William Bernstein latest book on investing

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Beachbum KL
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William Bernstein latest book on investing

Post by Beachbum KL »

From the latest book , The Four Pillars of Investing by William Bernstein…

“When you’ve won the retirement game, stop playing it with the money you need to pay the rent and groceries.
I suggest at least 10 years’ worth of basic expenses; 20 years or 25 years is even better.
Take whatever risk you like with what assets you have beyond this”

Does anyone thinks that this strategy is too conservative ?
Last edited by Beachbum KL on Fri Feb 02, 2024 1:35 am, edited 1 time in total.
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Brianmcg321
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Re: William Bernstein New Book on asset allocation

Post by Brianmcg321 »

No.

viewtopic.php?t=346520

If you had $1mil and were going to draw 4%, that would mean you would be at a 60/40, stock/bonds, portfolio. That would be a good portfolio for most retired people.
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RubyTuesday
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Re: William Bernstein latest book on investing

Post by RubyTuesday »

Beachbum KL wrote: Fri Feb 02, 2024 1:06 am From the latest book , The Four Pillars of Investing by William Bernstein…

“When you’ve won the retirement game, stop playing it with the money you need to pay the rent and groceries.
I suggest at least 10 years’ worth of basic expenses; 20 years or 25 years is even better.
Take whatever risk you like with what assets you have beyond this”

Does anyone thinks that this strategy is too conservative ?
What does he suggest you do with the money you’re not playing with?

TIPS ladder, Nominal bond funds, MM Funds, mattress?
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
ScubaHogg
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Re: William Bernstein latest book on investing

Post by ScubaHogg »

Beachbum KL wrote: Fri Feb 02, 2024 1:06 am From the latest book , The Four Pillars of Investing by William Bernstein…

“When you’ve won the retirement game, stop playing it with the money you need to pay the rent and groceries.
I suggest at least 10 years’ worth of basic expenses; 20 years or 25 years is even better.
Take whatever risk you like with what assets you have beyond this”

Does anyone thinks that this strategy is too conservative ?
He talks at length in that book and others why he is in favor of a liability matching portfolio (LMP) vs the more standard BH probability based portfolio (to use Wade Pfau’s term). You either find his argument compelling (I do) or you don’t

Not to put words in his mouth, but I think he would say the LMP needs to be either TIPS or an inflation adjusted pension.

Your Risk Portfolio (RP) on the other hand can be much more aggressive
“You can have a stable principal value or a stable income stream but not both" | - In Pursuit of the Perfect Portfolio
dbr
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Re: William Bernstein latest book on investing

Post by dbr »

ScubaHogg wrote: Fri Feb 02, 2024 6:08 am
Not to put words in his mouth, but I think he would say the LMP needs to be either TIPS or an inflation adjusted pension.
That has always been my understanding. Also, of course, that income may already exist in the form of Social Security, pensions, and annuities. I assume he is clear about that.

The other comment that ten years of 25 in a conservative position works out to 60/40 leaves some food for thought as to what difference is even being recommended. On the other hand if one has in total 25X and one puts all of it in conservative low returning assets that might be something one would think twice about. A standard result in safe withdrawal rate examples is that all bond portfolios have high failure rates at 4% withdrawal. Note 25x means 4% withdrawal. You can secure 4% withdrawal for 30 years with a TIPS ladder if you buy the TIPS at about 1.5% real yield or better, but at 0% real the withdrawal is 3.3%. It is still a concern that when the ladder ends one is left with nothing so a person would hardly put everything in a ladder or in an SPIA.

Bernstein's approaches are well worth considering, especially if the rationale is understood, but I would not arrive at any investing plan based simply on someone writing a book or an article or making a post trying to tell someone what to do without that someone fully understanding what is going on.
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Re: William Bernstein latest book on investing

Post by Target2019 »

Beachbum KL wrote: Fri Feb 02, 2024 1:06 am From the latest book , The Four Pillars of Investing by William Bernstein…

“When you’ve won the retirement game, stop playing it with the money you need to pay the rent and groceries.
I suggest at least 10 years’ worth of basic expenses; 20 years or 25 years is even better.
Take whatever risk you like with what assets you have beyond this”

Does anyone thinks that this strategy is too conservative ?
Mr. Bernstein is a successful author. I wouldn't ignore what he says. You'll find there are arguments with just about anything written in a book, so there's that, too.

I don't have the book handy, so I'm missing a lot of context for what you're pointing out.

Are you asking if more risk is ok? Or is it the goals of 10 years' expenses, and so on?

I think one point you've missed is that he could be speaking of a period in time when the investor switches from accumulation to decumulation. I'm assuming you're younger. I am retired, in case that makes a difference.
Kinda like an 80% passive index believer and 20% free spirit.
dbr
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Re: William Bernstein latest book on investing

Post by dbr »

Beachbum KL wrote: Fri Feb 02, 2024 1:06 am From the latest book , The Four Pillars of Investing by William Bernstein…

“When you’ve won the retirement game, stop playing it with the money you need to pay the rent and groceries.
I suggest at least 10 years’ worth of basic expenses; 20 years or 25 years is even better.
Take whatever risk you like with what assets you have beyond this”

Does anyone thinks that this strategy is too conservative ?
Another comment is that between ten years and 25 years is a huge range. Just on the face if it such a wide range in the advice is not very helpful. Note the comment is already made that if "won the game" means you have assets 25 times your total spending then 10 years gives you a 60/40 asset allocation and 25 years gives you no stocks at all. As a standing statement this is much to simplistic and self contradictory to follow. There is also a discussion in there regarding what is "basic expenses" and what that means relative to all your expenses.

