The Simple Path to Wealth

Your roadmap to a rich, free life — in just five minutes per week.

November 25, 2025

“People who think they know everything are a great annoyance to those of us who do.”

—Isaac Asimov

Black Friday looms, and Amazon is offering a discount on The Simple Path to Wealth that's worthy of JL's philosophy: Spend less, and put the rest into VTSAX!

If you're starting to stockpile those holiday gifts, particularly for the young people in your life, why not a toolbox they can use to earn their financial freedom?

THE SIMPLE NUMBERS

What's the story with bonds? If you've read the Simple Path, you'll know that when you buy bonds, you're loaning money to a company (or the government). They'll pay you interest on that money, which creates a return on your investment.

So, what has that interest looked like recently? According to an Invesco report from this fall, "U.S. investment grade corporate bonds are yielding about 5%," and they've fluctuated between 4.5% and nearly 6.5% since the pandemic. This is quite healthy compared to the recent historical average:

Bond index funds, like the Vanguard Total Bond Market Index Fund (VBTLX) that JL recommends, are also quite stable.

"There have only been 10 calendar years with negative returns in the Bloomberg U.S. Corporate Index since inception in 1975," the Invesco report continues. "Nearly 80% of the time, index returns have been positive, with an annualized average return of 7.8%."

Nothing is zero-risk, but there's a reason JL recommends that you reserve at least some portion of your investment pie for VBTLX. The fund's year-to-date return as of Monday, November 24 is 7.27%.

SIMPLE PATH OF THE DAY

A slice of timeless wisdom from The Simple Path to Wealth:

"Money is the single most powerful tool we have for navigating this complex world we’ve created. Understanding it is critical. If you choose to master it, money becomes a wonderful servant. If you don’t, it will surely master you."

ASK JL

Q: I’m still shaky on rebalancing my stocks and bonds every year. Can you offer a step-by-step for this? —Carol W.

Hi Carol,

Sure, and it’s really pretty easy.

First, decide on your asset allocation. Let’s say 70/30 for this conversation.

Second, pick a random day you’ll remember for rebalancing. We chose my wife’s birthday.

Third, check your investments on that day and see what your current allocation has become. If stocks have gone up over the past year, your 70% might now be 75%. That means your 30% bonds have dropped to 25%.

Fourth, reach out to Vanguard or the investment company you use. Instruct them to sell enough shares in your stock fund to bring it back to 70%, and use that money to buy shares in the bond fund to bring it back to 30%.

Be sure you are looking at your stocks and bonds collectively across all your accounts as you make this calculation. If possible, make these transactions in your tax-advantaged accounts to avoid capital gains tax.

For instance, my wife and I hold VTSAX in both our IRAs and Roth IRAs. The bonds I also hold in my IRA so that I can make these adjustments tax-free. We also hold VTSAX jointly in our taxable account. So, we have VTSAX in five different accounts and VBTLX in one.

Hope this makes sense and it helps!

—JL

Got a money question keeping you up at night? Reply to this email and we'll get it over to JL.

Tall buildings in a city at dusk — Stocks will make up most of your investment structure, but a few floors ought to be bonds.

WHAT WE'RE READING

📚 Over at A Wealth of Common Sense, Ben Carlson tracks the coming boost to 401(k) and Roth IRA contribution limits.

📚 Financial independence is about retiring when you want. But how will you know when you're ready to retire? Bruce Horovitz has some thoughts in the Wall Street Journal.

📚 "'Tis the Season," JL writes in, "and if you are looking for a gift to entice your friends and family into the magical world of financial independence (FI), Once Upon a FI is a charming and creatively written book that introduces newbies to FI concepts through the imaginative and entertaining retelling of classic stories, tales, and fables from our childhoods. As the author — and my pal — Paul says: 'It's a personal finance book for people who never thought they would read a personal finance book.'"

THE BIG QUESTION

Have you picked a date to rebalance your portfolio between stocks and bonds each year? Or do you have another method for keeping your ratio right?

Reply to this email and we'll feature some of your responses in upcoming issues!

Last time, we asked whether you've ever sold off your stock holdings out of fear that a market crash was around the corner. Here are a couple of your answers...

I first got serious about investing in 2016-2017. By February 2020 I had nearly $250,000 invested, and then COVID-19 happened. At the bottom of the market, my investments were down about $100,000. A novel pathogen was ravaging its way across the globe, and it was only a matter of time before everyone became infected. I thought to myself that this really might be a situation where things are getting so bad, the value of my investments are the least of my concerns.

But even in a "this time it really is different" situation, my thought was that either this is going to end badly for everyone — and whether I sell or not won't make a difference — or it will all blow over and be like every other "this time it's different" crash. So, I stood my ground and watched my investments crash and burn.

Then something incredible happened. The market started going back up. Masks stopped the spread, vaccines were being developed, people continued to work remotely, people who lost their jobs found newer, higher-paying jobs (including yours truly). My investments finally broke even again and began to reach new highs only about six months later.

Now, five years after what truly seemed like the end of the world, my investments continue to climb. I look back at the COVID crash, and what looked like a bottomless cliff at the time is now just a little bump on a meteoric rise upward. If I'd panicked and sold, I would not have half the wealth I have today. —Dominic S.

Never out of fear, no. But there are times (such as these, incidentally) when stocks are valued so highly that cash (held in a Vanguard money market fund to shield it from inflation) is worth more. This amounts to a variable asset allocation. It makes sense to me and has served me well, but it is not simple and I would never suggest that anyone use the same approach. One advantage is that when stocks do crash, I have some cash to invest in them. —Bruno B.