, the stress because you owe somebody else. You get these, uh, same emotions as an addict, shame, guilt, loneliness, self-destructive pattern start, you start drinking or, I mean, it can be, it can be absolutely horrible.
I think J, this is a great time to have this conversation because as you and I record this a few before it goes live, tariffs were just introduced across the board. No matter what you’re purchasing, you and I have been around long enough to know the price of everything is going to go. Through the roof.
Being able to understand your expenses. To control your expenses. You talk about buying a new car, a new car. I saw a thing yesterday that new Dodge Ram you’re looking at could be, you know, $4,500 more money tomorrow than it was yesterday, even a US car. But let’s talk about tariffs, not, and the budget and debt, but tariffs and investing.
This is certainly a time when a lot of our stackers are going, do, do I wanna invest into this? Are we gonna see companies make the money that they’ve made before? Because people are gonna buy less stuff. So a company stock is gonna go lower. We need some framing here. Godfather, we, we, we need some, we need some help on the investing side.
How do we think about this in our head? So we have the courage to keep doing what we know is right.
[00:26:50] JL Collins: Okay. So, uh, as we sit here recording today, looking at what the market was about to do as it opened, the tariffs were announced last night, and the market is set to take a major, major drop. What it does throughout the day, we don’t know yet.Personally, I am very uncomfortable with the idea of tariffs. I’m very uncomfortable with them working out well for the economy, for the country in general. I could be wrong. I mean, there have been times in history where they have, but famously they were one of the things that drove us into the Great Depression in the 1930s.
So it’s kind of a scary thing, but one of my basic principles is that I have no idea what the short-term future holds. I’m reminded of Covid. When Covid happened, of course the entire economy shut down for a period of time. There was a crash that took the market down about 33% as I recall. And I was flooded with people saying, jail, we get it.
That we should tie ourselves to the mast. And that, you know, stock market, uh, plunges are, are a matter. Of course, they’re part of the process, which is true, but this time is surely different because this time it’s a pandemic. This time people are dying. And my response to that is, everything that triggers a market collapse is something different, something unique.
So yes, every time is different, and it’s certainly tragic that in this time people are dying. But in terms of the long-term effect, it’s not different at all. The market will recover and it will go on to greater heights. I had no idea by the way that the market would do that as quickly as it did very fast.
Covid. Oh, and you saw some
[00:28:42] Joe: of the pros, j I’m sure you read about this, some of the pros got caught up in it and lost not just their money, but lost money for clients that believed in them. [00:28:51] JL Collins: Oh, absolutely. I, it was stunning how quickly it turned around, and I certainly didn’t anticipate that. In fact, I was anticipating it going lower, and I had planned to move all of my bonds into the stock market to take advantage of those lower prices.And I had arbitrarily set, I don’t, I wanna say maybe a 40% decline to do that, and it, it just didn’t get there. So I miss the opportunity. So, uh, back to today, uh, you know, I wrote a blog post between the election and the inauguration saying that, you know, should you change anything with the Trump presidency, love him, or, or lo them, you know, and it seems to be it’s one or the other these days.
Trump is gonna be a disruptive force. So should you go to cash? Should you do something like that? My answer in that blog post, which I stick by as we sit here today, is, no, it doesn’t change the way I invest. Now. I don’t know where the market goes from here. It may very well get very ugly, and by the time this is released and people are listening, they’ll, they’ll have a better idea, I suppose, but I don’t care because it might not get ugly, but even if it gets ugly, it’s going to recover.
And that’s the key thing. Whether the market makes you wealthy or leaves you bleeding at the side of the road, depends not on what you do when it’s going up, because that’s easy and that that makes you wealthier. It’s what you do when it goes down. And if you panic and sell when it’s down, it’s very difficult to pull the trigger to get back in.
Ask me how. I know that’s one of the many mistakes you alluded to that I’ve made in my past. So the best thing to do is stay the course, keep investing. If you’re building your wealth, keep investing, you’re now buying those shares on sale, and eventually when it turns, you will be richly rewarded. And if someday, by the way, I’m wrong about that, things will have gone so bad that where your money is invested will no longer be an issue at all.
[00:30:53] Joe: That I think for me is the magic of, uh. Investing in the total stock market too. ’cause all you’re betting is that the economy’s gonna continue. That’s the only bet. The only bet. And that’s not a tough bet. Yeah. And to your point, if the economy goes fubar around the world, well then your money didn’t matter. [00:31:10] JL Collins: Right. So yeah. Better to find your cave. You’re basically betting on the future of the United States and frankly the world. And frankly the world because yes, because it is tied together, but specifically the United States, and there are people, by the way, who think that the country’s going to hell in a hand basket and, and that the end is here.And if you think that I don’t agree with that, and for lots of reasons we can discuss. But if you think that, obviously you don’t want to follow my, my approach because my approach is betting that the country is going to continue to do well and prosper. And even if the country is not in as dominant a position as it’s enjoyed for the last a hundred years, still doesn’t mean we can’t.
Prosper and do well, especially as investors.
[00:31:59] Joe: It’s just calming hearing you talk about it. Even as a guy who’s been there as long as I’ve been there, it’s, it’s, it’s very calming. Maybe it’s your vocal tenor jail. I don’t know. Just talk us to sleep when everybody’s nervous. [00:32:09] JL Collins: Yeah. [00:32:10] Joe: I wanna focus one more thing.You worry about a lot that people don’t necessarily know you for, but I know that, you know is important. Let’s talk to some of our stackers that are in the withdrawal years. Mm-hmm. Right? They’re withdrawing their money. How do you think about, you know, there’s a lot of attention given to accumulating.
