JL Collins - The Simple Path to Wealth

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jacob
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Re: JL Collins - The Simple Path to Wealth

Post by jacob »

@TD - To be clear .. those aren't technically MY recommendation as much as they're the standard recommendation. They're what used to be recommended by the CFA Institute before they started binding their own books (mostly using licensed chapters from those books) and charging much much more.

ThisDinosaur
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Re: JL Collins - The Simple Path to Wealth

Post by ThisDinosaur »

Well, having read them, do you have an opinion about their individual quality? Which ones had the biggest impact on your investment style?

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Re: JL Collins - The Simple Path to Wealth

Post by jacob »

@TD - I don't have an opinion other than that reading all of them is "good enough" as a starting point. I think you're missing the point. These books only serve to establish a proper foundation that allows you to have an informed opinion when you evaluate various investment styles you get from elsewhere or to build your own ideas on. It's a freshman-level curriculum of financial analysis.

These are not the 15 minute TED-talk novelties you're looking for(*) ...

(*) Attempting to use the force here :-P

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Re: JL Collins - The Simple Path to Wealth

Post by ThisDinosaur »

Well, insofar as im only reading them to make better investment decisions, that sounds fine. You said these books helped you move beyond the Bernstein/Shiller popular book level of insight, which is roughly my current level. I have been operating under the assumption that you quit your CFA program because there were diminishing returns along an S-curve in further formal education in finance. Is that a fair assessment?

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Re: JL Collins - The Simple Path to Wealth

Post by jacob »

@TD- No it's not. I quit because I realized that typical CFAs spend their time site-visiting or calling investor relations in order to keep the level above (investment manager) supplied with up-to-date summaries which are checked, marked, filed, and ignored. It sounded depressingly too much like doing high school homework. There were other reasons as well like timing and other priorities. You know the joke about the difference between a mathematician and a philosopher where the latter is the one who never throws anything in the waste basket. Well, a financial analyst is someone who throws almost everything in the waste basket.

Now that's the job description. However, if you're analyzing for your own purposes, you don't have to write it down and that saves a lot of time. You just have to have an informed understanding of what you're reading. If you have your own money, you can skip to the next level. If you're looking to short-cuts to an informed understanding that minimize reading, this will never work, because that curriculum is just the beginning. Investing is an ongoing process. It's not a hack. Reading those books will not allow you to pick a better "lazy life-hack approach". If that's what you're looking for, just go total stock market and live and let die.

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Re: JL Collins - The Simple Path to Wealth

Post by ThisDinosaur »

Sounds like you're saying there's no middle ground between total stock market, and what you're doing. I dont buy that. Even Graham said the less enterprising investor (or whatever term he used) could just pick the 20 biggest dow stocks and shift between 25 and 75% equity based on market valuations. And while "dont be lazy" is always good advice, there is an opportunity cost to increasing effort toward something with diminishing returns. Could I beat the broad market consistently for the next 60 years? It will take me 60 years to find out. In the mean time, im just trying to maximize my efforts at minimizing my ignorance.

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Re: JL Collins - The Simple Path to Wealth

Post by jacob »

@TD - We seem to be talking across each other. You're talking various strategies. I'm talking about what is required to have an educated opinion about various strategies which I think is about the college freshman level for a business/finance student and that is what I'm recommending as a minimum.

That is being able to understanding critically analyze the difference between 100% TSM and 25--75% in 20 stocks depending on valuations. There is no short-cut to such "skills". I prefer SWAN strategies but I need to understand what qualifies as a SWAN strategy.

If you don't want to have an informed opinion, there's literally a million books out there each hawking their own strategy and justifying why theirs is the best ever. The issue I would have with that is that you don't know what the author isn't telling you because of a lack of general foundation. But if you're still comfortable putting six figures or several years of salary on the line based on that that's a position many take.

Maybe that works, but to me that's buying climbing gear on the internet presuming one can get safely down from the top of the building after watching a few youtube instructions. But clearly that's just me ...

Recall the recommendation I wrote for the book:
jacob wrote:Personally, I don't follow the strategy laid out in Collins' book. But then, I have spent years of work and study developing and managing my own. For those who don't want to do this, I'd recommend this book. If your goal is financial independence, you're going to need strategies that are optimal for your skills, talents, and temperament. Those in The Simple Path to Wealth will serve you well.

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Re: JL Collins - The Simple Path to Wealth

Post by ThisDinosaur »

We might be talking past each other. Probably my fault.

You said these books are "good enough" (your words) to result in a freshman business major level of understanding. This is appealing to me, so I'm reading them. But I'm asking you, as someone who has already walked the path, if you still think that's the most efficient way to get there.

I've read lots of books in my life. Textbooks and otherwise. Some were good, some sucked, and some had only one good idea that could be summarized in a paragraph. I don't need an ERE TED talk. Just some guidance on whether I'm following the most effective path for my goals.

