Bill Bernstein's "If You Can" Kindle Book for Millennials Free Today and Tomorrow

[audreyh1]

Yes, Bernstein was obviously blindsided by his clients bailing at the bottom. But that wasn't the worst part. The worst part was that once they bailed, they couldn't bring themselves to get back in. So they ended up locking in their loses permanently.

I feel for him. That was obviously some kind of "come to Jesus" moment for him when he realized that his clients, not being particularly sophisticated investors, no matter how hard he worked to educate then, would fall prey to panic and make really bad decisions. Well - with hindsight they looked really bad. What if things had worked out differently?

Many of us here who stayed invested, even rebalancing when things looked so dire (although I think quite a few folks couldn't bring themselves to rebalance, but at least they stayed invested), we were lucky. It could have been much worse. It could have been much, much longer recovery.

I don't think we should be so sanguine about the next nasty bear and expect a quick recovery like in 2009 and 2010. It won't necessarily bounce right back.

 

[growing_older]

I, on the other hand, learned a lot of what I know about investing from Dr Bernstein's books, and mostly based my portfolio on the ideas from "Four Pillars of Investing" I was never a client, nor got any direct coaching from him, and had no problem at all with staying the course during 2008. Maybe his change in approach is in response to a selected clientele that feels like they need to pay for guidance? Those of us who are so inclined to adopt his ideas and do it ourselves, have done just fine with the ideas.

 

[pb4uski]

Well, to put it in perspective, I can't think of any other financial adviser who made such an abrupt turn after 2008/09.... Vanguard didn't, Fidelity didn't, Money magazine didn't, Kiplinger Personal Finance didn't... etc. Bernstein is the only one who did.. you either believe in what you preach or you don't and it looks like he didn't really believe.

 

[Huston55]

Bernstein's The Four Pillars of Investing was my favorite investing book, my portfolio was/is based on the tenets of that book. His earlier books were along the same lines, just more technical.

One of my favorites too, and I did/do follow much of that advice.

I've lost respect for Bernstein after his sharp right turn after the Great Recession... I can't recommend reading him to young people even if it is free.

I understand the 'turn' that Bernstein made after The Great Recession; I've read some of the articles he's written since then. But, I don't really see that in this little 16 pg pamphlet. Admittedly, I gave it a quick read but, nowhere did I see him say "put all your money in CDs, T-Bills & the like." In fact, he recommends (in order) getting out of debt, creating an emergency fund, then investing as much as you possible can with an AA of 67/33 (discounting emergency funds). So, I'm not sure why all the cringing about giving this to millennials to read. I would, along with the other books he recommends in this pamphlet, plus some others.

I will say that his rather acerbic description of the market, financial advisors and our natural tendencies as humans should scare the bejeezus out of most anyone but, that's not necessarily a bad thing IMO, and not at all contrary to a total market investing approach.

 

[Huston55]

Everyone using the 4% rule or similar spending levels combined with a volatile portfolio is just betting that the future looks no worse than the past. That's not a bet I want to take. If I don't fill that straight, I might have to go back to work.

Actually, this is backwards. Your chances of "failure" using the 4% rule for a 30 yr retirement are about equal to drawing to an inside straight.

So, will you take the bet?

 

[daylatedollarshort]

Sorry, but I don't get the Bernstein bashing. After reading his "Ages of the Investor" in 2012, I have been using his liability matching ideas. For us, it was not that dramatic. First, liability matching is only for base spending in excess of pensions, SS, etc. You can be as aggressive as you like for your assets supporting discretionary spending. Second, he considers half of one's equity dividends as safe for liability matching purposes. So the change for us was moving to a TIPS ladder. We were already in the process of shifting equity to fixed income anyway. TIPS make sense for us since our pensions are non-COLA and fixed (maybe inadequate) COLA. Our ladder need go out only to age 70 (from ER at 57) because if we take SS at that age, SS, our pensions (if inflation leaves any spending power), plus dividends should be enough for base spending.

Everyone using the 4% rule or similar spending levels combined with a volatile portfolio is just betting that the future looks no worse than the past. That's not a bet I want to take. If I don't fill that straight, I might have to go back to work.

+1. We were quite happy to read up and implement many of the ideas of liability matching. It works well for us. My understanding is not that Bernstein recommends putting all of a retiree's portfolio in safe investments, but just the amount needed for essential expenses. I like not having to worry about ever running out of money, even if we both live well past 100 (except for the asteroid strike kind of events, and I can't control those). I don't want even a 1% chance of running out of money at age 100, just like I would not play Russian Roulette with only a 1% chance of losing. I see it as not risking the money we have and do need (or want to leave to the kids and charity) for the opportunity to make more money that we don't need.

