Created at 11pm, Mar 29
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The-Simple-Path-to-Wealth
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There’s no shortage of stuff you really should be learning inthis world, and no shortage of books about exactly thatsame stuff. Every bit of knowledge you could ever hope foris already waiting right there in a book somewhere. Or awhole shelf of books. Heck, you could probably fill an entireunderground parking garage with all the books that havebeen written on the subject of investing alone, and still findmore pouring out onto the ground when you climbed backout.The problem is that most of those books are boring andyou end up setting them down with a bookmark somewherearound page 25, never to return. Even with the best ofskills and intentions, I find that the writers of most booksabout stock investing cannot seem to get it right. They dragit out painfully or write paragraphs so dry and dense thatyou find yourself re-reading the same passage over andover for half an hour while your mind wanders off to moreinteresting pastures.JL Collins takes this old style of investment book writingand disregards it completely. He creates the stuff that yourmind wants to run to when it is tired of reading aboutstocks. Instead of esoteric equations about measuring astock’s alpha and comparing it to its beta, he compares theentire stock market to a large mug of beer and explainswhy it’s still worth buying even when it comes along withan unpredictable quantity of foam.He lights up the campfire and just starts telling stories,and if those stories just happen to be about exactly whatyou wanted to learn in the first place, your new knowledgeis a happy side effect.This is exactly what happened in real life a few yearsago, when Jim started writing a series of blog posts onwww.jlcollinsnh.com about good investing. I read them allas they came out, and they were so good I started referringmy own readers to them. The readers liked them so muchthey referred others. Their numbers reached thethousands, then the hundreds of thousands.Word kept spreading about the Stock Series, and stilldoes to this day, because it is something people actuallyenjoy reading. Sure, the author has the technical chops anddemonstrates them well in his own enviable financial life.But readers don’t keep coming back just to bask intechnical wizardry—they are there to enjoy the fire andhear a good story.I think that amazing response is what motivated Jim torewrite and expand his great Stock Series into this evenbetter book. The Simple Path to Wealth is a revolutionarybook on stock investing (and good finance in general)because you’ll actually read it, enjoy it, and then be able toimmediately put the lessons profitably into action with yourown money.You’ll be relieved to hear that you can be very successfulby holding only a single Vanguard fund over your entirelifetime. You can branch out and get a little fancier if youlike, but there is nothing to lose, and everything to gain, bykeeping things as simple as you can.Although very few people actually follow it, I have foundthat the road to a wealthy life really is simple and quiteenjoyable to follow, so it only makes sense that a bookabout it should have those same fine traits. This one does.

Short-Term Ination-Protected Securities Index Fund As the years roll by and the retirement date chosen approaches, the funds will automatically adjust the balance held, becoming steadily more conservative and less volatile over time. You neednt do a thing. The expense ratios range from .14% to .16%, depending on the fund. Not quite as low as a basic index fund like VTSAX (.05%), but very good considering the extra simplicity these oer.
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What are the shortcomings? Some people say the funds get too conservative too soon. Others complain that they are too aggressive for too long. For my money, I think Vanguard gets it pretty close to spot on. Maybe a bit conservative for me personally, but then Im on the aggressive side. This is easy to adjust for. If you want a more conservative (greater percentage of bonds) approach, choose a date before your actual retirement. The earlier the date the more conservative the asset allocation. If you want more aggressive (greater percentage of stocks), just pick a later date. Other fund companies use diering allocations for dierent retirement dates. If those are whats oered in your 401(k) or 403(b) plan, youll need to take a look and decide accordingly. But the same principles apply.
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Given these benets and relatively low costs, I am comfortable recommending TRFs. They are an excellent choice for many, maybe even most people. They will certainly outperform the vast majority of active management investment strategies over time. But I do have a slight preference for the approaches described in the earlier chapters. Heres why: The expense ratios are even lower than those of the TRFs. The TRFs all hold the Total International Stock Market Index Fund. While this is an excellent fund, as we discussed in Chapter 15 I dont feel the need for additional international coverage beyond that found in the Total Stock Market Index Fund, VTSAX. With separate funds, I can keep my bonds in my tax-advantaged bucket, protecting the dividends and interest from taxes. If you decide to own TRFs, they too are best held in a tax-advantaged bucket.
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Where are you likely to nd Target Retirement Funds? Target Retirement Funds have become very popular as options in the 401(k) and 403(b) retirement plans oered by employers. The idea is most people really have very little interest in investing. Overall, this is sound thinking and TRFs provide an eective, simple and well-balanced one decision solution. Plus, because such retirement plans are interest from the bonds and the tax-sheltered, the dividends from the stocks go untaxed. Of course, other than those held in Roth 401(k) or Roth IRA accounts, when money is withdrawn in retirement taxes will be due. What should you do? If your companys retirement plan oers TRFs from Vanguard or low-cost equivalents from another fund company, they are well worth your consideration. If you want a portfolio thats as simple as possible and still eective, TRFs are for you. They have The Simple Path to Wealth stamp of approval. Chapter 17 What if you cant buy VTSAX? Or even Vanguard?
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