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!