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Re: JL Collins - The Simple Path to Wealth

Post by jacob »

@TD - I think it's the best/only way. I suppose you can ask some finance professor if they've discovered a better way by now. It's conceivable that there are audio lectures on youtube. I wouldn't know anything about that. I read much faster/deeper than I listen. I certainly think that reading the standard textbooks is far far better than trying to piece together an operating understanding by reading popular investment strategy books. You'll know far more after reading text books that you would after reading a dozen books along the lines of e.g. Collins, Swedroe, Bernstein, Ferri, Greenblatt or other little books of investing etc. and using those to piece together a theory of economics and finance. I wasted a long time on that approach when I was starting out.

Like with textbooks, you get out of them what you put into them. I spent some time building a couple of analyses out of 10Ks. I suggest picking a simple company. I remember using FAST: http://investor.fastenal.com/financials.cfm ...

My guess though ... is that if you're looking for economy of effort, you're probably not going to get any alpha out of it. Economy of effort works if you're trying to solve a fixed problem, such as sweeping the floor, because the relation between effort and result is linear. It doesn't work well when there's an opponent, like in boxing or investing, where the relation shows bifurcation. Learning is not the same as getting grades.

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Re: JL Collins - The Simple Path to Wealth

Post by 7Wannabe5 »

I still haven't gotten around to developing an interest in finance, but mightn't the general method towards erudition of starting with textbook and delving for original sources also prove helpful? I prefer this method because original sources are usually less dry reading and often reveal the common textbook error of repeating not-entirely-valid examples or analogies or models. For instance, I laughed out loud a few times while reading "On the Origin of Species", and I doubt that would happen if I attempted to read a modern textbook on the topic.

So, why wouldn't I be better served by reading some selection such as "Reminiscences of a Stock Operator" by Edwin Lefevre, "The Wealth of Nations", "Principles of Political Economy and Taxation" by Ricardo, "The Theory of the Leisure Class" and "The Theory of Investment Value" by Williams, than some dull textbook?

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Re: JL Collins - The Simple Path to Wealth

Post by ThisDinosaur »

Devil's advocate, because I'm an argumentative prick:

A factoid I hold in my brain is that economists are notoriously bad investors. (But I don't remember where I read that.) And very many successful investors don't use economic metrics or concepts for investment decisions. Furthermore, most business majors I know are not wealthy, and certainly haven't figured out anything like ERE.

That implies there is some economy of effort to be found in skipping some texts and focusing on others. At least in principle.

7Wannabe5 suggests skipping textbooks in favor of primary sources. I certainly think that's a good idea some of the time, but a *good* textbook would be one that summarizes and pairs down the ideas learned from several, perhaps conflicting, primary sources.

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Re: JL Collins - The Simple Path to Wealth

Post by jacob »

@7wb5 - Because those lack the crucial (3) of Fish's post: https://forum.earlyretirementextreme.co ... 10#p147210 ... and you'd be left devising your own theories. The risk of working out of original sources in an intellectual vacuum/without a basic understanding of the framework is clueless crackpottery (see e.g. every single climate change thread on these forums for illustration). I've read 4 out of the 5 books you've listed. You'd be better served and know much more after reading the Bodie book than those.

Reading the textbook (or a review article) and then tracking back references can be enlightening because earlier sources tend to take fewer concepts for granted... so they're easier (less abstract) to understand. Williams' book is a very long book (his PhD dissertation IIRC) that modern textbooks would summarize in a few statements about NPV of cash flows. It was a novel idea at the time. It's now axiomatic but you're not going to find many investments that are priced in this fashion these days because you now have to know/account for additional factors.

@TD - Nope, that does not imply that anymore than the observation that since 1st graders can't do calculus but 12th graders can, then someone who wants to learn calculus should somehow be able to skip learning how to count or multiply. Knowledge is built on top of other knowledge.

Also economists being bad investors is a straw man. Academic economists are certainly worse than professional investors (no surprise), but as long as they retain a sense of humility they're still better than uninformed or misinformed amateurs. The examples you know are the overconfident ones that blow up. If you look at the investment log, we have a few accountants and self-taught traders who seem to be doing well.

Also see https://www.amazon.com/Death-Expertise- ... 190469412/

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Re: JL Collins - The Simple Path to Wealth

Post by 7Wannabe5 »

@jacob:

Moi, devise my own theories and take off running without first engaging in exhaustive research? That never happens :lol:

Once again. Do both. Gotcha.

Since life is short and information is near infinite, one shortcut I sometimes use is to simply observe what somebody who is already an expert does and then copy-cat. For instance, I am copy-catting your latitude choice. I asked my multi-millionaire friend what I should invest in, and he said Vanguard Index Fund, which I took to be the sort of condescending advice you offer somebody whom you also offer a handful of 4th of July Parade candy which you would never eat yourself. So, I asked if that was how he invested, and he replied in the negative , but offered no further information. However, I have picked up a few hints from tossed off comments, so I shall persevere with this line of research. For some unknown reason I am like crack on the aging male ENTJ market, and they usually do pretty good in that realm. So, I decided that will be my edge. Figure worst case scenario will find me working my way through a stack of Russian novels in the Martha Stewart wing of some Federal Penitentiary, but no-risk, no reward, fish in the hand worth two fishing poles in the bush... etc. etc. etc.

