Highlights from Bernstein Interview
/William Bernstein was interviewed in the September issue of Money. Here are some highlights:
1. How young people should invest – no surprise here: “For the average person, you’ll want a very high stock allocation.” The reason is that you have three to four decades of earnings potential ahead of you. “So even if your investment capital when you’re 26 years old falls by one-half, your total worth has fallen by only a couple of percent because you still have that 34 years of human capital left.”
2. A different take on inflation protection: Bernstein points out that buying dividend-yielding stocks is not the only way to protect against future inflation. Another asset class is short, high-quality bonds with a maturity of less than three years. “If we ever do get an inflationary shock, investors will demand a high real short-term rate of return. It’s what happened during the late ‘70s and early ‘80s.”
3. On investing near and after retirement: “…you should save 20-25 times your residual living expenses – that is, the yearly shortfall you have to make up after Social Security and any pension. This portfolio should be in safe assets….” This is yet another reason why you should have a good handle on your expenses now. It is hard to set goals and plan for the future otherwise.
To view the entire interview, including how to invest during other stages of life and how to find a good financial advisor, go here.
Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.