JL Collins Simple Path To Wealth Portfolio Review and ETFs

[@OptimizedPortfolio]

If 100% VTI is the "Simple Path To Wealth Portfolio," maybe I can coin a lazy portfolio name for 100% VT.

[@scapegoatedstudiosllc]

Yo you got a good thing going. I came here after finding your website. I am glad to see you're active don't give up

[@OptimizedPortfolio]

@@scapegoatedstudiosllc Thanks, Marcus!

[@OptimizedPortfolio]

@joshsantos9965 Recognize this is just outcome bias. The observation of the unfavorable outcome has nothing to do with the rationality of the original decision to diversify globally at the time it was made. Market timing also tends to be more harmful than helpful. You might switch to 100% VTI and then we might see a decade of international stocks beating US stocks.

[@OptimizedPortfolio]

@joshsantos9965 Depends on time horizon and what you're looking to get out of a bond fund. BND is a popular one for the total US bond market.

[@jm123456789101112]

I read JL Collins’ book. He does not say that he “hates” bonds, nor does he say not to use them. He advocates the use of bonds to “smooth the ride”, as he puts it, as one nears one’s withdrawal phase.

[@OptimizedPortfolio]

jlcollinsnh.com/2014/06/10/stocks-part-xxiii-selecting-your-asset-allocation/

[@jm123456789101112]

@@OptimizedPortfolio I should have added “for those who don’t like the wild and bumpy ride” to my last sentence. Yes, his basic starting point recommendation is for 100% VTSAX or similar type fund, but he does acknowledge some studies that suggest that having up to 20% bonds can improve returns. From the link: “Some studies suggest that adding a small percentage of bonds, say 10-20%, actually outperforms 100% stocks. You can see this effect by playing with this calculator: Vanguard Retirement Nest Egg Calculator You’ll also see that adding too great a percentage of bonds begins to hurt results.” Not sure I’d interpret that as a “hatred” of bonds, but for sure, he’s all in on an aggressive stock portfolio, especially for young investors.

[@srourfamily]

this guy must read other book/ he is investing in bonds good luck

[@TallDarkStranger60]

Excellent summary. Adding some small cap and emerging markets along with STRIPS has shown to increase long-term return, reduce volatility, and increase the Sharpe ratio. Adding some STRIPS actually increases long-term return over a 100% stock-based index like VTSAX. The JL Collins argument is far too simple....or perhaps simplistic. I do agree with him that you should set your portfolio and then use dollar-cost investing to make it automatic....and never touch it until close to retirement.

[@OptimizedPortfolio]

Thanks! Indeed. I actually use STRIPS, Emerging Markets, and small cap value stocks in my own portfolio outlined here: www.optimizedportfolio.com/ginger-ale-portfolio/

[@TallDarkStranger60]

​@@OptimizedPortfolio Thanks for sharing. This is an excellent portfolio, based on modern portfolio theory and the optimized frontier. It is very similar to what I have in my portfolio, and I have been doing this for the past 25 years. Miraculously I have quietly beaten the S&P 500 over this time. Still 90/10 stocks / STRIPS. BTW, phenomenal website. Love all the lazy portfolios and how you have backtested them.

[@OptimizedPortfolio]

@@TallDarkStranger60 Thanks! Wow that's awesome! Sounds like you were ahead of the curve. And thanks for the kind words! :)

[@mmabagain]

Another problem with short term volatility it that it is often anything but short term. There have been periods where it took decades for the market to return to its previous high.

[@OptimizedPortfolio]

Indeed.

[@PassivePortfolios]

This is basically the Couch Potato Portfolio which Scott Burns created back in 1995, followed by the Bogleheads 2 Fund Portfolio which renamed Burns' initial idea. I corresponded with Burns back in 1997-1998 about adding International Index but he declined my suggestion due to the poor performance of non-US stocks. This would have created the famous Three Fund Portfolio which is widely touted nowadays as a starting point for novice investors. Burns changed his mind at some time around 2007-2008 and added non-US stocks, calling it the Margarita Portfolio. JL Collins' book while immensely readable for novices, lacks global diversification as explained by Modern Portfolio Theory.