There’s a lot of tension given to where to stuff money away. I. But when you flip that switch and now you want to live on this, this, uh, mountain of cash that you’ve created, what’s the j Collins strategy? What’s the simple path to using your wealth
[00:32:45] JL Collins: mechanically? It’s very simple. I, I, uh, for me at least, I made the shift index funds fairly late in life.You know, that’s again, part of the mistakes that you were alluding to earlier. And so when I retired from my corporate job, which would’ve been 2011, and started living on the portfolio, then I simply looked at the, the various individual stocks that I still had. The cats are what I thought of as the cats and dogs.
And I began selling them off. I mean, the first thing I did is if I had a, a gain in them, I sold them, and then I took the equivalent number that had losses in them and sold them to offset that gain. So. It’s not a taxable event if it was in the little tax
[00:33:29] Joe: efficiency. Yeah. [00:33:30] JL Collins: Right. And then if I had remaining stocks that had gains, I sold them a little bit at a time.And that’s what I lived on initially. And then after that, mechanically, my daughter’s a good example of this because she, uh, just turned 33 and she left her corporate job last fall and is now, uh, living on her portfolio. That means that she went from all V-T-S-A-X to adding V-B-T-L-X bonds. If I remember correctly, she got about 25% in bonds.
She wants to pull 4% of that classic 4%, uh, rule thing. So the first thing you do is you say, okay, you, she’s with Vanguard, but you can do this with any brokerage. You tell them, usually with a couple of clicks on your computer screen, I now want my dividends rather than reinvest it, which they had been. I want my.
Dividends and interest from the bond fund and from V-T-S-A-X. I want you to send that now to my, to my bank account. That’s a certain amount of that 4%, depending on, because bonds have more of an interest rate than the stocks do. And then you look at, okay, what is the shortfall between that and getting up to the 4%?
And you are gonna be selling shares probably of your B-T-S-A-X, but sometimes they’re your bonds, depending on what the market does. And keeping, keeping that balance rate. And you just reach out to Vanguard either whenever you need the money and say, sell this many shares. Or you can set it up to automatically sell a certain number of shares every month or every quarter, whatever you wanna do.
So that mechanically, it’s really pretty simple. You just decide how much money you wanna withdraw, take your dividends and and interest first, and then figure out how many shares you have to sell. Uh, I prefer just selling them when, when you need to because your expenses are probably gonna vary.
[00:35:27] Joe: I like that too, because I tend to think that we prognosticate too much on where the market’s gonna go and trying to time it out.We’re always fricking wrong.
[00:35:35] JL Collins: Yeah. Well, right. I somebody once said, you know, the market will do whatever it needs to do to embarrass the most people, [00:35:42] Joe: but especially Joe Cel Cihi. [00:35:44] JL Collins: Well, and, and yeah. But you come in second to me, pal. [00:35:51] Joe: Well, let’s talk about psychologically though, because you know, as well as anybody, that second half of your strategy selling off shares is always the part that gives people a little bit of consternation.Right. Is my money gonna last?
[00:36:02] JL Collins: Yeah, we kind of talked about this a little bit already, but, but, uh, you know, Vanguard and some of the other big brokerages have done some interesting research and what they found is I. And we of course, are talking to a group of people who, like my daughter may be early retired, but traditionally, of course, it’s older people and, and the brokerage firms found that older people actually tend not to spend their assets.Hmm. They don’t actually spend it down. So they continue, if they’ve accumulated large numbers of assets, they’ve been fairly frugal and they continue that lifestyle. As I alluded to earlier in my mind, there’s nothing wrong with that. If you are happy and living that lifestyle, you shouldn’t feel compelled to go out and spend more money for the sake of spending more money.
But if you’ve accumulated a fair amount of money and there are things that you would like to do, you would like to go to Greece, you would like to buy a new car, you would like to go on a cruise, you would like to pay for your grandchildren’s college, whatever it might be. If there are those things and you are not doing those things because you are afraid.
Then I think you’re making a mistake and you should loosen up. One of my favorite parts about the new edition of the book is I’ve included a case study about, and I was asked in interview if, if Tom’s a real guy and he is a real guy.
[00:37:26] Joe: Well, and Tom’s a Detroit guy, so he is a buddy of [00:37:28] JL Collins: mine. Yeah. He’s a Michigan guy, a Detroit guy, born and bred.Tom, uh, is a couple years older than I am, but he arrived at the age of 62. Um, multiple divorces, bankrupt, house foreclosed. Tom lost everything. The only thing he managed to hang onto is he had an anti-gun collection and he managed to convince the court to let him keep that. But he at an old age where he was essentially unemployed and he’d been an advertising agency guy.
Unemployable in that field. You know, he’s unemployed, bankrupt, homeless. He rebuilt because like the monk in our story that we began with, it really doesn’t take very much to hold Bo body and soul together. So Tom started drawing his, uh, social security a little bit early. He had a small pension from one of the companies that he had worked for.
And then he went and found himself a job on the, um, what is the Henry Ford Museum has a Oh, nice. Yeah. Yeah. They have a farm attached to it.
[00:38:32] Joe: Yeah. The whole part of Greenfield Village. Yeah, [00:38:34] JL Collins: Greenfield Village. That’s what I was trying to think of. And so Tom is now a, he works in the farm part of that. And, you know, these are people who dress up in period clothes.They do actual farm work, but then they tell visitors how things were done in the old days. What, so Tom has a physical job. He’s out in the fresh air. He’s active, he’s healthy. He’s, Tom’s probably the single happiest human being I know. And Tom has had the worst financial experience of anybody I personally know, especially to have arrived at that age.
I love that story because. I think a lot of Americans should be worried, a whole lot more worried about their financial situation than they are. But the kind of people who are listening to us today are not those people. If you’re listening to this podcast, if you’re reading my book, then you already have the awareness that is going to, is gonna see you through to the end.
