The Simple Path to Wealth Book Review
The go-to resource for financial independence written by one of the most respected within the community.
The hype that surrounded this finance book when I read it was ridiculous. Everyone I was listening to, reading or watching trying to learn about Financial Independence Retire Early was referencing this book and the author JL Collins. This was one of the last finance books I read in 2021 when I had read quite a number back to back, when I was in the infancy of my Financial Independence journey.
JL Collins wrote this book for his daughter so that when she was ready to learn there was the perfect finance book available to her. I listened to a podcast where JL Collins explained that his daughter was like most young people and just didn't have an interest in finance or investing. Especially when that information is coming from your dad! So he decided that if he collated his knowledge into a book it would always be there ready when she was.
Like most dads he knew not to try and force someone to learn this type of subject, and knew not to try and change someone's lifestyle choice by telling them to live in a certain way.
The subheading makes it clear what he has in mind: "Your Roadmap to Financial Independence and a Rich, Free Life"
Overview:
The book gives clear and simple advice on the history of the stock market, why you need to manage your money, and even a blueprint on how to do it. The book can take you from zero to hero in a few hundred pages. He explains each technical area in enough detail without any jargon, and using relatable metaphors where needed.
First Impressions:
As I mentioned this was one of the last finance books I read in 2021 after reading a number in a row as I wanted to be confident I was doing the right thing. I started the history chapter of this book expecting to be bored and know all the information from my last few books - super wrong. I had either forgotten it or completely misinterpreted what actually was happening. I was hooked from the start and that lasted throughout.
The structure of the book follows a methodical process so any questions are almost answered as soon as they crop up in your head. You can see very quickly why this was such a popular book.
Key features:
1/ JL Collins really hammers home the past volatility of the stock market. He doesn't shy away from that at all and doesn't try and place it as a rosy safe haven. However, even with those ups and downs, he explains in a mathematical un-bias way why even at it's worse using a certain type of fund means you can weather the storm, even at those specific times which were particularly tough.
He explains how during these rough patches the majority of people sell, but in fact this is the time you want to stay steady and keep your head down. I found the history part of this book very relatable and the manner in which it was written made it very easy to understand.
2/ Ignore the media, ignore the news and don't believe the hype. I was (still a little) massively guilty of all of these. Rather than just passing these off as his belief he gave examples as to why this is important, and the consequence if you don't. In recent times with COVID-19 and the Ukraine-Russia war these events it is important to just keep with the plan and not be influenced by rumours.
3/ The blueprint on what you should do. I love practical advice and something you can go away and do - this book nails that. It is US centred but a quick Google and you can find the UK equivalent you need to use or invest in. And even if you can't it arms you with the knowledge on what to look out for. This was probably the most helpful thing in the book.
What I learnt:
1/ The harsh truth that if your savings rate is low, it will take you longer to hit your independence. Even if you get all the other stuff right he showed the percentage rate against time to 'retire' and it really struck home. This was a penny drop moment for me.
2/ The set and forget method of investing. His ability to give practical examples when the 'experts' said to sell in panic in the past at a time of uncertainty, versus if you just ignored them and kept going, he showed the financial impact of doing either of these decisions on your net worth. This gave great confidence and proof that he knew what he was doing, and it settles your uncertainty when you go through it yourself.
3/ The importance of changing your portfolio as you get closer to retirement. When you are young investing in equities at a high percentage of your portfolio makes sense as you have plenty of time to weather out the tough times, but when you get closer to retirement you need to look at reducing that risk and taking on more bonds. He again showed great examples why you needed to do this and the effect if you didn't.
Conclusion:
There is literally no negative point on this book. If this is the first review of mine you have read I always manage to generally draw up something that I would have preferred was done in a different way. Not with this one though. Simply put this should be taught in schools. Every person on their Financial Independence journey should read this book first, and then anything else next. Because if you run out of time to read any more books or get bored of reading, this book has everything you could possibly need to know. It pretty much tells you how to invest, and what you shouldn't do.
Go and buy it. So of course - 5/5!
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