[@OptimizedPortfolio]

Yep

[@tylersucher8653]

What do you about the VT ETF? I like it, but it’s a little too much International exposure I think. It’s about 60/40

[@OptimizedPortfolio]

I think VT is great for a one-fund solution for global stocks exposure. It's market cap weighted, which currently happens to be 60/40. There were times in the past when that was 30/70.

[@msarros1]

JL Collins gave an Interview to a British Financial advisor's KZbin channel called meaningful money and in that interview he clearly said if he was a non US citizen or younger he would invest in a global index fund vs US index fund. He also feels his daughter might change into a global index over the next 20 years.

[@Oikofugix]

Does he now recommend VT?

[@OptimizedPortfolio]

Not sure why age would be a factor in geographical diversification in equities.

[@AK-47ISTHEWAY]

​@OptimizedPortfolio Because an investor's portfolio should always have their home country index represented. After all, it makes sense to keep as much of your money in the currency with which you pay your bills. For example if you lived in Japan you would want to have a large portion of your money invested in the Japanese stock market and in Yen which is the same currency you pay your bills in over there. If you lived in France it would be the same way.

[@OptimizedPortfolio]

@@AK-47ISTHEWAY VT, Vanguard's fund for the global stock market, is 60% US stocks. That is quite well "represented." But I'd also question why you think this. Tell that to the Japanese investor in the 1990's who took 3 decades to recover. One should aim to diversify AWAY from their human capital. All this also has nothing to do with my original statement about age not being a factor of one's global equities diversification or home country bias.

[@worldnomad2301]

What about a taxable account? You do 80/20 there as well

[@JourneytoMoneyRich]

This video is a must watch as Point of View raised in this video enlightens the financial knowledge further. Also the discussion and comments are worth to read! Great Job!

[@OptimizedPortfolio]

Glad you enjoyed it!

[@mattmatt245]

What do you think about going 100% SCHD if it drops another 10% or so ?

[@JonTheDisciple]

kzbin.info/www/bejne/haWmqpKhZceKnpI

[@steve99912]

100% in one fund can't be the optimal stragedy

[@william_gear]

@@steve99912 with the exception of tqqq of course

[@OptimizedPortfolio]

Remember SCHD is basically just 100 U.S. large cap value stocks. You'd be missing a lot of the global stock market in doing so.

[@OptimizedPortfolio]

@@steve99912 Maybe a multi-asset fund like AOR, or VT for the global stock market. As always, depends on one's goal(s), time horizon, and risk tolerance. But agreed in most cases with narrowly focused funds.

[@kwonh4008]

In short, aren't JLCollins' financial points to dollar-cost average into low-cost index funds, and hold for decades? And don't pull out in a panic during market downturns?

[@OptimizedPortfolio]

Basically yea the Boglehead approach by another name.

[@kwonh4008]

@@OptimizedPortfolio Then there really isn't anything much to it. It is literally "SIMPLE". Whether it works or not, time will tell, but if you have to wait for decades, then that's really another thing to consider if you want to wait that long.

[@mr2981]

"Components" seems like an overstatement.

[@OptimizedPortfolio]

Good point

[@dietbajablast5790]

speed up to 1.25x

[@OptimizedPortfolio]

Indeed

[@gomesdiogo]

ty great video

[@OptimizedPortfolio]

Thanks!

[@MrJeffgonz]

100% VTSAX is the way 💪

[@OptimizedPortfolio]

Collins would approve.

[@papabear4066]

Bogle never advocated for international stocks. Bogle also advocated for total US stocks and total US bonds, and JL is advocating the same. Your commentary is unnecessarily derogatory towards him.

[@OptimizedPortfolio]

Sounds like authority bias to me. Thankfully Bogleheads don't just take everything these guys say as gospel. Bogle's reasons for avoiding int'l were objectively terrible and basically amounted to "the French are lazy." Collins's arguments are arguably worse and are pretty lazy and amateur. Ironically, had he been able to do so cheaply and frictionlessly at the time, Bogle would have enjoyed greater general and risk-adjusted returns over his investing lifetime had he invested globally. Bogle also later said "If there's one area to ignore my advice on, it's international stocks." He said "buy the whole haystack." That's the globe. Not 1 single country out of nearly 200 in the world... Burden of proof is on the US-only argument, which has been thoroughly refuted ad nauseam. The logic is pretty simple. I attack ideas, not people, so "unnecessarily derogatory" is entirely your opinion, and, in my opinion, is laughable.