You are gonna be fine. I mean, unless things completely collapse, in which case nobody’s gonna be fine. You are going to be fine. So I would say kinda lighten up. Uh, you know, I, I listened to these conversations about is 4% too much to withdraw? You know, maybe it should be 3.92%, or people don’t know this. If you’re not
[00:39:53] Joe: watching this.I almost just spit up my, I I did spit up my coffee when you said that. Oh my God. You’re about to do the rant. I don’t wanna stop you, but you’re about to do the rant. That’s a Joe Saul-Sehy rant. So keep going, brother. Come on. Bring it. Oh, okay.
[00:40:03] JL Collins: Well, yeah, I mean, bring mean that I, if your, your audience has already heard it, I’ll, I’ll do the, oh, no, no, [00:40:07] Joe: no, no, no.I don’t know if they’ve heard it from me or not, but I love this rant. I think, I think I know where you’re going, but let’s go.
[00:40:12] JL Collins: Well, here’s my extra spin on it. So I, I don’t know if this is true, but it should be true. Right? Evidently, according to the story, uh, about four or 500 years ago, theologians were having serious discussions.Serious discussions, deep discussions about how many angels could dance on the head of a pin.
That’s kind of how I see. That’s kind of how I see this debate as to whether it should be 2.98 or 3.62. You know, just, just stop. First of all, you’re not gonna set it and forget it. At any given withdrawal rate. You’re gonna pay attention because yes, occasionally, 4% of the time, actually statistics indicate 4% will not, will not work.
You’ll run outta money. So you don’t want that to happen. But the thing that people forget if you look at the Trinity study is that a huge amount of the time, not only does your money last, it grows to enormous proportions, right? Your million dollars that you started with is suddenly after spending 4% a year for 30 years is worth $15 million.
So that’s why I say never said it and forget it for two reasons. You don’t want any unlikely event that things really turn against you. You don’t wanna run outta money. You’re gonna want to adjust some things along the way, but also in the much more likely event that your money grows and grows, you’re gonna wanna enjoy that money or at least have the potential to enjoy that money.
So you need to pay attention. And other than that, don’t worry about it. Same thing I say, by the way. I’ll have people who will come to me and say, you know, jl, I’m in this soul crushing job. Uh, I’ve got a million dollars set aside, but I need $50,000 a year to, to live on. And so I’m grinding it out to, to add to the portfolio so that I get up to that 50,000 to 4% and ’cause you know, that’s 5% of my million.
I said, man, if you’re in a soul crushing job, you know what? According to the Trinity study, 5%, it works about 87% of the time. I’m gonna take those odds to get out of that soul crushing job every day of the week. And then the second question I say is, do you think that you could figure out a way. As smart as you are, and you gotta be pretty smart and pretty well organized and have your act together to get to this point.
Do you think you could figure out a way to accumulate, earn an extra 10 grand during the course of a year? I have yet to have anybody say, no, I don’t think I could do that. You know, so I, again, lighten up. You’re probably almost certainly gonna gonna be fine if you’re following this path. If you’re listening to Stacking Benjamins,
[00:42:57] Joe: I wanna just, uh, put this on pause, come across the cart table and give you a big, giant hug.Man, I had this rant on afford anything. People were asking about withdrawal rates. I’m like, I, I hate that we start there in this commute. Why do we start there? Why do we start with what’s gonna make us happy? What’s gonna give us more life and then see if I can afford that. And to your point, the soul crushing job, why don’t I get out of there?
That’s job, right? I feel, I feel like we over discuss money and we under appreciate. The finite resource, which is time. We don’t appreciate the finite amount of time we have. And so we do this stupidity to have more money.
[00:43:36] JL Collins: Sorry. Yeah, no, I, I a hundred percent agree. And the only caveat I put to that is sometimes when people shift the conversation to time, it becomes, well, spend more money.Spend more money. Because that’s how you make yourself happy. Right? And I, I object to that. It’s a lie. A it’s a lie. Yeah. Anybody who thinks that spending money is gonna make them happy, by definition is gonna be severely disappointed.
[00:43:59] Joe: I heard a guy tell me once, JL he told me, he goes, you would see a lot more happy multi-millionaires.And whenever you see these multi-millionaires in the media, three quarters of ’em are still miserable. They got tons of money and they’re still miserable.
[00:44:12] JL Collins: Yeah. There is not an equivalent. Now, to be clear, there are times when buying things can make your life better. I alluded to, you know, I fly first class.Not actually to make my life better, not flying at all would make my life better, but just to make the flying slightly less painful, not worse, right? But, but, but, but that does, that does make it a little bit better. So yeah, by all means, spend money to make your life better, but don’t spend money for the sake of spending money, thinking somehow it’s gonna make you happier, just because some guru suggests that you should.
[00:44:45] Joe: The book is of course, the simple Path to Wealth. All new, updated, you heard about the case studies, the numbers have all been updated in the book. The links to resources have been everything. You worked on this project with your daughter jail, which I thought was pretty kick ass. [00:45:01] JL Collins: Uh, that was probably the best part about this project for me is, and by virtue of working on it with her.I mean, I knew that she was following the path, but I didn’t realize how deeply she understood the work. And that was extraordinarily gratifying to come across. And it was, you know, it was a fun thing for my daughter and I have always had a close relationship and this was just one more great fun thing to do together.
The other thing that’s in the book, that’s new as an FAQ, since the book came out originally 10 years ago, there of course have been a lot of questions. And sure, this has given me an opportunity to address some of those, and some of the questions can at least simply refer back to sections of the book, but some of them are topics that are not covered in the narrative in the book, and that gives me an opportunity to do that.
[00:45:49] Joe: Well, congratulations on the staying power of this work. Obviously it’s well deserved. We recommend it all the time, and it’s available everywhere yesterday. Thank you so much for mentoring our stackers today, JLI super appreciate you and everything you do. [00:46:04] JL Collins: Hey, it’s an honor to be here. I really appreciate the invitation.I had a blast, and I hope the people listening enjoy it too.
