Author and financial blogger JL Collins brings his refreshingly unique and approachable take on investing to Google.

The author of "The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life", JL offers easy-to-understand, effective tips and resources to understand investing with confidence. 

In this interview with Googler Rachel Smith, JL Collins discusses money and investing, including: how to think about money and investing to build wealth, how to avoid debt, how to simplify the world of 401(k), 403(b), TSP, IRA and Roth accounts, TRFs (Target Retirement Funds), HSAs (Health Savings Accounts) and RMDs (Required Minimum Distributions). 

He also talks about what the stock market really is and how it really works, How to invest in a raging bull, or bear, market, and specific investments to implement financial strategies.

Learn more at jlcollinsnh.com or get the book here: https://goo.gl/bvWZLq

Moderated by Rachel Smith.

So, my first question for you, the title of your book is The Simple Path to Wealth.

And It's a roadmap to financial independence and a rich, free life.

So what does wealth mean to you, and how is it tied to a free life?

Well, I suppose we could look at that in 2 different directions.

So if we think about the psychological part of it, To me personally, what wealth represents is security and freedom.

So security to protect you from what the world can throw at you and freedom to chart your own path in a way that you couldn't do without the resource.

On the financial point of view, I suppose, when I think about what the benchmarks are for are you wealthy or not, have you achieved financial independence or not, what has come to be called the 4% rule is a good guideline.

That comes out of a thing called the Trinity Study.

And without belaboring that point, it simply suggests that if you have enough assets that

of that amount can cover your annual expenses, you can consider yourself financially independent.

So you can work at it from 2 different directions.

You could say, well, I have a million dollars, so

And therein lies the answer to your question.

Or you can look at it from the other direction.

to live on, so how much do I need to be financially independent?

You multiply 40, 000 by, as it happens, 25.

You get a million dollars and there's your answer.

So it really depends on what your needs are.

And why is it important to keep the path simple?

I think there are a lot of folks tuning in or folks in the audience who have read financial independence books and maybe their eyes roll back in their head because they just can't make sense of it all.

So why is it important to keep it simple?

But the reason that I prefer keeping it simple is simple is simply more powerful.

Simple is what gets you the best results.

And in this case, when I talk about simplicity, I'm talking about index funds and specifically broad-based stock and then bond index funds when you bring them into it.

There are a lot of reasons that simplicity is an advantage.

It makes things, when the time comes, easier on your heirs.

But the most important thing is it is the most powerful way to reach financial independence.

People who come to my blog are always, I get 2 kinds of readers on my blog.

People who are really into this stuff, and they always want to tinker.

And that's not who I'm really writing for.

I'm writing for people like my daughter, who knows that it's important, But she has other things that she'd rather do with her life than fixate on finances and investing.

And so when you have a simple path, you can just get a couple of things right.

You will outperform the vast majority of professionals out there.

And I'm fond of saying to those people who want to tinker, if I thought there was a way to successfully tinker and do better, then that's what I would have written the book about.

And in fact, I wasted a couple of decades trying to find that.

If folks are interested in your content, should they begin with your blog or your book?

Well, I would suggest that if you don't know anything about me or this concept, I would go first to the blog.

And I would go to, there's a button at the top called Stock Series, and the blog is best known for my stock series of posts.

And when you click on that button, it will take you to an introduction.

And in that introduction is a link to what I think is the best review of my stock series that's been done.

And not best because it's most favorable, but in my view, most accurate.

So you can click over to that and read that brief review.

And after reading it, you'll know very clearly whether this is going to resonate with you or not, and whether it's worth your time.

And then I would read a couple of the posts.

And then If you like what you read, you can consider going on to the book.

There is nothing in the book that's not in the blog.

So you can get all the information just by staying on the blog.

It's better organized, because the posts in the blog came organically as they occurred to me or were suggested.

And the book has the advantage of being better organized.

And I spent more time polishing the writing.

So I hope that the writing is more polished.

And thinking back to the early days of your own investment history, how did you learn all this stuff?

I spent, as I alluded to earlier, decades trying to do things that were not.

What's seductive about this is that they were subpar, but not bad performance.

I tell people that long before I discovered or embraced index investing, I had reached financial independence.