I would advise reading the whole book carefully and stay away from taking marching orders in 25 words or less formats.
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Re: William Bernstein latest book on investing

Post by simplesimon »

Beachbum KL wrote: Fri Feb 02, 2024 1:06 am From the latest book , The Four Pillars of Investing by William Bernstein…

“When you’ve won the retirement game, stop playing it with the money you need to pay the rent and groceries.
I suggest at least 10 years’ worth of basic expenses; 20 years or 25 years is even better.
Take whatever risk you like with what assets you have beyond this”

Does anyone thinks that this strategy is too conservative ?
What are you trying to achieve by doing otherwise?
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Re: William Bernstein latest book on investing

Post by HMSVictory »

Percent of must spend from your portfolio (ie: expenses) is King.

0-2% spend you can have any allocation you want

2-4% spend you need to have 5-10 years in safe assets

4%+ spend you need to have 10+ years in safe assets because your draw rate is so high

Portfolio allocation is driven by need to draw and secondly by behavioral reasons (downside risk protection). All else is supplemental.
Stay the course!
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Re: William Bernstein latest book on investing

Post by delamer »

dbr wrote: Fri Feb 02, 2024 7:02 am
ScubaHogg wrote: Fri Feb 02, 2024 6:08 am
Not to put words in his mouth, but I think he would say the LMP needs to be either TIPS or an inflation adjusted pension.
That has always been my understanding. Also, of course, that income may already exist in the form of Social Security, pensions, and annuities. I assume he is clear about that.

The other comment that ten years of 25 in a conservative position works out to 60/40 leaves some food for thought as to what difference is even being recommended. On the other hand if one has in total 25X and one puts all of it in conservative low returning assets that might be something one would think twice about. A standard result in safe withdrawal rate examples is that all bond portfolios have high failure rates at 4% withdrawal. Note 25x means 4% withdrawal. You can secure 4% withdrawal for 30 years with a TIPS ladder if you buy the TIPS at about 1.5% real yield or better, but at 0% real the withdrawal is 3.3%. It is still a concern that when the ladder ends one is left with nothing so a person would hardly put everything in a ladder or in an SPIA.

Bernstein's approaches are well worth considering, especially if the rationale is understood, but I would not arrive at any investing plan based simply on someone writing a book or an article or making a post trying to tell someone what to do without that someone fully understanding what is going on.
He previously has talked about have 10+ years of residual expenses in a TIPS ladder or something similar. Residual being defined as basic expenses minus Social Security plus pensions plus annuitues.

My spouse and I are very fortunate to currently have no residual expenses, since our SS and pensions cover everything. But if I am widowed and find that I do need to withdraw from my portfolio to cover basic expenses, then I’ll adopt the Bernstein allocation. The number of years I put in cash equivalents will be determined by my age at that time.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: William Bernstein latest book on investing

Post by abc132 »

I like to think of the joke about becoming a millionaire by being a billionaire and losing money purchasing an airline company.

The advice is great that if we can secure our portfolio with extra stuff (risk portfolio) on top of that then laddering TIPS makes sense.

The problem with this is it is not actionable on how to get to the everything-you-need-plus-extra-stuff.

When and how do we purchase our TIPS to minimize risk along the way?
bbrowning
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Re: William Bernstein latest book on investing

Post by bbrowning »

RubyTuesday wrote: Fri Feb 02, 2024 6:03 am
Beachbum KL wrote: Fri Feb 02, 2024 1:06 am From the latest book , The Four Pillars of Investing by William Bernstein…

“When you’ve won the retirement game, stop playing it with the money you need to pay the rent and groceries.
I suggest at least 10 years’ worth of basic expenses; 20 years or 25 years is even better.
Take whatever risk you like with what assets you have beyond this”

Does anyone thinks that this strategy is too conservative ?
What does he suggest you do with the money you’re not playing with?

TIPS ladder, Nominal bond funds, MM Funds, mattress?
In Chapter 6 - "Asset Allocation For Investing Adults, Part 2" - there's a section on "The Most Important Number For Retirees" and here he goes into more detail about suggested asset allocation based on size of nest egg compared to expenses. Expenses here meaning Residual Living Expenses (RLE), defined as expenses minus any fixed income streams (social security, pensions). With a portfolio of only 25x RLE, he posits that this investor cannot afford to take much risk if they want to guarantee (or as closely as possible) that they have enough for the rest of their life expectancy. So, in this case, he recommends spending down retirement savings to defer Social Security to 70 ("buying" that inflation-adjusted annuity in essence) and the leftover used for ideally inflation-protected investments, such as a TIPS ladder.

For investors with 2-3.5% withdrawal rates (28x - 50x RLE), he recommends anything between 25/75 and 75/25 stock/bond mixes. For investors with < 2% withdrawal rates (> 50x RLE), he says the asset allocation doesn't really matter for you but may to your heirs or charities that benefit from what's leftover.

To the original question of whether this is too conservative, Bernstein's arguments for why he doesn't believe a 4% withdrawal rate (25x RLE) is enough for a traditional 25/75, 60/40, 75/25 stock/bond split are laid out in Chapter 6 as well, with reference to the Trinity Study as well as the Bengen rule. Ultimately, it comes down to an argument that historical performance does not predict future returns, and a prediction on Bernstein's part that stocks and bonds will not continue to provide real returns over the next several decades as high as they had in the last century. It's a prediction he backs up with extensive experience, but that doesn't mean it will come true.