[00:46:16] Doug: Hey there, stackers. I’m Joe’s mom’s neighbor, Doug, and, well, I mean this. It’s a little embarrassing, you know, while she covered it up well, Joe’s mom thought our guest was Jackie Collins, not JL Collins, Jackie Collins. When I said author in great book, I mean, you can, you can see how an older person might just hear what she wants to hear.What’s amazing is how she’ll totally miss us asking for more cake, but she can hear us complaining about having to wash windows from a mile away. We weren’t talking about you, ma. God, we were kind of talking about her. See what I mean? Incredible. Modern science has yet to figure out how that works. But since she thought we were welcoming Jackie Collins today, let’s ask about her famous sister.
Who is Jackie Collins’ famous sister. I’ll be back right after I go change over the laundry. Joe’s mom hears that buzzer loud and clear every time. You gotta stay ahead of her.
Hey there, stackers. I’m the guy who is as smooth as a good fabric softener. Joe’s mom’s neighbor, Doug Jackie Collins, wrote a total of 32 novels, all of which appeared on the New York Times Bestseller list. They sold all of ’em. All of them. I mean, holy Talk, Batten a thousand. She is. They sold more than 500 million copies cumulatively and have been translated into 40 languages.
But she also had a very famous sister who was named, well, that was today’s trivia question, wasn’t it? What was her name? It was none other than the actress Joan Collins and now two guys who emulate Jackie Collins by bringing the romance to Money Talk. That kind of gives me the ick, Joe and og.
[00:48:14] Joe: This isn’t romantic. This isn’t our, I mean, welcome to the Money Romance podcast. Right. [00:48:20] Doug: You guys are OG embracing while you’re talking. No. [00:48:23] Joe: Welcome to the smooth sounds. I think. [00:48:25] Doug: I think OG would punch you in the throat if you tried to hug him while you talked. Just hug him, period. Let alone talk about money.What was it?
[00:48:33] Joe: Old Chill called love lines. Love lines. With, uh, Dr. Drew and Dr. Drew. Yeah, [00:48:38] Doug: yeah, [00:48:38] Joe: yeah. We could have like money, money lines, money, love lines. That sounds weird. You get all the prostitutes calling us. It’s gotta be, gotta gotta be a name there. Uh, big thanks to j Collins for stopping by. And you know what, og, keep it simple, man.Keep it simple. I think that book, it was been so popular for a reason. So many people, when they first start out, down this path of life, freak out about the budget. Keep it simple. Freak out about the lifestyle and keeping up with their, you know, the Joneses. Keep that simple. Don’t worry about the Joneses.
And I love that parable. You know, you can learn early on to live on less and then everything that you buy is a gift. Or you live on, learn to live on a bunch growing up. And then when you don’t have a bunch,
[00:49:27] OG: you work harder, [00:49:27] Joe: you feel left out, you’re like, whoa, wait a minute. Everything in moderation. How’s that?It is a, a great place to start and if you’ve got a graduate in your life, you know, after you buy them stacked super serious guy to modern money management, go buy simple pastor wealth. It’s just shameless. Wow. It’s weird. It was sitting right here. The book was sitting right here. That’s so weird. Weird.
All right. You know what? Let’s help out one of our stackers who said, you know what? I better call Saul. See Hi in og. This is the segment of the show where we help a stacker. Indeed. If you are in need and would like OG and I, and even Doug to dive into your question, head to Stacking Benjamins dot com slash voicemail, and you can be as cool as Mike is because we’re gonna answer Mike’s question right now.
[00:50:16] caller: Hey, Joe and og. This is Mike. Loved meeting you fellows in New York, though you were hard to recognize in person, given how ridiculously handsome you guys are in real life. My question is about portfolio allocation. I use the portfolio visualizer tool, attended Joe’s tutorial, but I’m still unsure about the right approach.Even with a 30% max weight allocation to any given asset class, the results tell me I should be 30% small cap value for my long-term growth portfolio. Is that too high? I feel like I can handle the wild rollercoaster ride. I’ve heard Joe mention before that he uses eight asset classes in his portfolio, but I’m not sure which and in what percentages.
It would be helpful for me to get your thoughts on the right amount to allocate to each asset class for long-term growth. This is money 20 plus years out, so maybe 30% small cap value works. Oh, and Doug, you would’ve had my vote in 2028 until I heard you comparing a little cold weather to war. PTSD. Grow up here, bro.
Come on.
[00:51:28] Doug: You just made the list, pal. [00:51:31] Joe: And, and Mike, by the way, I love, love Doug’s eye roll. When you call this ridiculously handsome, like that was a monster eye roll. It’s a good thing. [00:51:40] Doug: I was on mute ’cause I gagged a little bit too from Doug. [00:51:42] Joe: All right, Mike, I’m gonna take the beginning part of this ’cause you’re asking specific questions to the training that I did.We’ll link to that training in our show notes, but the quick answer is. I may have said I use eight, I actually use nine different asset classes when I am filling that tool with what asset classes I want to use. And you can change these because like OG has said in the past, and we’ll get his take here in just a minute, but if you can’t control the volatility, which it sounds like you can, you can also put bonds in there.
But I don’t use bonds at all. At this stage in my life. I’m using stock. So it is large growth, large value, mid growth, mid value, small growth, small value international emerging markets, and REITs. So there’s the nine asset classes that I use in mine. Now, for some people, when they get into retirement and they want less volatility, they’ll put in bonds.
So then I’ll add treasuries, I’ll put in tips, I’ll put in corporate bonds, high yield bonds. I even, you know, international bonds kind of gimme some eye roll, but I may put that in. Uh, notice you didn’t hear commodities. You didn’t hear gold in the allocation. Now remember when I said 30%, 30% is an artificial cap that I put on that tool?
