JL Goes International, and to ETFs… Oh my!

The landscape of passive index investing is undergoing a notable shift as JL Collins, a central figure in the Financial Independence, Retire Early (FIRE) movement and author of "The Simple Path to Wealth," has announced significant adjustments to his long-standing investment strategy. For over a decade, Collins has been a staunch advocate for a U.S.-centric portfolio, specifically recommending the Vanguard Total Stock Market Index Fund (VTSAX). However, citing a confluence of geopolitical shifts, domestic economic policy concerns, and a changing global equity landscape, Collins has transitioned a portion of his holdings toward international exposure and shifted his primary vehicle from mutual funds to Exchange-Traded Funds (ETFs).

This pivot represents a departure from the "U.S. only" doctrine that has characterized much of modern American index investing. The move involves the adoption of the Vanguard Total World Stock Index ETF (VT) within tax-advantaged accounts and a transition from VTSAX to the Vanguard Total Stock Market ETF (VTI) for domestic holdings. While seemingly technical, these adjustments reflect a broader recognition of the diminishing dominance of the United States in the global economy and the increasing efficiency of ETF structures.

The Evolution of the Simple Path: A Historical Perspective

To understand the significance of this shift, one must look at the historical context of the "Simple Path" philosophy. Since 2012, Collins has advised U.S.-based investors that the American economy was sufficiently large and diversified to serve as a standalone investment. This "home bias" was grounded in the post-World War II economic reality. In 1945, the United States stood as the only major industrial power with its infrastructure intact, accounting for approximately 50% of global Gross Domestic Product (GDP) and nearly 80% of the world’s equity market capitalization.

Over the subsequent decades, the implementation of the Marshall Plan and the industrialization of emerging markets led to a natural "shrinking of the pie" for the U.S. in relative terms, even as the absolute size of the global economy grew. By 1960, the U.S. share of global GDP had declined to roughly 40%. In the current era, that figure has dropped to approximately 25%. Despite this relative decline, the U.S. economy has grown from approximately $2.5 trillion in 1945 to $32 trillion today.

In the equity markets, the trend has been similar. The U.S. currently accounts for approximately 46% of global equity market capitalization. China follows at 14%, with the European Union (EU) representing between 8% and 12%. For years, Collins maintained that the U.S. market’s size justified a domestic-only approach, but he frequently noted that international diversification would become necessary once the U.S. share of the global market fell below a certain threshold—a threshold that recent data suggests is being approached more rapidly than previously anticipated.

Catalysts for Change: Economic Policy and Currency Concerns

The decision to integrate international stocks via the Vanguard Total World Stock Index (VT) is driven by several macroeconomic factors that Collins identifies as potential headwinds for U.S. assets. A primary concern cited is the current trajectory of U.S. economic policy, specifically regarding trade and fiscal management.

The implementation of aggressive tariffs and an erratic approach to international trade agreements have raised concerns among market analysts about the long-term reliability of the U.S. as a trading partner. These policies are viewed as potential catalysts for inflation, as domestic companies may eventually pass the costs of imported goods and materials to consumers. Furthermore, global allies and competitors alike have begun forming stronger regional trading blocs to reduce their dependence on the American market, a move that could accelerate the erosion of U.S. economic dominance.

Simultaneously, the status of the U.S. dollar as the world’s primary reserve currency is facing unprecedented scrutiny. While the dollar has held this position since the end of World War II, replacing the British pound, recent years have seen a concerted effort by various nations to conduct trade in alternative currencies. In the past year, the U.S. dollar experienced a valuation drop of approximately 10% against a basket of other major currencies, marking its most significant decline in five decades. This currency volatility, coupled with a national debt approaching $40 trillion, has created a sense of urgency for investors to seek geographic diversification.

Comparative Performance: The 2025 Market Divergence

The most immediate catalyst for the strategy shift appears to be the stark performance gap between U.S. and international equities in 2025. While the U.S. market, as measured by the S&P 500, delivered a robust return of 16.4%—well above its 50-year average of 12%—it significantly underperformed when compared to the rest of the world.

