“The Simple Path to Wealth” Notes

This book is the polished version of his “Stock Series” and some other blog posts which you can read here.

On Debt: Avoid credit card debt and auto loan, and be cautious about student loan and mortgage.

The Importance of F-You Money: To gain “freedom to do what you want and to work for whom you respect.”

Stocks and Bonds are the building blocks.

• Stocks: VTSAX, or any low cost broad market index fund.

• Bonds: VBTLX.

During wealth accumulation stage(working or earning income): 100% stock

During wealth preservation stage(taking a break or retired): adding bond to smooth out the ride and provide income. (For example: 80% stock and 20% bond, the asset allocation is depend on your risk tolerance.) Rebalance the portfolio every once a while.

Thoughts on International Funds: They add unnecessary risks plus top 10 companies in the index fund are already tap into the global market. So VTSAX has got it covered.

Two Types of Investment Buckets: ordinary buckets and tax-advantaged buckets.

• Ordinary buckets: taxable investment brokerage account
• Tax-advantaged buckets: 401(K), IRA, and Roth.

Basic Hierarchy for Deploying Investment Money

1. Fund 401(K) plan to the full employer match, if any.
2. Fully fund a Roth if your income is low enough that you are paying little or no income tax.
3. Once your income tax rate rises, fully fund a deductible IRA rather than the Roth.
4. Finish funding the 401(K) plan to the max.
5. Consider funding a non-deductible IRA if your income is such that you cannot contribute to a deductible IRA or Roth IRA.
6. Fund your taxable account with any money left.

Why the Author Don’t like Dollar Cost Averaging: “You are trading one risk(the market drops after you buy) with another(the market continues to rise while you DCA, meaning you will pay more for the shares).” The market is far more likely to continue to rise than to drop after you buy statistically. When you are investing a portion of monthly income, it is a form of DCA. And you didn’t have the lump sum option. But you are putting the money to work as soon as possible. So do the same to any lump sum.

Personal Note

On stocks, I am using VTSAX, SPLG, and DSPIX. On bonds, I am using SCHZ, and SPAB.