Investment Adages You May Want to Trust

Keep these adages in mind as you review your investment strategy.

Posted on

William Bernstein is a noted physician, author, and expert on matters financial, especially investment and asset allocation.

Here are several axioms from his ample writings:

For the young: “It’s virtually impossible for young workers to deploy their investment capital too aggressively, because their human capital overwhelms it.”

In other words, when saving for retirement early in your career, when your time horizon is the greatest, you can afford to take the risk and reap the long-term rewards that stocks present. You will outlive and out-earn any temporary downturn.

For those squeamish about a downturn: “Higher volatility leads to more opportunities to buy at much lower prices.”

Our goal is to buy low and sell high. Volatility gives us this opportunity, and should be embraced by an accumulating investor. As you invest regularly in a downturn, you can buy more shares at lower prices.

For those concerned about risk: “Risk, then, comes in two flavors, ‘shallow risk,’ a loss of real capital that recovers relatively quickly, say within several years; and ‘deep risk,’ permanent loss of real capital… Shallow risk, if handled properly, deprives you only of sleep for a while; deep risk deprives you of sustenance…Stocks protect you against deep risk, but exacerbate shallow risk.”

Once again, for an accumulating investor, shallow risk is uncomfortable, but it is an opportunity for gain if you have a long-term investment horizon.

For those approaching (or in) retirement: “Wealth is not a dollar amount, but rather a ratio measured in years; in other words, how many years’ living expenses you’ve saved.”

And it is dependent on your living expenses which you can control, and reduce, if needed. The retiree with a million dollar nest egg spending only $50,000 annually is twice as wealthy as the retiree spending $100,000. Your retirement spending is of supreme importance.

Keep these adages in mind as you review your investment strategy.

Will Your Money Last Through Retirement?

No one wants to run out of money. But without goals and a solid plan,
how can you know for sure whether you’re on the right track?

Will I be able to maintain my current lifestyle?

What will my monthly income be in retirement?

Can I protect my hard-earned savings and still
have the income I want?

Rodgers & Associates answers questions like these every day.

Get Personalized Answers
2025 Lititz Pike, Lancaster, PA 17601
Phone: 717-560-3800, Toll-Free: 888-876-3437