Personally, I'm quite a ways from retirement, hoping for at least 30x expenses, and plan to follow a more traditional stock/bond mix. If you're curious about a Liability Matching Portfolio, keep reading the rest of Chapter 6 where he goes into more details.
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Re: William Bernstein latest book on investing

Post by delamer »

abc132 wrote: Fri Feb 02, 2024 11:45 am I like to think of the joke about becoming a millionaire by being a billionaire and losing money purchasing an airline company.

The advice is great that if we can secure our portfolio with extra stuff (risk portfolio) on top of that then laddering TIPS makes sense.

The problem with this is it is not actionable on how to get to the everything-you-need-plus-extra-stuff.

When and how do we purchase our TIPS to minimize risk along the way?
Can you elaborate on the “not actionable” part?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: William Bernstein latest book on investing

Post by dagsboro »

If what Bill Bernstein said is quoted accurately, then it correlates positively with my own financial attitudes. I am very cautious and want to see the return of my money even more than I want to see the return on my money. Our government, our financial institutions, our citizens are flawed - and some are even corrupt. So CYA before you put too much trust in markets. But if you have 20 to 25 years before you need your money, then I still trust our capitalist system to deliver with stocks and bonds and real estate.
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Re: William Bernstein latest book on investing

Post by abc132 »

delamer wrote: Fri Feb 02, 2024 4:24 pm
abc132 wrote: Fri Feb 02, 2024 11:45 am I like to think of the joke about becoming a millionaire by being a billionaire and losing money purchasing an airline company.

The advice is great that if we can secure our portfolio with extra stuff (risk portfolio) on top of that then laddering TIPS makes sense.

The problem with this is it is not actionable on how to get to the everything-you-need-plus-extra-stuff.

When and how do we purchase our TIPS to minimize risk along the way?
Can you elaborate on the “not actionable” part?
How we add TIPS along the way without increasing risks prior to already being at 28x expenses.

Our biggest risk is that our portfolio is not big enough. Taking lower expected returns can increase risk when our portfolio is not already at 28x. How you get your TIPS really matters if the goal is risk reduction. It would be possible to do this and increase risk. I suspect many are doing this without being aware of the additional risk along the way.
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Beachbum KL
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Re: William Bernstein latest book on investing

Post by Beachbum KL »

Thank you for all the astute comments and questions.
I don’t want to use the wrong words to explain Dr William points, here is what he says in the book…
“On the bond side, things are simpler. A bond portfolio’s workhorse should be either a short-term Treasury fund or your own hand-built ladder. Better yields can often be had from bank certificates of deposit, which also carry a government guarantee below $250,000.
If your burn rate is between 2% and 3.5%, you’re probably in good financial shape. You should still defer Social Security to age 70 and have a reasonable stock/bond mix (between 25/75 and 75/25), which should service your retirement needs fairly well”

Probably a good reminder for retiree that stock return might be lower in the next decade.
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Beachbum KL
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Re: William Bernstein latest book on investing

Post by Beachbum KL »

Thank you for the clear and precise explanation . It made me understand Dr William’s writing deeper.
bbrowning wrote: Fri Feb 02, 2024 1:30 pm
RubyTuesday wrote: Fri Feb 02, 2024 6:03 am
Beachbum KL wrote: Fri Feb 02, 2024 1:06 am
In Chapter 6 - "Asset Allocation For Investing Adults, Part 2" - there's a section on "The Most Important Number For Retirees" and here he goes into more detail about suggested asset allocation based on size of nest egg compared to expenses. Expenses here meaning Residual Living Expenses (RLE), defined as expenses minus any fixed income streams (social security, pensions). With a portfolio of only 25x RLE, he posits that this investor cannot afford to take much risk if they want to guarantee (or as closely as possible) that they have enough for the rest of their life expectancy. So, in this case, he recommends spending down retirement savings to defer Social Security to 70 ("buying" that inflation-adjusted annuity in essence) and the leftover used for ideally inflation-protected investments, such as a TIPS ladder.

For investors with 2-3.5% withdrawal rates (28x - 50x RLE), he recommends anything between 25/75 and 75/25 stock/bond mixes. For investors with < 2% withdrawal rates (> 50x RLE), he says the asset allocation doesn't really matter for you but may to your heirs or charities that benefit from what's leftover.

To the original question of whether this is too conservative, Bernstein's arguments for why he doesn't believe a 4% withdrawal rate (25x RLE) is enough for a traditional 25/75, 60/40, 75/25 stock/bond split are laid out in Chapter 6 as well, with reference to the Trinity Study as well as the Bengen rule. Ultimately, it comes down to an argument that historical performance does not predict future returns, and a prediction on Bernstein's part that stocks and bonds will not continue to provide real returns over the next several decades as high as they had in the last century. It's a prediction he backs up with extensive experience, but that doesn't mean it will come true.

