Jul 10, 2017

A Simple Approach to Investing (Podcast and Article)

I just got back from a ride to the coast listening to Meb Faber’s podcast with surgeon and investor Bill Bernstein. I have read a bunch of Bill’s books (Intelligent Asset Allocator, Four Pillars of Investing, Investor’s Manifesto) and he has had quite an impact on my approach to investing (index funds, tilt towards small cap and value). Bill has a great quote in the podcast that really resonated with me: “Investing is simple but not easy.”

First, the simple. He espouses a three fund approach to investing: 1/3 U.S. stocks, 1/3 International stocks and 1/3 U.S. Bonds. Later in the podcast he makes it even simpler by advocating for one Target Date Fund that matches up with your expected retirement date. Pretty simple right?

Why isn’t it easy? Here is where Bernstein does a great job of highlighting the hurdles that investors face in following this simple approach. He lays these out in a 16 page essay he wrote titled “If You Can..How Millennials Can Get Rich Slowly,” which I blogged about before. Here are the hurdles he highlights:

  • People spend too much money
  • Lack a basic understanding of finance (which most don’t have)
  • Lack of understanding of market history
  • I have met the enemy and it is….me
  • The “monsters” in the financial industry

Both the podcast and the essay provide an excellent primer on investing and also describe strategies so investors can overcome these hurdles. Enjoy!

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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