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.
In Today’s Podcast we cover:
Part 2 of the Stock Series conversation with Jim Collins
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
Links from the show:
The Stock Series at JLCollinsNH
Books Mentioned in the Show:
The Simple Path to Wealth
The Black Swan
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