Personally, I'm quite a ways from retirement, hoping for at least 30x expenses, and plan to follow a more traditional stock/bond mix. If you're curious about a Liability Matching Portfolio, keep reading the rest of Chapter 6 where he goes into more details.
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Re: William Bernstein latest book on investing

Post by Capster1 »

My initial reaction is how can you know what 10 years of basic expenses would be? Seems like a difficult thing to forecast for many reasons.
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Re: William Bernstein latest book on investing

Post by jaMichael »

I loved this book. Bernstein is a Bogle acolyte but a free thinker and thus occasionally a minor heretic (commodities (pro), value tilt (pro), dry powder market timing (pro), total bond market (against)). Here are my notes on his chapter discussing LMPs:

- Bernstein recommends a stock-bond allocation between 25/75 and 75/25 in retirement, and an initial safe withdrawal rate of 2 to 3.5%. He prefers a TIPS ladder (liability matching portfolio) to an asset allocation approach. “The most precise and secure way of closing the gap between Social Security and your living expenses is with a TIPS ladder whose rungs mature as you age, but this approach still has drawbacks. First and foremost, TIPS yields have varied widely over the past few decades and have often strayed into negative territory in the past several years. Second, as previously noted, there are currently no TIPS maturing between 2033 and 2039, although this gap will slowly close by 2029 with successive auctions of the 10-year securities.” “TIPS taxation is messy, so they’re best held in IRA accounts.” The LMP should cover your living expenses. “once you’ve accumulated an LMP of safe assets, you’re free to invest additional money in a “risk portfolio” (RP) that will benefit your heirs and charities.” The risk portfolio can be 100% stocks if your LMP covers 100% of living expenses. If TIPS real yields are negative, use treasury bills (until TIPS yields improve) or I Bonds, which can be held in taxable. How long should the LMP go? Perhaps age 90. Or even age 100 to be safe.

- No need to get overly complicated about the LMP. Although a TIPS ladder is ideal because of its inflation protection, the key idea is to have 30 or 40 years of living expenses (beyond those covered by Social Security, pensions, and annuities) in safe assets—TIPS, CDs, or short/intermediate term treasuries. And the need for such a high allocation to safe assets is most critical for those whose withdrawal needs are in the 4% range. If you only need to withdraw 1 or 2% from you savings to meet your living expenses, you probably don’t need a LMP.

- Recommends only US treasuries in bond portfolio—TIPS of any maturity and nominal bonds with maturities up to five years. He doesn’t like corporate bonds (don’t do well in stock downturns), long term treasuries (too much interest rate risk), international bonds (currency risk), or municipal bonds (credit risk), especially long-term munis (presumably the same problem as corporate bonds). “I would limit your exposure to munis to less than a third of your bond holdings.” I believe Bernstein’s focus on safety on the fixed income side is about investor psychology and behavior as much or more than portfolio optimization. As a student of human nature and history, he would rather minimize two existential threats — panic selling and inflation — than maximize expected returns. At least that’s my inference.

Your residual living expenses are your annual expenses (you a could use your current budget as a starting place if need be) minus your other guaranteed sources of income: Social Security (which Bernstein strongly advises deferring to 70), pensions, annuities (he’s skeptical), etc.
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Re: William Bernstein latest book on investing

Post by watchnerd »

RubyTuesday wrote: Fri Feb 02, 2024 6:03 am
Beachbum KL wrote: Fri Feb 02, 2024 1:06 am From the latest book , The Four Pillars of Investing by William Bernstein…

“When you’ve won the retirement game, stop playing it with the money you need to pay the rent and groceries.
I suggest at least 10 years’ worth of basic expenses; 20 years or 25 years is even better.
Take whatever risk you like with what assets you have beyond this”

Does anyone thinks that this strategy is too conservative ?
What does he suggest you do with the money you’re not playing with?

TIPS ladder, Nominal bond funds, MM Funds, mattress?

The safe money goes in a TIPS ladder.

The leftover goes in a risk port.

That's what I do
Global stocks, IG/HY bonds, gold & digital assets at market weights 78% / 17% / 5% || LMP: TIPS ladder
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Re: William Bernstein latest book on investing

Post by dcabler »

watchnerd wrote: Sat Feb 03, 2024 12:46 am
RubyTuesday wrote: Fri Feb 02, 2024 6:03 am
Beachbum KL wrote: Fri Feb 02, 2024 1:06 am From the latest book , The Four Pillars of Investing by William Bernstein…

“When you’ve won the retirement game, stop playing it with the money you need to pay the rent and groceries.
I suggest at least 10 years’ worth of basic expenses; 20 years or 25 years is even better.
Take whatever risk you like with what assets you have beyond this”

Does anyone thinks that this strategy is too conservative ?
What does he suggest you do with the money you’re not playing with?

TIPS ladder, Nominal bond funds, MM Funds, mattress?

The safe money goes in a TIPS ladder.

The leftover goes in a risk port.

That's what I do
Same. TIPS + SS is the inflation adjusted spending floor. I often call these the sources of spending that are deterministic. Some call this riskless, but really, is anything truly riskless?

Everything else is in a risk portfolio - what I often call a probabilistic portfolio since the dispersion of possible outcomes is relatively large compared to the deterministic part. In my case, the risk portfolio is 100% stock, but it could be any AA that makes somebody comfortable depending on exactly how much risk they want or can tolerate.

Cheers
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Re: William Bernstein latest book on investing

Post by dbr »

I have SS and pensions and we withdraw money from an investment portfolio. I don't "call" any of those things anything because what things are "called" is nonsense. I do think about them in terms of what they are, namely SS and pensions are income streams with certain specific properties (example SS is inflation indexed and the pensions are fixed, both are life benefits) and the portfolio is a store of wealth invested in stocks which have the properties of stocks and in bonds that have the properties of bonds. It is also true that all the transaction through the year incur a tax cost that needs to be considered.
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Re: William Bernstein latest book on investing

Post by delamer »

Capster1 wrote: Sat Feb 03, 2024 12:30 am My initial reaction is how can you know what 10 years of basic expenses would be? Seems like a difficult thing to forecast for many reasons.
Such as?