So I reached financial independence by picking stocks and picking mutual fund managers, active managers, who could pick stocks or thought they could pick stocks So it can be done the problem with it is it's more expensive.

It's more time-consuming It's not as effective as indexing so I would have been much better off if I discovered indexing earlier The great irony is the Jack Bogle who was the founder of Vanguard and the inventor of the first index fund available to the public, launched that fund in

I'd never heard of Jack Bogle or Vanguard or index funds when I started.

And then it took me a disturbingly long time to embrace it.

And so I went down, and some people say, how do you know all this stuff?

And it's, well, because I made just about it.

If you can think of a mistake you can make in investing, I've probably made it.

So to the extent that I know anything, it's from my mistakes.

So speaking of mistakes, what do you think was working in your favor versus working against you as you were trying to figure this out on your own?

Well, I think the main thing that was working against me at the time and that is working against Everybody listening to this is there is a large industry, Wall Street, whose drumbeat is counter to our best interests, and that is based on making this as complex as possible, putting out a siren song that you too can be Warren Buffett, you too can pick stocks, you too can outperform the indexes, only if you're willing to pay us for the privilege.

And that's a very seductive message because everybody wants to think that they can be above average and outperform.

You're in a room full of above average people.

Now, the irony is if you invest in index funds and of course the slam that active managers put against index Investing is that you will only get average returns That's a little bit misleading because yes the index gives you the return of the market overall, but that return is far above average.

Index investing, based on the research that has been done, outperforms depending on what numbers you look at, 80 to 85 percent of active managers over a 15-year period of time.

If you research out 30 years, the number of active managers who can outperform the index is less than

So when you invest in the index and you're getting the average performance of the market, you're actually getting the best performance that you can expect by a long shot.

I think what was working in my favor is I continued being curious, and I continued trying different things, and I continued researching.

And indexing, which was first put in front of me in 1985 by a good friend of mine, there's something about it that is very counterintuitive.

And I think particularly for smart people like the people in this room and the people listening.

Because you look at it and you say, well, indexing says I buy every stock in the index.

And yet, if I can only just not buy the obvious dogs, I'll outperform.

I mean, outperforming seems like it should be so simple, But the problem with that, or even if I just buy the top performers and not even buy the mediocre or the low-performing ones, you know, obviously I'm gonna outperform.

And yet you look at that research that says that doesn't happen.

And of course The reason it doesn't happen is today's dogs are sometimes tomorrow's great turnaround success stories.

And those that are flying high are the stories of how they crash and burn.

So there is no way to know what is going to happen with specific stocks.

And it is just way too easy to guess wrong.

So 1 thing that struck me about your blog and your book is how specific the advice is.

So in other books or websites I've tried reading in the past, The advice was always really vague, like invest in mutual funds.

And it would leave me thinking, well, which 1 and how much?

So why do you think other authors' advice is not very specific?

Well, I'm not sure I can answer that because I can't put myself in the heads of other people.

Maybe I can answer it by telling you why my advice is what it is.

That's because I didn't write this blog to have the international audience that I have today.

It never occurred to me that that would happen.

I had started actually writing a series of letters to my daughter about financial things I wanted her to know.

And I shared it with a business colleague of mine.

He said, you know, Jim, this is kind of interesting stuff.

You might want to share it with your friends and family, and a blog would be a good way to do that.

I like the idea of a blog because it occurred to me that it would be a great way to archive the information.

But I didn't have a plan to create a blog as a business or as a successful way to reach a broader audience.

It was just to archive the information I wanted my daughter to know.

And that was basically what mistakes I've made, what's worked, what's kicked me in the ass, and what I think specifically she should do.

And so I think that's why my advice is so specific.

These are the things I wish I had done in 1975, or at least in 1985 when I became aware of indexing.

These are the things that I want her to do and that I've got her started doing.

So that's maybe why my advice is more specific than others.

Yeah, I can't tell you how many times I've talked with a friend about how I'm on this new track where I'm investing.

And I just send them 1 sentence of exactly what I'm doing, and that's what I read in your book.

So aside from telling them to open their computer, start it up, and what clicks to make to log into their account, it's such simple advice.

You know, I was, it was a year and a half, 2 years ago.

