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034 | The Stock Series Part 2 | JL Collins

This podcast is Part 2 of the Stock Series discussion with JL Collins, author of The Simple Path to Wealth and the website JLCollinsNH; we discuss the Great Depression and the mindset you need to be a successful long-term investor, plus how to allocate between equities and bonds.

Podcast Episode Summary

  • Part 2 of the Stock Series conversation with Jim Collins
    • If you have not yet listened to Part 1 you can listen to it here
    • Be sure to check out the associated Friday Roundup here for Brad and Jonathan’s take-aways
  • A discussion of what happened during the Great Depression and the Crash of 1929
  • A large portion of the crash was due to many people buying stock on margin
  • Jim’s explanation of leverage and buying stocks on margin
  • Jim’s Four Lessons to watch out for
  • Making peace in your mind when a crash/correction happens. What caused it?  Psychology or something legitimate?
  • Unless you believe the US economy has permanently collapsed, then “the market always goes up” over time according to Jim
  • Jim says the best thing that can happen to a young investor is a market crash as you get to purchase stocks “on sale” for potentially years
  • Savings rate is the most crucial aspect for the FI community since it allows you to continually invest in good markets and bad
  • Bull markets and bear markets are a part of life. We need to toughen up mentally to prepare for both
  • Jim’s explanation of the 40 year period starting in 1975 showing the calamities that happened and yet how far the market increased
  • Nobody knows what the next 40 years will hold, but we have a dynamic economy
  • What stage of investment life are you in? It varies depending on your age
  • Wealth building and wealth preservation stages and the discussion surrounding both
  • When you’re in the wealth building stage you need to have your psychology correct: Keep pumping money into the market and take advantage of sales when the market goes down
  • 100% equities in the wealth building stage per Jim
  • When you stop working for money you are in the wealth preservation stage
  • What percentage should you have in stocks and bonds in the wealth preservation stage
  • The more you have in bonds the smoother your ride will be, but the lower your return will be
  • Your tolerance for volatility will determine your percentage in equities and bonds
  • Would Jim ever consider going back to 100% equities?
  • Mathematically you are always better off in stocks than bonds over the long-term
  • Even Jim contemplated selling during recent market plunges, so everyone is susceptible to this

Listen to Brad and Jonathan’s thoughts about this episode here.

Links from the show:

Books Mentioned in the Show:

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