Because what that tool wants to do because of recency bias is give you a ton of large cap growth. It’s gonna tell you to put in 70% large cap. I don’t know, A CFP. A CAP and OG might disagree with me here who’d say, yeah, just, you know, when you’re managing money beyond the simple path and you’re getting more technical, that 70 percent’s a good idea.
You’ll also see because of the recency bias of that tool, that you’ll also see, you know, an under allocation to international stocks. And so I keep international in my portfolio and that’s served me very well. So there’s some things that I will do personally to change up what the tool does. But my goal overall, my goal overall is to use a mix of assets that it’s gonna best get me to the goal.
And I think og, let’s turn away from his question about my tutorial more toward this. 30% of your money in small company value stocks, you think that’s too heavy?
[00:54:09] OG: I think this is illustrating the problem with any worksheet, whether it’s a excel hundred percent an asset allocation tool, a chat, GPT, and I mean, whatever you want to use when you put in constraints, it’s gonna give you the result based on.Whatever period of time you’re feel like looking at. If you say, well consider the last quarter century and give me a good asset allocation versus consider the past four years, or consider the last hundred years, right? I mean it’s gonna be different. But this is a problem that I think with all of these tools is no matter what you put in, I can find something that’s better.
No matter what I put in, you can find something that’s better. A hundred percent. ’cause you can say like, well, hold on a second. Why would you only cap it at 30% small cap? Why didn’t you do 37% small cap value? Right? Right, right. Like, what the heck? I got a better return. If you look at just different asset classes, Joe uses mid midcap.
I don’t think that’s necessary. The correlation of mid and small is the same. So just I take that out, but conceptually we’re on the same page. But if you look at the historical data of big companies and small companies, you find that small companies do better and they have to, like, they logically have to, and I’ve said this in different examples over time, but.
Think about your brother-in-law who’s starting an ice cream shop in the vacation town, right? And he says, Hey, I think we’re gonna sell a lot of ice cream. I think we should be partners. I think I can get you, you know, eight to 10% a year return. I just need a hundred grand to get started, and you go eight to 10.
What are you talking about? My V-T-S-A-X account does eight to 10. My s and p 500 fund does. Eight to 10. He goes, okay, all right, all right, all right. I see what you’re saying. I’ll get you 12. You go 12. My small cap value does 13 and a half. Why would I, you know, the, the risk and the return is commensurate.
You know, you, the greater amount of risk that you have, the greater amount of return that you need to have in order for it to be worthwhile. So when you have a bunch of companies that are brand new and just getting started, even though they’re publicly traded, they’re still, you know, small companies, the return expectation has to be higher.
Just makes sense. And when you’ve got companies that have been around a long time and you say, well, what kind of great returns can Proctor and Gamble get me? You go, eh, I mean, it’s still gonna grow, but they’re not developing new toilet paper anytime soon. Or new dish soap. It’s just, you know, they’ve been doing this for a hundred years.
So you get a return commensurate with that. You say, well how about if I want my money sitting in a, in, in a guaranteed location that can access immediately without any constraints whatsoever, and it’s always gonna be the same amount of money every time. That’s a different level of return, right? That’s your checking account.
You get no return for that, basically. So you can, can see how this makes sense. So whatever constraints you put on are self-inflicted. If you said, Hey, hold on, what is the absolute best portfolio for the next 25 years based on a hundred years worth of data? A hundred percent small cap value. That’s the best portfolio.
That’s the best portfolio. Actually, that’s where I was going next a hundred percent. You know, buying your own company and running your own thing, that’s probably better because you higher return potential a hundred percent. Create your own Amazon a hundred percent more risk. Say, well, hold on. Alright, so why?
Why don’t we all put our money in small cap of value? Because every so often it goes down two thirds. So you put in a million bucks and you expect it to grow at 13% a year because that’s what it’s done for the last a hundred years on average. But on occasion it’s gonna lose two thirds of its value. So you put in a million, it goes down to 300,000 and you stay in small cap value.
This is what, this is what people miss on this whole piece about asset allocation, staying in the course and all that sort of stuff. Just look at history. When you look at it at a single asset class or a single idea like recently technology as an example. Ai, all the rage I. Is it up and coming? Yes. Is it providing growth?
Absolutely. But it can also flatline for a long, long, long time. Nasdaq is a perfect example of this. In my career, in Joe’s career, in Doug’s career as a working man, the freaking Nasdaq went up to 5,000, lost 78% of its value, and took 13 years to get back to even money. There is not a soul on this planet that that put in a million bucks, watched it go down, watched it go down to 200,000.
Can you imagine that? And went, yeah, I’m just gonna stay the course. And for 13 effing years said, I’m just gonna stay the course. I’m just gonna stay the course. I’m just gonna stay the course. I’m just gonna stay the course. While everything else, every other thing in the entire universe went up at 10% a year and your account went down 78% and then took 13 years to get back to even money.
So that now you can have a good, you know, seven, eight year time periods is whatever. I guess it’s been 10 years now. But my point is, is that. Any singular idea whether small cap value, large cap tech inflation bonds from two years ago. Oh, they’re paying 9%, but dump all your money in I bonds. That’s great.
Yeah, it was great for six months. You’re right. You know, then it stopped being great. I talk to people every week that I look and I go, do you still have your I Bonds? Yeah, yeah, yeah. I still got my eye on. So like, well, they’re paying two and money market. Whatcha doing, paying five? You know, keep up, keep up.
We’re onto the next thing. So anytime you put a constraint in yourself, identifying where your limitation’s gonna be. If you said, well, and I’m sure Joe, I didn’t go to your training, but I’m sure you didn’t say allow zero to a hundred percent in every single asset class because it will go 50% small cap value, 50% emerging market value.