I was interviewed by Farnoosh Tarabi on her podcast, and I don't know if anybody's listened to her podcast, but at the end of her interview, she likes to ask a question that says, if you were suddenly given $100 million, what would you do?

And the typical kinds of answers she gets is, well, I'd buy this, that.

We're talking about index fund investing, and specifically VTSAX, which is Vanguard's total stock market index fund, and the 1 I recommend the most and love the best.

So when she got to that question, well Jim, you've got $100 million, what would you do?

And she was, really, that's what you'd do?

So 1 of my favorite posts on your blog is called, Why Your House is a Terrible Investment.

And I know you got a lot of feedback from your readers about this.

So why do you think this post is so controversial?

Why do your readers get so excited about this post?

You know, somebody, not me, but somebody said, home ownership is the American religion.

And you could go to Daly Plaza in downtown Chicago and you could set up your little soapbox and you could climb up on it and pick any major religious leader and begin to vilify that individual, Jesus Christ, Mohammed, Buddha, whoever, just vilify them in the most horrific terms possible, and people would just turn around and walk away.

You get up on that same box and suggest that home ownership isn't the perfect thing for everybody to do and they start gathering rocks.

So I think it's polarizing and the people who love their homes and love the idea of owning a home, that gets that response.

And then there's another segment of people who don't like owning homes and see value in renting, and they muster to the cause.

And that's what makes that post, to my surprise, because I kind of did it tongue-in-cheek.

And I, by the way, I'm not anti home ownership.

I am anti believing the propaganda that it is always or even commonly a good financial decision.

It can be a great lifestyle decision, and that's why I bought the houses I bought over the years.

But I never once bought them thinking I was doing something that was financially astute.

Because unless you happen to get lucky with a rising market, and that does happen, it's generally not the best thing you can do with your money if financial independence is your goal.

And so for the person who's at the point where they're considering buying their first home or condo, What considerations would you advise them to make before they do that?

Well, I think the first thing along the lines with what I just said was to understand that you are not making an investment.

I, In my manifesto on my blog, 1 of the things that I say is something to the effect of All of our decisions don't have to be driven by financial considerations, but you should always understand the financial dynamic of what you're choosing to do.

And I have a post about buy versus rent, run the numbers, which talks you through how to do that.

So I would suggest if you're renting now and you're thinking of going into a house or a condo, that you first run the numbers and find out exactly what it's going to mean financially.

And it might be that it's going to be less expensive than what you're renting.

More commonly, you're going to find that it's going to be more expensive.

And just because it's more expensive doesn't mean that you don't have to buy the house.

It just means that you understand what you're paying for the lifestyle decision that you're making.

And that was 1 of the first conversations we had at the Chautauqua, I wanted to tell you a story about how I frequently get asked, like, Rach, are you going to buy a place in Chicago?

Collins' book, and I'm cool with renting for now.

And I told you a story about how my refrigerator broke right before I came to Ecuador and just called my landlord and said, need a new fridge.

So other than this post called, Why Your House Is a Terrible Investment, is there any other post on your blog that's generated a lot of feedback or controversy from your readers?

Well, that's the 1 that's generated the most controversy, because it's such a hot-button topic.

Less controversial, But very popular, probably the 2 that are most popular is How I Failed My Daughter and A Simple Path to Wealth.

And in that 1 post, I kind of sum up the whole content of the blog and the book.

Why you need FU money is probably at least as popular.

And from the reaction of the audience, I gather we have people who agree with that.

There's a famous video on YouTube called The Importance of FU Money.

So for those of you who haven't seen it, write it down.

There's a movie called The Gambler, which is not a particularly good movie, so I'm not recommending the movie.

It stars John Goodman, who's a wonderful actor.

And there's a wonderful segment, a little piece in that movie, and you can Google that and find this clip where John Goodman is talking to Mark Wahlberg about the importance of having F.U.

And when I saw that clip, I thought, I want to do a version of that.

I want to keep it as close to the original as I can, but tweak it so it reflects my values.

He talks about buying a house, for instance, and we've talked about that.

But my problem is I didn't know anybody who could make the film.

But 1 of the wonderful things about Chautauqua, which is where you and I met, is that you meet really cool, interesting people who come to Chautauqua, including a couple of years ago, a pair of filmmakers who were less than an hour from where we were living at the time.

