Afford Anything JL Collins Part 1: The Simple Path vs. The "Optimal" Path
Simple Beats Optimal in Practice
- JL Collins argues that a simpler investment path outperforms more complex, mathematically optimal paths in real life.
- Execution discipline matters more than theory because most can't stick with complex strategies long term.
Why Simple Investing Beats Complex Strategies Every Time
JL Collins argues that a simple investing approach, like holding one total stock market fund such as VTSAX, often outperforms more complex, mathematically "optimal" strategies because execution matters more than theoretical optimization.
He concedes that Paul Merriman's four-fund portfolio might mathematically outperform the simple path, but most people struggle to stick with the complexity and discipline required for twenty years, especially when it involves selling winners to buy losers.
Index funds like VTSAX are "self-cleansing," automatically rotating out failing companies or sectors and bringing in new winners, which removes the need to predict market leaders.
This simplicity helps investors stay the course and avoid panic selling during downturns, which is far more valuable in achieving long-term success than attempting to optimize the portfolio continuously.
> "The challenge is, I have enough trouble getting people to stay the course with just VTSAX... I don't think anybody is ever going to execute" complex rebalancing strategies over decades.
Mathematical Superiority vs Execution
- JL Collins concedes Paul Merriman's four-fund portfolio is mathematically superior.
- Yet, most people fail to execute that approach faithfully over decades due to human nature.