Yeah. Those are the biggest return opportunities. Honestly,
[00:59:49] Joe: if you go far enough right on the efficient frontier, it just, it does what it, it is meant to do. How do you make more money diversify less? That’s how you make more money. Yeah. But what goes up, as you get that higher return, the standard deviation goes up, wild swings.You start getting these outcomes, incredible swings. This is the reason, by the way, that I put constraints on it. Not because it’s more efficient, but because of two risks that we talked about a few weeks ago on the show. We had a great round table discussion about all the different types of risk. And one is the risk that your horizon, your time horizon changes.
If we go all small cap value and that market’s down 78, let’s say that the small cap market goes down 78%. I mean, small cap value
[01:00:33] OG: has been so underperforming for so long. It’s one of those things that you just go, well, I don’t, it’s, it’s like international at this point. It’s like, yeah, just have it. It’s never gonna do good again.And then it does in very short burst of time,
[01:00:46] Joe: it does incredibly well. But if the horizon changes and all of a sudden I need the money now, I. W while it’s through the floor, og. Well then I’ve got a problem. So to protect, for me against horizon risk is why I cap an individual asset class at 30%. So I get enough diversification that if for some reason the w worst happens and I need some of that money, I’m now, I’m only going stocks.I’m not putting in any bonds because I think the risk of my horizon changing with my long-term money is so low. Mm-hmm. Because I have an emergency fund, I have separate buckets of money for the projects and the trips that I wanna take. I have a good plan for that and other places I can take money, but I still just don’t wanna go over 30 for that reason.
And international, to your point, OG has underperformed for so long, that is just a belief of mine. Reversion to the mean. So the, the science of the efficient frontier in this tool. When I look at the last 20 years, it says, nuh no. But the problem is what Jason Zweig talked about on Monday Show, go back and listen to Monday show and what we know.
And that’s that time period before 20 years from now, when you change that timeframe, it was all international. International kicked the US’ butt. So for me then I put in, I want at least 15. I’m gonna put in 15. Even though it tells me, tells me no. Now the cool thing and the reason why I like this, the reason I like this is I know what my constraints are because the biggest thing that I’m protecting against by knowing a little bit about the efficient frontier and about how this works.
I am affecting my behavior. I know why I did it. I know exactly why I’m there. I know, I know why I capped it at 30% and just, you don’t have to know everything about everything. But when you know a little bit about this stuff and it’s not that hard to learn, your money gets stickier. Then it is. If you throw it in a target date fund and then you start doing what you and I report on all the time, og, you start day trading your target date fund.
Like, why the hell am I gonna move out of this target date fund?
[01:02:51] OG: Well, and that’s why when you work from a financial planning standpoint first, and you find out, okay, I’ve saved some money, what does it have to do? You know, what do I have to save? I, I talked about this on Monday too. It’s like, it’s just this fun exercise of going, well, if I save a thousand a month for the next 10 years, how much do I have if I save it for 20 years, if I save it for 50 years, if it grows at 8%, if it grows at nine, if it grows at 10, the difference between eight, nine, and 10 in a year from now is nothing.Over 50 years, huge is, is tens of millions of dollars different. That helps. But when you are building your asset allocation from the standpoint of what kind of rate of return do I need, you can start adding the, the little bit of flavors to the VTIs of the world to see how that affects. And I think this is where a tool like Portfolio Visualizer helps.
It’s not picking the right asset allocation. You can’t put it into chat EPT or Claude or Perplexity or Portfolio visualizer. Give me the best asset allocation because it’s always gonna have a constraint either in the program by the designer, or you’re gonna say, yeah, I want, but gimme the best, but cap it at 15% international.
Why 15 and not 17 beats the hell outta me. I just picked 15. Right? That’s just the number you picked. There’s no science behind your picking of that. Right? But we’re, when you start putting that in, you can see the effect. Of what happens when you add different asset classes to your mix. You know, I start with all s and p, what happens if I add, Paul Merriman has this in his 10 fund portfolio report, you know, single.
I love that. You know, so
[01:04:29] Joe: then I did this and I accidentally made more money, then I did this and I accidentally made more. [01:04:33] OG: So I, uh, I copied it into a, into an Apple note on my phone once because I was like, oh, I wanna reference this, but I can never find the actual article anymore. So if somebody can find it, it’s great.But anyways, um, oh yeah, I’ll send
[01:04:43] Joe: it to you because I’ve got it. [01:04:45] OG: Is it updated? I’ve got, I feel like he updates it every year. But anyways, nevertheless, my point is, is that you can see the impact of adding those things, how it affects your return, but also how it affects the variability of your return. If you took a stats class in college, you get the idea of standard deviation and kind of, you know, you go out to two, you know, that’s a 95 ish percent of the returns should be somewhere in that range.And then to your point, I think it helps you be a little bit more comfortable in the. In the ups and downs of what’s happening. It gives you a sense of what’s normal. Because I think, you know, you look at that portfolio and you say, all right, this portfolio is gonna average or should average 8% a year with 8% standard deviation.
So what does that tell me? That tells me zero to 16 is two out of every three years, minus eight to plus 24 is 95% of the time, minus 16 to plus 30 is 99 per 97%, whatever the number is. So when you see a minus 15 on your statement, you go, okay, then we’re still Yeah, we’re, I’m hanging in there. It’s in the range of expect expectations and like I’ve said before, people make mistakes with their money when their expectations are not aligned with what’s actually likely to happen.
[01:05:57] Joe: That is why I love knowing that we just got finished with our 10 session training. We do at the start of every year. People can, um, can sign, we’ll talk about it late in the year, but we call ’em the success sessions. 10 90 minute sessions. And in that class, OG, we really dive deep into this. And the mistake I found that people in my class were making before the class, and I think this is the mistake people in our community make, is where they wanna start.They wanna start building their portfolio from what’s best and what’s best. To your point, this whole discussion is so subjective and you chase your tail so damn much and you second guess yourself so damn much. It is much better to start this whole process, including the efficient frontier. Like if you go into the efficient frontier asking what’s best to your point, it’s gonna be a mess.
