Securities, such as stocks, bonds, and the index and mutual funds that hold them, are the most passive of the passive income asset classes. They likely play some role in all paths to FI. For our personal situation, the majority of our securities are held in tax-advantaged accounts, and we are allocating our after-tax money to different asset classes (see the resources on my Passive Income page to understand why). Regardless, the following resources shaped our securities portfolio, and should be suitable for you to do the same.

1. The Simple Path to Wealth

Jim’s book (or audiobook in my case) is a great place to start for the beginning investor. He outlines a very simple approach to index fund investing that will outperform most alternatives, such as actively managed mutual funds. I have deviated from his recommendations after reading the other resources below, but I believe this book will give almost anyone the confidence necessary to take their investments into their own hands. The info in the book is also available for free on his blog, although I think there is value in getting the book or audiobook, especially if you can get it from the library.

2. The Bogleheads’ Guide to Investing

This book covers the essentials of building and investing a diversified portfolio. If you only read this book and The Simple Path to Wealth above, you will probably have everything you need to succeed. Nonetheless, I recommend also reading at least one of the two books below, since they show more data than the Bogleheads’ book. The additional data strengthens the case for simple low cost index fund investing.

3a. The Intelligent Asset Allocator

This book also highlights the effectiveness of keeping a relatively simple portfolio comprised of low cost index funds. It recommends holding a few more asset classes than JL Collins does, such as foreign stocks, for the purpose of having more diversity when you periodically re-balance your portfolio. I started implementing this approach recently myself, since it has historically offered improved returns without additional risk.

3b. All About Asset Allocation

This is nice complement to the Intelligent Asset Allocator listed above. This book reiterates the benefits of holding (and re-balancing) a portfolio of diversified low cost index funds. It goes a bit further by giving examples of index funds you may consider depending on your progress and risk tolerance. As mentioned in this book, asset allocation accounts for more than 90% of a portfolio’s long term performance. This book and the two above it will give you all the info you need to successfully manage your own investment portfolio.

Close Menu