There are some posters on the Boglehead forum in favor of this strategy (discussion in the link):
Bernstein: When You've Won the Game, Stop Playing

 

[pb4uski]

I have to wonder in how many instances his funding for essentials with safe investments and open on the remainder just gets one back to a 40/60 to 60/40 AA if the remainder is in equities so it becomes a distinction without a difference.

 

[audreyh1]

I have to wonder in how many instances his funding for essentials with safe investments and open on the remainder just gets one back to a 40/60 to 60/40 AA if the remainder is in equities so it becomes a distinction without a difference.

It depends on the size of the nest egg, so I would say there is definitely a difference. If someone retires with just enough to cover their residual expenses (20X to 25X expenses not covered by other guaranteed income streams such as pension and SS), he recommends no equity exposure.

For someone to put 40% in equities, according to this new criteria, they would need to retire with 33X to 42X residual expenses saved/invested. That's a considerably larger nest egg.

Classic Trinity study approach would be 25X residual expenses, invest at least 40% in equities for 4% rule and 30 year expected retirement duration. Shorter expected retirement can reduce recommended equity exposure somewhat.

Definitely a difference.

 

[pb4uski]

Interesting. But if you had 25x and we're all bonds vs 40/60 to 60/40 wouldn't the portfolio survival rate with inflation be a lot lower? It seems to me that of you follow his advice you need a bigger nestegg to retire in order for investment returns to cover inflation.

 

[Midpack]

Everyone using the 4% rule or similar spending levels combined with a volatile portfolio is just betting that the future looks no worse than the past. That's not a bet I want to take. If I don't fill that straight, I might have to go back to work.

The "past" data the 4% SWR study was based on includes the Great Depression, two World Wars and several other wars, dozens of recessions (some lengthy), and a few inflationary spikes to name a few setbacks.

That's fine if you want to be more conservative, I am too, but I wouldn't want readers to think the "past" data used for the various 4% SWR studies (and FIRECALC) was mostly recent or rosy historical circumstances only - 'filling a straight' isn't a fair analogy.

 

[audreyh1]

Interesting. But if you had 25x and we're all bonds vs 40/60 to 60/40 wouldn't the portfolio survival rate with inflation be a lot lower? It seems to me that of you follow his advice you need a bigger nestegg to retire in order for investment returns to cover inflation.

That was the issue for me - his recommendation ignores inflation risks. But if someone is going to bail when stocks crash anyway, then it doesn't matter - they are even further behind.

Normally 33X residual expenses is recommended for a 100% fixed income retirement portfolio.

Between a rock and a hard place!

 

[samclem]

Well, to put it in perspective, I can't think of any other financial adviser who made such an abrupt turn after 2008/09.... Vanguard didn't, Fidelity didn't, Money magazine didn't, Kiplinger Personal Finance didn't... etc. Bernstein is the only one who did.. you either believe in what you preach or you don't and it looks like he didn't really believe.

I don't think Bernstein changed his mind about objective risk, AA strategy, etc. He changed his mind about how people behave (vs how they say they will behave). That's fine, but I don't come to a financial author for tips/guidance on how I might behave in the future. Warranted or not, I still think I'm better able to judge that than he is. I just want the facts.

Second, he considers half of one's equity dividends as safe for liability matching purposes.

This is a flourish that I believe is more recent than his earlier versions. So, if my total portfolio is $1M and it is 60S/40B, he says I can count $300K as "safe" for meeting my baseline liabilities. How does he propose that I turn that $300K into an income stream?

 

[MichaelB]

Mr. Bernstein published an updated view of expected future returns (in '14) which were substantially below long term averages. So there are really two factors here - lower expected returns together with a reduced allocation to equities.

 

[Huston55]

It depends on the size of the nest egg, so I would say there is definitely a difference. If someone retires with just enough to cover their residual expenses (20X to 25X expenses not covered by other guaranteed income streams such as pension and SS), he recommends no equity exposure.

For someone to put 40% in equities, according to this new criteria, they would need to retire with 33X to 42X residual expenses saved/invested. That's a considerably larger nest egg.

Classic Trinity study approach would be 25X residual expenses, invest at least 40% in equities for 4% rule and 30 year expected retirement duration. Shorter expected retirement can reduce recommended equity exposure somewhat.

Definitely a difference.

Starting to sound a lot like Otar's 'zones' isn't it?!

 

[ponyboy]

Are we positive the authors last name is bernstein or is it supposed to be bernstain?

 

[Midpack]

From his good old days...

 

[jimbee]

From his good old days...

I think that quote still works.