Yes, people can go through a time of extraordinary expenses do to an expensive health condition or having to help a family member. Or needing long-term care.

But barring those unpredictable costs, expenses are pretty predictable.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: William Bernstein latest book on investing

Post by exodusing »

Capster1 wrote: Sat Feb 03, 2024 12:30 am My initial reaction is how can you know what 10 years of basic expenses would be? Seems like a difficult thing to forecast for many reasons.
The usual reason for investing is to fund retirement expenses. If you don't have a reasonable idea what those will be, how do you do any investment or retirement planning?

If you don't know your goal, you're going to have a hard time getting there.
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Re: William Bernstein latest book on investing

Post by dbr »

exodusing wrote: Sat Feb 03, 2024 9:25 am
Capster1 wrote: Sat Feb 03, 2024 12:30 am My initial reaction is how can you know what 10 years of basic expenses would be? Seems like a difficult thing to forecast for many reasons.
The usual reason for investing is to fund retirement expenses. If you don't have a reasonable idea what those will be, how do you do any investment or retirement planning?

If you don't know your goal, you're going to have a hard time getting there.
At some point people arrive at retirement as a fact and they have what they have. The question then becomes inverted into what can one spend with what one has and how should what one has be deployed. This is actually more like real life up to there. Some people have a target for what income to achieve in their working life but most of the time setting a target for income and getting it is hard to do.

So the question is still the question it has always been, which is how can I control my spending.
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Re: William Bernstein latest book on investing

Post by iim7V7IM7 »

I have greatly enjoyed and learned from Dr. Bernstein’s writings. His updated version of the four pillars is definitely worth a read. Do I plan on following everything that he suggests? No. The same is true of other esteemed authors on investment and retirement planning. It is worth reading a number of them to determine what one is comfortable with.

The things that I take from Dr. Bernstein relating to fixed income is to stay in high quality Treasury Bonds of shorter duration and diversified, low cost global equity for the risk side of your allocation. These are definitely things that we have adopted into our plan.

I have chosen not to address our income floor for our RLE via a TIPS ladder that he suggests. We are fortunate to both have ample Social Security benefits and I will have a nominal pension from my company. My wife is taking her benefit at her PIA (67) and I am deferring to Age 70 to maximize my and my wife’s survivor benefit. I believe that this will cover our essential expenses well into our mid 70s when inflation may erode our nominal pension. What we plan on doing to address the future gap in our RLE is to buy a SPIAs when needed (say every 5 years at age 75, 80 and 85 etc.).

We are setting aside investment assets dedicated to purchasing these in the future based on upon assumed time horizons and a conservative PV. In the case that we’re off on these additional buffer assets are there. Since we don’t know exactly when the money will be needed or how long we’ll live we don’t want to commit to a DIA prospectively. We will use a time segmentation approach to support when the money needed. Some in about 10 years will be invested more conservatively (say 40/60) than the funds potentially needed 15 to 20 years (say 60/40). The fixed income portion of these investments will be in ETFs using a mix of short term (about 2 years) intermediate term US Treasury bonds (about 5 years duration).

We prefer a ladder of nominal secured income to a TIPS ladder. Dr. Bernstein’s worry is inflation with this approach and to a lesser degree company default risk. We however, are comfortable with this approach. Our discretionary expenses will be funded from our risk portfolio. Again, a time segmentation approach is what we are comfortable with. For our first 5-7 years money market, laddered CDs, Treasury Bonds or MYGAs. For beyond that, a 60/40 risk portfolio to support discretionary expenses. The fixed income side will be comprised of similar funds to what I described above.
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Re: William Bernstein latest book on investing

Post by Wiggums »

There are a lot of numbers being thrown out there, but at the end of the day, people have to work with whatever they have accumulated. When it comes to investing, there is no perfect “one size fits all” formula. We are flexible. We defer discretionary spending whenever needed. In retirement, we reduced our AA to 65/35 and we plan ahead for lumpy expenses for cashflow purposes.
"I started with nothing and I still have most of it left."
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Re: William Bernstein latest book on investing

Post by watchnerd »

Capster1 wrote: Sat Feb 03, 2024 12:30 am My initial reaction is how can you know what 10 years of basic expenses would be? Seems like a difficult thing to forecast for many reasons.
Estimating living expenses / expenditures is a key input into pretty much any retirement planning software.
Global stocks, IG/HY bonds, gold & digital assets at market weights 78% / 17% / 5% || LMP: TIPS ladder
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Re: William Bernstein latest book on investing

Post by KarlJ »

I loved this book. Bernstein is a Bogle acolyte but a free thinker and thus occasionally a minor heretic (commodities (pro), value tilt (pro), dry powder market timing (pro), total bond market (against) ...Once you’ve accumulated an LMP of safe assets, you’re free to invest additional money in a risk portfolio (RP) that will benefit your heirs and charities. The risk portfolio can be 100% stocks if your LMP covers 100% of living expenses.
+1

I am in the position of the RP that can be 100% stocks due to a pension that is COLA adjusted that more than covers all living expenses. When this is not the case, the LMP of laddered TIPS is probably the optimal solution for meeting living expenses.

For me, this book provided answers to those with existing complex tilted portfolios regarding the way forward. I am extremely grateful that William Bernstein updated his twenty-year-old 4 Pillars classic at a time when tilted portfolios are so out of favor.