[@srourfamily]

i disagree with you!! itis simple without study foreign stocks just invest in stocks dividends and index funds!!! good luck i have over 10000 schd shares and it is been great. wow you really like bonds!! i dont!!

[@OptimizedPortfolio]

Great

[@user-jy7yw5kw3w]

I don’t hold international either and agree with Collins Bogle and Buffet on their views that the economy is now so globalized and the us market derives and does business with the international market. Also the top stock in the international fund (vxus) is nestle. I had one of their frozen pizzas the other day and lets say I won’t be investing in the international fund due to this 😂 it was so bad. I’m a big pizza snob and that turned me off knowing their top stock can’t make a good pizza.

[@OptimizedPortfolio]

Thanks for sharing! Just remember the economy is not the stock market and vice versa. You may find my newest video on international diversification useful (first 2 min.): kzbin.info/www/bejne/n5PMemp8bthgetk

[@AK-47ISTHEWAY]

I find it funny how JL. Collins doesn't recommend international stocks, yet in 2017, the following year after his book was published, emerging market funds performed the best with over a 37% gain and emerging markets are international. There have also been many, many times in the past, where international stocks have pummeled U.S. stocks. Most people would be better off with a total world stock index fund, also known as a global fund.

[@rennaway8728]

@@AK-47ISTHEWAYit wasn’t many many times. It was twice I believe. Two ten year periods over the last 100 years where exUS beat US and it was marginally beaten each time, not trounced. Over the long term US and exUS have basically the same returns, that is why holding both makes sense, you never know when that time comes to retire which will be outperforming.

[@OptimizedPortfolio]

@@rennaway8728 Appreciate that the salient comparison is not US vs. ex-US but rather US vs. global. The latter has had greater general and risk-adjusted returns over most rolling periods historically due to the imperfect correlation between US and ex-US. US dominance is a very recent phenomenon. The US has beaten ex-US in only 2 of the last 7 decades.

[@tombkk1322]

4:22 I turned off the video. Your attitude sounds very arrogant. Show some respect for the great JL Collin’s. I’m out.

[@OptimizedPortfolio]

Thanks for watching until 4:22! And thanks for the feedback! I'm the first to point out that "the great JL Collins" has done a lot in spreading the Boglehead message far and wide, but there's the rub - with that authority and having millions of followers comes a responsibility, at least in my opinion, to avoid putting out potentially harmful - or at best, intellectually lazy - information. I have confronted him several times over the years on international stocks and bonds and he refuses to engage and acknowledge basic facts and data. He also continues to parrot the same tiresome, amateur talking points about "the economy" - which is uncorrelated with stock returns - usually made by those who just don't know any better. Put another way, his arguments for avoiding international stocks are objectively terrible. Period. Appreciate that one can criticize ideas while not being disrespectful toward the person, and that nuance exists. Experts and authorities are not inherently infallible or exempt from criticism, myself included. One can simultaneously have some pieces of good advice and some pieces of bad advice. Not everything from an authority figure should be taken as gospel; that's the definition of authority bias. Your attitude sounds very dismissive and reductive. Best of luck!

[@tombkk1322]

@@OptimizedPortfolio thanks so much for proving my point. I don’t need to say anything else.

[@AK-47ISTHEWAY]

​@@tombkk1322JL Collins is a charlatan.

[@rennaway8728]

Not having international exposure is just something many folks will never agree on so they cannot sometimes hide those biases when covering 100% US portfolios.

[@OptimizedPortfolio]

@@rennaway8728 100% US portfolios are usually the product of such biases. I discussed them here recently: kzbin.info/www/bejne/rpi6iqmMnc5_aqc

[@brianmccorry9186]

Why do you call his approach “imprecise?” It is quite the opposite.

[@OptimizedPortfolio]

0:18 I said that the *book* , from a technical standpoint, is imprecise. That's not necessarily a bad thing. That's what makes it beginner-friendly.