And I give you all this background because if you choose to watch this, it's filled with salty language that I don't use every day.

I'm trying to channel John Goodman, and he uses the same language.

And if you like it, you think I do a good job in it, the credit goes to my filmmakers, Joan and Terrell Ondrauna, drawing a blank on his name.

But it's if you go to my blog and you do the search function you'll find it and you'll see who they their credit is given.

So we're in the beginning of 2018 and this is a good time for folks who are trying to get their financial house in order to maybe come up with a 2018 plan, 2018 and beyond.

And the amount of investment options is confusing and overwhelming.

So I know a lot of folks who are maxing out their 401k, because that's very sound advice, we get the full match.

They might also have an emergency savings fund, but beyond those 2 things, they don't know what to do with what's left over.

And they're just keeping their money in savings or checking.

Or maybe they're outsourcing the management of their money to someone else.

So for the folks who don't feel confident investing beyond just the 401k match, and they're just keeping their money maybe in savings or checking, how should they begin to make sense of all these different options?

How would you advise them to get started?

Well, in a way, this circles back to the advantage of things being simple.

So if you have a visual image, let's say, of a long banquet table that is just groaning under the weight of every kind of food and preparation and dish you can possibly imagine, think of that image as what the financial community has laid out for us and that they want us to partake in.

The problem is these are all very expensive things that are, for the most part, designed for the people who have created them and who sell them to enrich them, not necessarily what's best for us.

The good news is you can put your arm down on that table at 1 end, except for a tiny little corner, and sweep it all under the floor Because none of that matters.

Only a very small sliver of what out there really matters for us in building our wealth.

That's index funds, and that's very specifically broad-based Stock index funds and broad-based bond index funds.

I mentioned the 1 that I like the best is VTS ax which is Vanguard's total stock market index fund More common and the original fund Jack Bogle created is the S&P 500 index fund.

That's perfectly acceptable and the 2 are surprisingly close.

So sometimes people get hung up on deciding between them.

If you actually have access to 1 and not the other, Go for which either 1 you have.

And then there are total bond market funds.

That's with those 2 tools, that's all you really need.

It gets a little complex with 401K plans and 403B plans for people who are not in the private sector, because they don't always offer those particular Vanguard funds that I prefer.

Most plans offer some kind of broad-based stock index, usually an equivalent of an S&P 500.

It might not come from Vanguard, which is my preferred company, but an S&P 500 index fund is pretty much the same no matter who's providing it.

And so if someone wanted to get started this year and they wanted to take a look at some index funds, but they also know that there are HSAs, 529 plans, how would you recommend they get started?

Like maybe if 2018 was just gonna be a simple year, what would your advice be if they're feeling overwhelmed by all the different places they could put their money?

Well I think if you're really starting from ground 0, and you really do not have any base of knowledge on this, and that's not a bad thing.

That can be an advantage, because at least it means you don't have bad knowledge, and there's a lot of bad information out there.

So if you're at that ground 0 level, don't feel bad about it.

That's an advantage in some, there's nothing you have to unlearn.

At the risk of touting my own book and my own blog, I would go there and do a little bit of reading and do a little bit of learning.

So 1 thing in the way you phrased the question that people need to be clear about, and this is something that I come across a lot, is to say, well, I want to invest in my 401k, or I want to invest in my IRA, or I want to invest in VTSAX.

Well, you're conflating investments with what I come to call buckets.

In those buckets, you hold your investments.

Investments are things like mutual funds and stocks and bonds.

So those are the investments that you choose to put in your bucket.

So if you have a 401k, as you do at Google, and I have no idea what your 401k looks like, but you will have a list of selections of investments you can put in that 401k bucket.

If my approach resonates with you, and you believe in broad-based index funds are something you want to go with, you can go down that list and maybe find the specific funds I'm talking about, but you'll certainly probably find something that is a broad-based index fund.

The easiest way to do that, by the way, is to find the column that shows the expense ratio, and you should have that.

You run your finger down that, and when you find the very lowest expense ratios, you have found the index funds.

And focus on those and take a look at them.

And why do you think some people choose to manage their own investments whereas others outsource it to someone else?

Well, I think the people who outsource it to someone else have been convinced that this is just too complex for their pretty little head.

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