For those wanting zero tilt, the book offers 5 no tilt portfolios of ascending complexity. To justify portfolio complexity, the book presents an epicurean argument of using the finest ingredients (ETFs) to produce the best meal (portfolio).

(Edited to correct spelling error)
Last edited by KarlJ on Sat Feb 03, 2024 2:00 pm, edited 1 time in total.
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anagram
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Re: William Bernstein latest book on investing

Post by anagram »

KarlJ wrote: Sat Feb 03, 2024 1:39 pm
I loved this book. Bernstein is a Bogle acolyte but a free thinker and thus occasionally a minor heretic (commodities (pro), value tilt (pro), dry powder market timing (pro), total bond market (against) ...Once you’ve accumulated an LMP of safe assets, you’re free to invest additional money in a risk portfolio (RP) that will benefit your heirs and charities. The risk portfolio can be 100% stocks if your LMP covers 100% of living expenses.
+1

I am in the position of the RP that can be 100% stocks due to a pension that is COLA adjusted that more than covers all living expenses. When this is not the case, the LMP of laddered TIPS is probably the optimal solution for meeting living expenses.

For me, this book provided answers to those with existing complex tilted portfolios regarding the way forward. I am extremely grateful that William Bernstein updated his twenty-year-old 4 Pillars classic at a time when tilted portfolios are so out of favor.

For those wanting zero tilt, the book offers 5 no tilt portfolios of ascending complicity. To justify portfolio complicity, the book presents an epicurean argument of using the finest ingredients (ETFs) to produce the best meal (portfolio).
What exactly are the portfolios complicit in?
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Taylor Larimore
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Re: William Bernstein latest book on investing

Post by Taylor Larimore »

Beachbum KL wrote: Fri Feb 02, 2024 1:06 am From the latest book , The Four Pillars of Investing by William Bernstein…

“When you’ve won the retirement game, stop playing it with the money you need to pay the rent and groceries.
I suggest at least 10 years’ worth of basic expenses; 20 years or 25 years is even better.
Take whatever risk you like with what assets you have beyond this”

Does anyone thinks that this strategy is too conservative ?
Beachbum KL:

William Bernstein Ph.D., M.D. is a retired Neurologist, author, and advisor to millionaires. I believe he is the smartest man I ever met. You can read about Bill Bernstein here.

Whatever Bill writes about investing is almost certain to be worthwhile advice.

Best Wishes.
Taylor
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"Simplicity is the master key to financial success." -- Jack Bogle
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Beachbum KL
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Re: William Bernstein latest book on investing

Post by Beachbum KL »

Thank you Sir!
I love Dr William’s books and after reading all the sharing and comments, I have a deeper understanding of it.
Taylor Larimore wrote: Sat Feb 03, 2024 2:04 pm
Beachbum KL wrote: Fri Feb 02, 2024 1:06 am From the latest book , The Four Pillars of Investing by William Bernstein…

“When you’ve won the retirement game, stop playing it with the money you need to pay the rent and groceries.
I suggest at least 10 years’ worth of basic expenses; 20 years or 25 years is even better.
Take whatever risk you like with what assets you have beyond this”

Does anyone thinks that this strategy is too conservative ?
Beachbum KL:

William Bernstein Ph.D., M.D. is a retired Neurologist, author, and advisor to millionaires. I believe he is the smartest man I ever met. You can read about Bill Bernstein here.

Whatever Bill writes about investing is almost certain to be worthwhile advice.

Best Wishes.
Taylor
Jack Bogle's Words of Wisdom: “The greatest enemy of a good plan is the dream of a perfect plan.”
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spencydub
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Re: William Bernstein latest book on investing

Post by spencydub »

watchnerd wrote: Sat Feb 03, 2024 12:46 am
RubyTuesday wrote: Fri Feb 02, 2024 6:03 am
Beachbum KL wrote: Fri Feb 02, 2024 1:06 am From the latest book , The Four Pillars of Investing by William Bernstein…

“When you’ve won the retirement game, stop playing it with the money you need to pay the rent and groceries.
I suggest at least 10 years’ worth of basic expenses; 20 years or 25 years is even better.
Take whatever risk you like with what assets you have beyond this”

Does anyone thinks that this strategy is too conservative ?
What does he suggest you do with the money you’re not playing with?

TIPS ladder, Nominal bond funds, MM Funds, mattress?

The safe money goes in a TIPS ladder.

The leftover goes in a risk port.

That's what I do
Why did you move away from the market portfolio? Just curious.
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watchnerd
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Re: William Bernstein latest book on investing

Post by watchnerd »

spencydub wrote: Sat Feb 03, 2024 9:15 pm
watchnerd wrote: Sat Feb 03, 2024 12:46 am
RubyTuesday wrote: Fri Feb 02, 2024 6:03 am
Beachbum KL wrote: Fri Feb 02, 2024 1:06 am From the latest book , The Four Pillars of Investing by William Bernstein…

“When you’ve won the retirement game, stop playing it with the money you need to pay the rent and groceries.
I suggest at least 10 years’ worth of basic expenses; 20 years or 25 years is even better.
Take whatever risk you like with what assets you have beyond this”

Does anyone thinks that this strategy is too conservative ?
What does he suggest you do with the money you’re not playing with?

TIPS ladder, Nominal bond funds, MM Funds, mattress?

The safe money goes in a TIPS ladder.

The leftover goes in a risk port.