It’s just a mess. There. There is
[01:06:47] OG: there. I mean, again, whatever you say, I can find something better. It is a mess. Thousand percent. [01:06:52] Joe: If you go to the efficient frontier though, with this is my goal and this is when I need the money. Then you look at the different asset classes it gives you and you go, that fits the timeframe.That fits the timeframe. This doesn’t fit the timeframe, this doesn’t fit, this doesn’t fit. Then you feed it in there and then you go, you know what? I don’t want to, now you say that, you know, 15% not based on any science. It is based on the fact that I’ve baked a cake before. You know what I mean? So I’m like, 15 is a number that’s in the, that’s in the uh, uh, notice how
[01:07:21] OG: you said he baked a cake and that he didn’t bake frosting.See, Doug,
[01:07:25] Joe: I had baked a cake so I could slather frosting on it, but because I’ve done it before, that’s why I have constraints of 15 and 30. It, it is nothing more than experience, which goes back to Jason’s week. ’cause you also gotta watch out for what you think your experience teaches you. But that’s a whole different discussion.I take that experience then and I go, okay, these historically have been asset classes that. Help me. How do I put these into something more scientific than just V-T-S-A-X? That’s gonna get me much closer to my goal. And if I start from that point, I’m not disappointed with, and, and I’m not searching for the perfect solution.
It was really cool to watch the students in this class get the aha, go. Oh, oh yeah, I, I truly have to begin with my goal. Begin with my goal, and build the portfolio based on the goal. Any other way of doing, it’s gonna just drive you crazy. Mike, thanks so much for the question. If you’ve got a question for us, head to Stacking Benjamins dot com slash voicemail and you can be as cool as Mike.
Um,
[01:08:30] Doug: and [01:08:30] Joe: maybe Doug. [01:08:30] Doug: Maybe Doug, you can win Mike’s vote back. I feel like I need to stand up for the pride of Northern Michigan. That was, that was a pretty big swipe. He just took at us, at US. All of Northern Michigan. All yeah. All of Northern Michigan. No, we, we won’t let you in despite you wearing your little tourist shirt grow up.Uh, yeah. I mean, okay, fine. I could go on and on. A little cold weather. It wasn’t even the temperature that was the problem. It wasn’t even cold.
[01:09:00] Joe: We have meandered out onto the back porch, which is where we finish every show talking about the Stacky Benjamins community and Doug, on, uh, Monday you promised us that you had a review that you wanted to read.Yeah. From, uh, Spider-Man.
[01:09:12] Doug: How big are we? How popular are we? We got Spider-Man to review us. And here’s what I also figured out. Spider-Man. His birthday is either March 14th or he’s from St. Louis because this review comes from Spidey 3 1 4. And, uh, Spiderman says, Joe brings the positive side of personal finance.OG punches you in the face with logic, so you stop making stupid mistakes. And, oh, he didn’t even smile. He is like, yeah, Uhhuh and Doug. And, and Doug is the captain steering the ship with his hilarious trivia. If you want a personal finance show that keeps people engaged with their zany antics, but also brings real actionable finance education, give them a listen.
Don’t sleep on the round table discussions. They’d give a well-rounded perspective on the topic of the day all around. Great podcast. Thanks Spider-Man. Wow. Wow. Mom’s got that one on
[01:10:08] Joe: the fridge. Mm-hmm. [01:10:10] Doug: That’s a good one. Doug steering the ship. [01:10:12] Joe: We also had a great discussion because during our greatest hits week a couple weeks ago, we played an episode, man, that still rocks today about, I.Advice for people new to investing or for recent graduates. So I asked people in the basement, Doug, what, um, what their best advice would be. Their best advice would be either money or career for a graduate. And we got some great ones, which a lot of people RIFed on this. Jennifer said, start your 401k, 4 0 3 B, whatever your plan is on the first day of your job.
She said that increase it by 1% every year until you get to the company match. And actually, that was super sized by Mike. Mike actually said, if it’s your first full job, just put 15% away. Mm-hmm. Immediately.
[01:10:55] Doug: Yeah. Yeah. I’m with, I mean, I appreciate Jennifer jumping in, but I’m kind of with Mike because you don’t know any different at that point, so why not start out a little more aggressive and that becomes the norm really fast. [01:11:07] Joe: And to your point there as well, Doug, which is if you get paid every two weeks, John says, take those 26 pays a year, but budget your life on 24. Oh yeah. Budget your life as if you’re getting 24 paycheck, save the other two right away, and pretty quickly you’ve got your emergency fund. Mm-hmm. Which is phenomenal.To build from the beginning, Josh says to track your net worth regularly if it’s small or even negative. That helped him, he said, more than I would’ve ever known. I would think, oh gee. Tracking your net worth from the beginning. The way it helps is you just start seeing the fact that no matter what you do, it seems like you go quicker without even, you know, 10 years from now, you’re gonna run at the same speed, but the effect is getting bigger and bigger and more magnified over time.
[01:11:50] OG: I wouldn’t necessarily track net worth right away because it will feel like that snowball is taking forever to go. I, I might wanna track that on an annual basis, and maybe that’s what he means here is tracking it. You know, something like that. I think anything more frequently than that, especially early on, is probably kind of a waste.I would be much more focused on cash flow and much more focused on getting to that savings percentage. High savings percentage, whatever that needs to be. 15, 20, 20 5% out the gate to, like what Doug said, you don’t know any better. You don’t have any expectation or what, what life really costs or what you’re, you know, you’re just used to living on 200 bucks a month, you know, as a college kid or whatever.