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Re: JL Collins - The Simple Path to Wealth

Post by jacob »

7Wannabe5 wrote:
Tue Jul 11, 2017 12:34 pm
I asked my multi-millionaire friend what I should invest in, and he said Vanguard Index Fund, which I took to be the sort of condescending advice you offer somebody whom you also offer a handful of 4th of July Parade candy which you would never eat yourself. So, I asked if that was how he invested, and he replied in the negative , but offered no further information.
Smart man!

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Re: JL Collins - The Simple Path to Wealth

Post by 7Wannabe5 »

:lol:

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Re: JL Collins - The Simple Path to Wealth

Post by vexed87 »

7Wannabe5 wrote:
Tue Jul 11, 2017 8:35 am
I still haven't gotten around to developing an interest in finance, but mightn't the general method towards erudition of starting with textbook and delving for original sources also prove helpful?

So, why wouldn't I be better served by reading some selection such as "Reminiscences of a Stock Operator" by Edwin Lefevre, "The Wealth of Nations", "Principles of Political Economy and Taxation" by Ricardo, "The Theory of the Leisure Class" and "The Theory of Investment Value" by Williams, than some dull textbook?


@7WB, Good point, but it works both ways, sometimes there are problems with going directly to the source, I can think of several notable errors Darwin made in OtOoS which would be debunked in later work by other evolutionary scientists. The framework might be there, but it might not yet be finessed, or relevant in the context of today. Of course, I'm definitely not saying that all original works only have their value in nostalgia/nerd factor. Summary learning can be dangerous too.

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Re: JL Collins - The Simple Path to Wealth

Post by 7Wannabe5 »

@vexed87:

I agree. I think I was only 18 or 19 when I read "On the Origin of Species", but I already had enough modern framework to recognize the "notable errors." So, not exactly a desert island experiment. But, that would also be true of my modern generalist framework, especially at my current age, if I chose to read original sources, rather than textbook, on the topic of finance. I mean, highly unlikely I would be able to summon up exact reference, but also highly possible that, for instance, something I read in a series of articles published in Harper's magazine in 1996 would allow me to recognize similar "notable error" made by Ricardo.

The best example of "danger of summary learning" in my experience, occurred to me when I finally got around to reading Einstein in the original when I was around 35. I just did a quick internet search to see if anybody else had this experience, and found this verification:

http://www.vicphysics.org/documents/tea ... danken.pdf

Also, I don't recommend actually reading the Qur'an (in a couple different translations) unless you want to feel like tearing your hair out when you watch the news. I have read at least 3 books or articles written by well-regarded Western journalists in recent years that repeated incorrect information from same secondary source in this realm.

One of the funniest, most interesting, threads I ever traced was Dr. Laura's "The Proper Care and Feeding of Husbands" back to a late 19th century work on the topic of voodoo love spells. I sort of feel like I own this "trace", so I often share the wisdom found therein :lol:

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Re: JL Collins - The Simple Path to Wealth

Post by jennypenny »

7Wannabe5 wrote:
Wed Jul 12, 2017 8:34 am

Also, I don't recommend actually reading the Qur'an (in a couple different translations) unless you want to feel like tearing your hair out when you watch the news.
Ha, I'm not a fan of bible thumpers and I get really annoyed with ones who've obviously never taken the time to read and study the bible before hammering people with it. It's applicable here because if you only adopt the 'bullet points' in a system without grokking the underlying principles, you risk misapplying them when conditions change (or only adopting the ones you like).

It's the difference between only being able to follow a recipe as written or understanding why your bread won't rise when it's cold or the cookies flatten out when the dough is too warm. Strictly following the recipe only works when conditions are 'normal' and you won't know how to adjust them when conditions aren't normal if you don't understand why the yeast needs to be warm and the butter shouldn't be completely melted.

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Re: JL Collins - The Simple Path to Wealth

Post by 7Wannabe5 »

@jennypenny: I agree, although I must admit that the only version of the Bible I have read cover to cover was the 1970s "The Way" edition, so it's kind of like I actually think "Jesus Christ Superstar" ,"Godspell" and soundtrack from "Exodus: The Movie" provide the background music for the Judeo-Christian tradition.

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Re: JL Collins - The Simple Path to Wealth

Post by Dragline »

7Wannabe5 wrote:
Tue Jul 11, 2017 12:34 pm
@jacob:

Moi, devise my own theories and take off running without first engaging in exhaustive research? That never happens :lol:

Once again. Do both. Gotcha.
Did somebody say "DO BOTH"? :D

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