That's what I do
Why did you move away from the market portfolio? Just curious.
I'm not sure what you mean.

My risk portfolio is the market portfolio if you remove Treasuries due to overweight exposure via TIPS LMP.

i.e. if you take out Treasuries, you're left with IG and HY
Global stocks, IG/HY bonds, gold & digital assets at market weights 78% / 17% / 5% || LMP: TIPS ladder
Capster1
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Re: William Bernstein latest book on investing

Post by Capster1 »

exodusing wrote: Sat Feb 03, 2024 9:25 am
Capster1 wrote: Sat Feb 03, 2024 12:30 am My initial reaction is how can you know what 10 years of basic expenses would be? Seems like a difficult thing to forecast for many reasons.
The usual reason for investing is to fund retirement expenses. If you don't have a reasonable idea what those will be, how do you do any investment or retirement planning?

If you don't know your goal, you're going to have a hard time getting there.
I realize that. I have a few calculators and it projects my needs based on my current spending. However, I’m also 20 years from retirement.
I don’t know what the inflation rates will be, cost of medical care, unforeseen other expenses…maybe it’s because I’m not close to retirement yet, but predicting 10 yrs into the future seems daunting. Much less 25!
Sure, I could come up with something, but I also see a danger in that. I might want to add a standard deviation there in my calculations, lol.
Is there an online calculator where you put in expenses and you can input inflation rates and perhaps age related inevitably increased medical increase costs?
In short, I don’t believe current expenses will be a very accurate predictor of expenses 20 yrs into my future. Of course, the answer is always have more than you expect.
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Re: William Bernstein latest book on investing

Post by dlwmai »

The concepts and allocations advised by Bernstein have merit and historical support; however, there are a number of alternatives to using TIPS. I would prefer short and intermediate term treasury funds or ETFs for the fixed income allocation. TIPS have an unremarkable history that combined with the hassle of creating a TIPS ladder is not likely worth the trouble. Beyond that, the recommendation centers around the Residual Living Expenses, which are total living costs minus fixed income streams such as social security or pensions. The RLEs multiplied by 25-28 gets to the comfortable asset level. He has a conservative approach of using a distribution rate between 2%- 3.5%. I would highly recommend augmenting this book with Paul Merriman's many return charts that outline withdrawal rates at 3%, 4% and 5%. These charts cover the past 50 or 60 years and provide a reasonable way to view how your money would have lasted at those withdrawal rates among a wide range of stock/bond asset allocations, from 0% equities to 100% equities. This period covers the terrible 1973-74 years as well as the decade of the 2000-2010 period, which included the big drawdowns at both ends of the decade (dot com bubble crash and the 20008-09 Great Recession). You will find that most people are clearly safe at conservative withdrawal rates of 3% at most stock/bond allocations. And by clearly safe, I mean you will still end up with a bit MORE money at the end of those bad decades than you started with. A 5% distribution rate begins to show a riskier pro forma in the out years (i.e., higher chance of running out of money before running out of life). Sequence of returns matter as well, but you can't plan for that very effectively.
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Re: William Bernstein latest book on investing

Post by dcabler »

I've read just about everything from everybody. I took all of that information, and my own ideas, and turned it all into something that makes sense - for my family.

In the case of "winning the game" I wasn't thinking in those terms when I created a TIPS based income stream that will last us to the end of our retirement planning. It will not cover 100% of our nondiscretionary expenses. But I also don't believe that this is required in order to be successful. It only means that the remaining risky assets don't need to work nearly as hard to provide the remainder for nondiscretionary expenses plus likely plenty of nondiscretionary spending.

My general advice is to read as much as possible, but don't get too attached to any single author.

Cheers.
"Repeating a thing doesn't improve it." Quote from Inman, as played by Jude Law, in the movie "Cold Mountain"
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Re: William Bernstein latest book on investing

Post by KlangFool »

Capster1 wrote: Sat Feb 03, 2024 12:30 am My initial reaction is how can you know what 10 years of basic expenses would be? Seems like a difficult thing to forecast for many reasons.
Why do you need to forecast?

A) In order for a person to save, the person needs to be able to control their expense. If not, they cannot save any money.

B) If someone can save money while they are employed, why do you think the same person is incapable of controlling their expenses when they retire?

C) The expense is entirely under the person's control.

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Re: William Bernstein latest book on investing

Post by watchnerd »

dlwmai wrote: Thu Nov 28, 2024 5:55 pm The concepts and allocations advised by Bernstein have merit and historical support; however, there are a number of alternatives to using TIPS. I would prefer short and intermediate term treasury funds or ETFs for the fixed income allocation. TIPS have an unremarkable history that combined with the hassle of creating a TIPS ladder is not likely worth the trouble. Beyond that, the recommendation centers around the Residual Living Expenses, which are total living costs minus fixed income streams such as social security or pensions. The RLEs multiplied by 25-28 gets to the comfortable asset level. He has a conservative approach of using a distribution rate between 2%- 3.5%. I would highly recommend augmenting this book with Paul Merriman's many return charts that outline withdrawal rates at 3%, 4% and 5%. These charts cover the past 50 or 60 years and provide a reasonable way to view how your money would have lasted at those withdrawal rates among a wide range of stock/bond asset allocations, from 0% equities to 100% equities. This period covers the terrible 1973-74 years as well as the decade of the 2000-2010 period, which included the big drawdowns at both ends of the decade (dot com bubble crash and the 20008-09 Great Recession). You will find that most people are clearly safe at conservative withdrawal rates of 3% at most stock/bond allocations. And by clearly safe, I mean you will still end up with a bit MORE money at the end of those bad decades than you started with. A 5% distribution rate begins to show a riskier pro forma in the out years (i.e., higher chance of running out of money before running out of life). Sequence of returns matter as well, but you can't plan for that very effectively.
What do you mean by "TIPS have an unremarkable history"?