Data from 2025 reveals that of the top 30 performing national markets, the United States ranked near the bottom. In contrast, international markets saw explosive growth:

• Mexico: The top-performing market on the list, returning approximately 55%.
• China: Rebounded with returns of roughly 30%.
• Canada: Matched the 30% threshold.
• European Union: Every country within the EU saw returns exceeding 20%, with many surpassing the 30% mark.
• India: Even as a relatively lower performer in the top tier, India returned 11%.

Against this global backdrop, the 16.4% return of the U.S. market is viewed by some analysts as a signal that capital is beginning to seek value and growth in undervalued international sectors. By moving into the Vanguard Total World Stock Index (VT), investors gain a portfolio that is currently 62.5% U.S. and 37.5% international. This allocation allows for continued participation in American growth while providing a hedge against domestic stagnation or currency devaluation.

The Technical Transition: Mutual Funds to ETFs

In addition to the geographic shift, the move from mutual funds like VTSAX to ETFs like VTI and VT marks a significant technical update. Historically, the FIRE community favored Vanguard’s mutual fund shares due to their "set it and forget it" nature and the ability to automate investments in exact dollar amounts. However, the structural advantages of ETFs have become too significant to ignore.

The primary driver for this change is the Expense Ratio (ER). The Vanguard Total World Stock Index Fund (VTWAX) carries an expense ratio of 0.09%, whereas its ETF counterpart (VT) is priced at 0.06%. Similarly, the transition from VTSAX (0.04%) to VTI (0.03%) offers a marginal but measurable reduction in costs. In the world of index investing, where minimizing "drag" is paramount, the lower fees of ETFs provide a long-term advantage.

Furthermore, the historical barriers to ETFs, such as trading commissions and the complexity of bid-ask spreads, have largely vanished. Most major brokerages now offer commission-free trading for ETFs, and Vanguard has streamlined the process for investors to convert mutual fund shares into ETF shares without triggering a taxable event. This "tax-free conversion" is a critical component of the strategy, allowing investors to modernize their portfolios without incurring capital gains taxes, provided the assets are held within the same brokerage account.

Strategic Implementation and Portfolio Impact

The implementation of these changes has been targeted primarily at tax-advantaged accounts, such as Individual Retirement Accounts (IRAs). This allows for a complete reallocation into the Total World Stock Index (VT) without the immediate burden of capital gains taxes that would occur in a taxable brokerage account.

For many investors, the "VTSAX and Chill" mantra is being replaced by "VT and Chill" or "VTI and Chill." The Vanguard Total World Stock Index (VT) is particularly noted for its self-adjusting nature. As the market capitalizations of various countries rise or fall, the fund automatically rebalances to reflect the global market. If the U.S. share of the global economy continues to decline, the fund will naturally decrease its U.S. exposure and increase its international weightings without requiring active intervention from the investor.

Broader Implications for the Investing Public

The shift by a prominent figure like Collins serves as a bellwether for the broader retail investing public. It signals an end to the era where U.S. exceptionalism was a sufficient basis for a retirement strategy. As the global economy becomes more multipolar, the risks of geographic concentration become more pronounced.

Financial analysts suggest that this move may encourage a new generation of investors to adopt a "Global-First" mindset. While the U.S. remains the most significant single market, the rapid growth of emerging economies and the recovery of European markets suggest that the next decade of returns may not be dominated by Silicon Valley or Wall Street alone.

The core tenets of the "Simple Path" remain intact: acquire low-cost, broad-based index funds, maintain a long-term horizon, and resist the urge to engage in active trading. However, the definition of "broad-based" has expanded. No longer confined by national borders, the modern index investor is increasingly looking toward a portfolio that encompasses the entirety of human economic endeavor, regardless of where that growth occurs.

In conclusion, the adjustment to the Collins portfolios highlights a pragmatic response to a changing world. By embracing international diversification and the efficiency of ETFs, the strategy evolves to meet the challenges of a $40 trillion debt, a fluctuating dollar, and a global marketplace that is no longer content to sit in the shadow of a single superpower. For the individual investor, the message is clear: the path to wealth remains simple, but it must now be global.