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Developing the Fortitude to Ignore the Noise 10:49 Lena: We’ve established that index funds are the engine, but man, that engine can feel like it’s vibrating pretty hard sometimes. I think about 2008, or even the 2022 "slow grind" down. It’s one thing to hear "stay the course" and another to watch your account balance drop by the price of a luxury car in a week.
11:09 Miles: It’s brutal. And JL Collins is very open about his own "expensive education" in this area. Back in 1987, on "Black Monday," the market dropped over twenty percent in a single day. He knew intellectually that he should stay the course. He held on through October, through November, but as the market kept grinding lower into December, he finally snapped and sold.
11:33 Lena: Oh no. He sold at the bottom?
11:35 Miles: Pretty much. And then he watched from the sidelines as the market rebounded. By the time he felt "safe" enough to get back in a year later, the prices were higher than they were before the crash. He essentially locked in his losses and paid a premium to get back his own seat at the table.
11:51 Lena: That’s the "shame" of market timing. It feels like you’re being "prudent" by getting out, but you’re actually just sabotaging your future self.
12:00 Miles: Right. You have to realize that the stock market is a "wild, swinging pendulum," as Collins describes it. But over the long term, that pendulum is attached to a clock that is steadily moving forward. Since the 1970s, the market has returned an average of about 11.9 percent a year with dividends reinvested. But it never feels like 11.9 percent. It feels like "plus twenty" one year and "minus thirty" the next.
12:25 Lena: So how do we build that "mental toughness" he talks about? How do we stop ourselves from clicking that "sell" button when the news is screaming about a recession?
12:34 Miles: One way is to "learn the history." If you look at a chart of the last hundred years, you’ll see dozens of "world-ending" events. The Great Depression, World War II, the Cold War, the 70s inflation, 9/11, the 2008 crash. In every single case, the market eventually recovered and went on to new highs. Why? Because businesses adapt. People want to improve their lives, and that collective drive is more powerful than any temporary crisis.
13:02 Lena: It’s about trust, isn't it? Trusting in the long-term ingenuity of the human race.
0:14 Miles: It really is. And another practical tip Collins gives is to "stop checking your account." If you’re a long-term investor, what the market does today or tomorrow is noise. It doesn't matter. The only price that matters is the price twenty or thirty years from now when you actually need the money.
13:26 Lena: I love that. It’s like checking the price of your house every single day. Nobody does that because you’re living in it and you aren't selling it tomorrow. Why do we do it with our stocks?
13:36 Miles: Because they’re liquid. We can see the "price" changing in real-time, so we feel like we need to "do something." But in investing, "doing something" is almost always the wrong move. The best thing you can do is "nothing." Just keep buying your index funds every month, regardless of the price. That’s dollar-cost averaging. When the market is high, your money buys fewer shares. When the market is low, your money buys more shares. It’s an automatic "buy low" system.
14:03 Lena: And for the people who are nearing retirement, the "all-in on stocks" strategy might feel a bit too risky. That’s where bonds come in, right?
0:41 Miles: Exactly. Bonds are the "ballast" for your ship. While stocks provide the "sails" for growth, bonds help smooth out the ride. Collins suggests a simple bond index fund like VBTLX—the Vanguard Total Bond Market Fund. It’s less volatile than stocks and provides a steady income stream.
14:30 Lena: But he’s pretty aggressive with his allocation, isn't he? He stays mostly in stocks for a long time.
14:36 Miles: He does. He argues that if you have a long time horizon, you want as much in the "growth engine" of stocks as possible. He usually only suggests adding bonds when you’re nearing the "withdrawal phase"—when you’re actually living off the money. Even then, he often sticks with a high percentage of stocks because you need that growth to outpace inflation over a thirty-year retirement.
14:57 Lena: It’s a balance. You want enough bonds so you don't panic during a crash, but not so many that your money stops growing. It’s about "knowing yourself." If a thirty percent drop in your portfolio will make you sell everything and hide under the bed, then you need more bonds.
15:13 Miles: That’s a key point. The "right" allocation is the one that lets you sleep at night and stay the course. There’s no point in having a "perfect" all-stock portfolio if you’re going to abandon it at the first sign of trouble. The simple path is only effective if you actually stay on the path.
15:29 Lena: And it’s interesting how he views wealth as a "responsibility." He mentions that our only obligation to society is to make sure we and our children are not a burden to others. Building this wealth isn't just about "getting rich"—it’s about self-reliance. It’s about having an emergency fund, insurance, and assets so that when life happens, you can handle it without needing a bailout.
15:51 Miles: It’s a very grounded, almost old-school philosophy. Wealth is a tool for freedom and security, not a scorecard for status. When you look at your dollars as "freedom units" instead of "stuff units," your whole perspective on the market changes. A market crash isn't a disaster; it’s just the world putting your "freedom units" on sale for a while.