William Bernstein, “The More Comfortable You Are Buying , The Worse It’s Going To Be”
- Mon, 17 Jul 2017 18:31
Guest: William (Bill) Bernstein. Bill is a financial theorist, a neurologist, and a financial adviser to high net worth individuals. Known for his website on asset allocation and portfolio theory, Efficient Frontier, Bill is also a co-principal in the money management firm Efficient Frontier Advisors. He has also authored several best-selling books on finance and history, and is often quoted in the national financial media.’
Date Recorded: 6/28/17
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Summary: In Episode 60, we welcome the great William (Bill) Bernstein.
Bill starts by giving us some background on how he evolved from medicine to finance. In short, faced with his own retirement, he knew he had to learn to invest. So he studied, which shaped own thoughts on the matter, which led to him writing investing books, which resulted in interest from the press and retail investors, which steered him into money management.
After this background info, Meb jumps in, using one of Bill’s books “If You Can,” as a framework. Meb chose this as it starts with a quote Meb loves: “Would you believe me if I told you that there’s an investment strategy that a seven-year-old could understand, will take you fifteen minutes of work per year, outperform 90 percent of financial professionals in the long run, and make you a millionaire over time?”
The challenge is the “if” in the title. Of course, there are several hurdles to “if” which Meb uses as the backbone of the interview.
Hurdle 1: “People spend too much money.” Bill gives us his thoughts on how it’s very hard for a large portion of the population to save. We live in a consumerist, debt-ridden culture that makes savings challenging. Meb and Bill discuss debt, the “latte theory,” and the stat about how roughly half of the population couldn’t get their hands on $ 500 for an emergency.
Hurdle 2: “You need an adequate understanding of what finance is all about.” Bill talks about the Gordon Equation, and how investors need an understanding of what they can realistically expect from stocks and bonds – in essence, you really need to understand the risks.
Links from the Episode:
- Efficient Frontier website
- Bill’s books on Amazon
- The Dunning-Kruger effect
- 4:32 – “If You Can”
- 10:23 – Episode #54: Elizabeth Dunn
- 12:48 / 15:56 – The Gordon Equation
- 21:00 – Dow 36,000 (Book)
- 22:30 – Common Sense on Mutual Funds (Book)
- 25:20 – Devil Take the Hindmost (Book)
- 25:20 – The Great Depression: A Diary (Book)
- 26:00 – Triumph of the Optimists (Book)
- 29:47 – The Dunning-Kruger effect
- 34:29 – Your Money and Your Brain (Book)
- 42:13 – How a Second-Grader Beats Wall Street (Book)
- 42:17 – All About Asset Allocation (Book)
- 55:11 – The Great Leveler (Book)
- 55:55 – Tatiana’s Sex Advice to All Creation
Article by Med Faber
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