All the data I've seen shows that they have been inflation-indexed as intended over the 27-28 years of their existence.
Global stocks, IG/HY bonds, gold & digital assets at market weights 78% / 17% / 5% || LMP: TIPS ladder
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watchnerd
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Re: William Bernstein latest book on investing

Post by watchnerd »

Capster1 wrote: Sun Feb 04, 2024 9:38 am
exodusing wrote: Sat Feb 03, 2024 9:25 am
The usual reason for investing is to fund retirement expenses. If you don't have a reasonable idea what those will be, how do you do any investment or retirement planning?

If you don't know your goal, you're going to have a hard time getting there.
I realize that. I have a few calculators and it projects my needs based on my current spending. However, I’m also 20 years from retirement.
I don’t know what the inflation rates will be, cost of medical care, unforeseen other expenses…maybe it’s because I’m not close to retirement yet, but predicting 10 yrs into the future seems daunting. Much less 25!
Sure, I could come up with something, but I also see a danger in that. I might want to add a standard deviation there in my calculations, lol.
Is there an online calculator where you put in expenses and you can input inflation rates and perhaps age related inevitably increased medical increase costs?
In short, I don’t believe current expenses will be a very accurate predictor of expenses 20 yrs into my future. Of course, the answer is always have more than you expect.
You're 20 years away.

Don't bother until you get closer.
Global stocks, IG/HY bonds, gold & digital assets at market weights 78% / 17% / 5% || LMP: TIPS ladder
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Re: William Bernstein latest book on investing

Post by dcabler »

watchnerd wrote: Thu Nov 28, 2024 6:30 pm
dlwmai wrote: Thu Nov 28, 2024 5:55 pm The concepts and allocations advised by Bernstein have merit and historical support; however, there are a number of alternatives to using TIPS. I would prefer short and intermediate term treasury funds or ETFs for the fixed income allocation. TIPS have an unremarkable history that combined with the hassle of creating a TIPS ladder is not likely worth the trouble. Beyond that, the recommendation centers around the Residual Living Expenses, which are total living costs minus fixed income streams such as social security or pensions. The RLEs multiplied by 25-28 gets to the comfortable asset level. He has a conservative approach of using a distribution rate between 2%- 3.5%. I would highly recommend augmenting this book with Paul Merriman's many return charts that outline withdrawal rates at 3%, 4% and 5%. These charts cover the past 50 or 60 years and provide a reasonable way to view how your money would have lasted at those withdrawal rates among a wide range of stock/bond asset allocations, from 0% equities to 100% equities. This period covers the terrible 1973-74 years as well as the decade of the 2000-2010 period, which included the big drawdowns at both ends of the decade (dot com bubble crash and the 20008-09 Great Recession). You will find that most people are clearly safe at conservative withdrawal rates of 3% at most stock/bond allocations. And by clearly safe, I mean you will still end up with a bit MORE money at the end of those bad decades than you started with. A 5% distribution rate begins to show a riskier pro forma in the out years (i.e., higher chance of running out of money before running out of life). Sequence of returns matter as well, but you can't plan for that very effectively.
What do you mean by "TIPS have an unremarkable history"?

All the data I've seen shows that they have been inflation-indexed as intended over the 27-28 years of their existence.
If I were to guess, it would be because the thought process is about TIPS bond fund returns and not TIPS based income streams. TIPS based income streams whether individual TIPS held to maturity or duration matched TIPS funds will indeed create income streams that do exactly what they're supposed to do, relative to inflation.

I would avoid SWR as a withdrawal method and instead consider amortization based methods such VPW, ABW, TPAW and Siamond's blog series.

Cheers.
"Repeating a thing doesn't improve it." Quote from Inman, as played by Jude Law, in the movie "Cold Mountain"
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Re: William Bernstein latest book on investing

Post by KlangFool »

Capster1 wrote: Sun Feb 04, 2024 9:38 am
I realize that. I have a few calculators and it projects my needs based on my current spending. However, I’m also 20 years from retirement.
.
Capster1,

I disagreed that you know you are 20 years from retirement. Unless you can predict your future, you do not know when you will retire. It could be less or it could be more. But, for it to be precisely 20 years......

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Taylor Larimore
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Re: William Bernstein latest book on investing

Post by Taylor Larimore »

Bogleheads:

In his book, "If You Can" I am pleased see that Mr. Bernstein recommends The Three Fund Portfolio.

Best wishes
Taylor
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Re: William Bernstein latest book on investing

Post by monkeytoad »

delamer wrote: Fri Feb 02, 2024 9:28 am

Residual being defined as basic expenses minus Social Security plus pensions plus annuitues.

Residual being defined as basic expenses - ( social Security + pensions + annuities ).
Just trying to stay the course
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Re: William Bernstein latest book on investing

Post by delamer »

monkeytoad wrote: Fri Nov 29, 2024 9:03 am
delamer wrote: Fri Feb 02, 2024 9:28 am

Residual being defined as basic expenses minus Social Security plus pensions plus annuitues.

Residual being defined as basic expenses - ( social Security + pensions + annuities ).
Right!
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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