JL Collins doesn’t know what the efficient frontier is. The author of “The Simple Path to Wealth” — the guy synonymous with VTSAX and chill — admits this right off the bat when we challenge him with advanced investing concepts.
Collins joins us for Part 1 of a two-part series where we skip the basics and dive straight into the complex stuff. We grill him on whether his simple approach actually beats more sophisticated strategies, and his answer might surprise you.
He concedes that Paul Merriman’s four-fund portfolio probably outperforms his one-fund approach mathematically. But Collins argues that execution trumps optimization every time. Most people can’t stick with complex strategies for 20 years, especially when those strategies require selling winners to buy losers – something that goes against human nature.
Collins prioritizes what works in real life over what looks good on paper. He calls index funds “self-cleansing” because they automatically rotate out failing companies and sectors while rotating in the new winners. You don’t need to predict which companies will dominate next – you’ll own whatever rises to the top.
The episode covers his thoughts on VTSAX versus VTI, international diversification, and why he’d rather put Tabasco than Cholula on his eggs — his quirky way of explaining personal preferences in nearly identical investment options.
Resources Mentioned
Episode 31, Interview in 2016 with JL Collins
Timestamps:
Note: Timestamps will vary on individual listening devices based on dynamic advertising run times. The provided timestamps are approximate and may be several minutes off due to changing ad lengths.
(0:00) Intro
(1:00) JL admits he doesn’t know the efficient frontier
(2:00) Simple vs optimal but complex paths
(4:30) Paul Merriman’s four-fund portfolio vs VTSAX
(6:00) JL concedes Merriman’s approach is mathematically superior
(7:30) Risk parity investing discussion
(8:30) Sequence of returns risk and retirement bonds
(12:30) JL’s birthday email from Jack Bogle
(15:00) VTSAX vs VTI
(17:00) Total stock market funds across brokerages
(23:30) Mag 7 concentration risk
(27:00) Sears story and self-cleansing index funds
(30:30) International diversification and US dominance
(39:00) World funds versus separate international
(45:00) When to shift to world fund
(47:30) Bond allocation timing strategies
(48:30) Target date funds
(50:30) One-fund vs two-fund approach
(52:00) Historical diversification and Nifty 50
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