[01:12:31] Joe: Yeah. [01:12:31] OG: So. Don’t buy the thing quite yet. Just wait. Don’t buy the thing quite yet. [01:12:35] Joe: And speaking of that intentionality, a couple of our stackers had great advice for graduates on intentionality. Stephanie, who was, who’s here locally in Texarkana stacker Stephanie, she, she was my favorite person ’cause she was my dental hygienist.She left that with her husband to still be my favorite person. ’cause she runs the cool local liquor store now. She, she and her husband own that place. Fantastic. On transition, Stephanie says, be intentional with how you spend your money, and more importantly, how you spend your time. Which John echoes, he says, don’t enter the workforce.
Thinking about how you can retire someday. Figure out what you wanna do and learn to enjoy work as an end to itself. I like that one.
[01:13:16] OG: Yeah. But when you’re 22, you don’t know anything about anything. Right? You don’t know what you like or don’t like. [01:13:22] Joe: You know, you like not working well and I think the piece that I like about what John’s saying, so I get where you’re maybe going, og, but what I hate is when a 24-year-old tells me how they’re part of the fire movement.You barely contributed. And I’m gonna, I’m gonna fire by the time I’m 27.
[01:13:42] OG: Mm-hmm. [01:13:43] Joe: Like it. I dunno. So you stayed [01:13:45] OG: at Four Seasons once. [01:13:49] Joe: I love Kimberly’s note about being nicer to yourself. Just do the best you can. Remember. We’re all trying to figure things out. Mm-hmm. You’re gonna walk your own path, so don’t compare yourself with others. That kind of echoes what Jail Collins said earlier and last Theresa read. Be Curious. Education doesn’t always come with a degree.Some of my best life lessons did not, can’t afford a book. Check out your local library or the Libby app. One of my favorite books and I know you, you echo this one. OG The Richest Man in Babylon.
[01:14:14] Doug: I, I like some of those kind old. Yeah. Doug. I like some of those, but it’s, when you give young people really broad advice, it feels good in the moment to hear that when you’re a young person.But sometimes they need some of those specifics. Here’s an example, back to the very first, uh, advice you talked about from Jennifer. Yeah.
[01:14:37] Joe: Put 15% in or increase it 1% every year. One of those two. Yeah. And even [01:14:40] Doug: more than that, I’m gonna tell a story about fin turn. ’cause we, my kids in my house, we grew up talking pretty specifically, I thought about personal finance.They got excited about the notion of how little money they had to put in as like a, a high school or an 18-year-old to, you know, get a massive, just by the compounding interest to get a massive return by the time they were, you know, 35 or 40. They were pretty excited about that. So I thought we were good.
Fast forward, fin turn gets outta college. The best college Purdue. And uh, and he gets a good job. And, uh, he signs up for the, like, I think it was probably 12 to 15%, I can’t remember his percentage, but a pretty good, solid percentage. Didn’t realize he had to specify which funds he wanted to put. He just said, yeah, I’m contributing into the 401k at my work.
Didn’t realize that for like six or eight months, all that money was just going into a cash account.
[01:15:34] Joe: They didn’t default ’em into the target date fund. [01:15:36] Doug: They didn’t. If I had chimed in on that thread, that would’ve been mine, which is make sure you take that second step and say how you want your stuff invested. [01:15:44] Joe: Well get in on there, Doug. Get in there. Yeah. Yeah. Thanks to everybody in the basement. It’s another great, robust discussion. If you wanna join in on those, stacky Benjamins dot com slash basement is the direct link that gets you in, uh, Gertrude the room. Mom will ask you a few questions and then we’ll let you in.And, and by the way, I had this, uh, I, I talked about the spider Cheryl and the spider, and about how there was the spider walking across our kitchen floor. And, uh, Cheryl said to take it out instead of killing it. So I took it out. So we went out, we had a couple beers. Turns out he’s a really nice guy. He’s a web designer.
So I put that as a post in the basement and our intern Denny said, that should have stayed in your draft folder. Our intern was ragged about me. Wow. I know. I’m like, like getting bolder.
[01:16:35] Doug: These kids when the intern is like, [01:16:38] Joe: yeah, never been [01:16:39] Doug: on the job for like 10 days and she’s taking shots at her boss. I like it.I’m a fan.
[01:16:44] Joe: Uh, our interns are pretty amazing. Alright, uh, Doug, take it from here, man. Uh, what’s on our to-do list today as we wrap this up? [01:16:51] Doug: Well, Joe, first take some advice from JL Collins. Keeping it simple is the best beginning you can have in any portfolio. No need to overthink your approach to managing money.Spend your time learning to be happy on less money so you can enjoy whatever you want to spend. That’s a great place to focus. Second, using a more scientific approach to money management doesn’t have to be difficult By using just a few different investments, you can diversify your money and achieve better results.
But the big lesson, I guess, Joe’s mom got over that whole Jackie slash JL Mixup, she invited JL to stay for dinner because in her words, j L’s an absolutely kick ass mother. Yeah. Sorry about that. Kids. I’m just quoting her. At some point, we gotta remind Joe’s mom about the time she threatened to wash our mouths out with soap.
Thanks to JL Collins for joining us today. It’s about time, I gotta say those words For the updated version of the Simple Path to Wealth. We’ll include links in our show notes. This show is the property of SB podcast LLC, copyright 2025, and is created by Joe Saul-Sehy. Joe gets help from a few of our neighborhood friends.
You’ll find out about our awesome team at Stacking Benjamins dot com, along with the show notes and how you can find us on YouTube and all the usual social media spots. Come say hello. Oh yeah, and before I go, not only should you not take advice from these nerds, don’t take advice from people you don’t know.
This show is for entertainment purposes only. Before making any financial decisions, speak with a real financial advisor. I’m Joe’s Mom’s neighbor, Duggan. We’ll see you next time back here at the Stacking Benjamin Show.
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