• Human capital outweighs investment capital
  • As such, you can take aggressive risks
  • But, you are probably too risk-adverse
  • It's better to limit stock exposure to 50% until you know how you will react in a crash
  • If you can hold on, or even buy more while the market is down, increase your exposure
  • The most import thing is to save and invest like your life depends upon it

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The Ages of the Investor

The Ages of the Investor

by William J. Bernstein

  • The win condition is to have 20-25 times your annual cash flow needs in assets
  • If you win, quickly shift your core investments to low-risk categories
  • Delaying Social Security to age 70 can greatly reduce your cash-flow needs later in life
  • If it looks like you aren't going to win, reduce your cash flow needs

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  • The trickiest stage / most dependent on luck
  • Transition assets into a passive income stream
  • Watch closely for the win condition
  • Do not stop saving and investing

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  • Lump-sum: the timing of market peaks and troughs do not matter so long as the general trend is upwards
  • Periodic contributions: it is best for the market to sustain heavy losses early in your investments (cheap stocks) and high gains later

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