Lifecycle Investing: A New, Safe, and Audacious way to Improve the Performance of Your Retirement Portfolio

Description

Diversification provides a well-known way of getting something close to a free lunch: by spreading money across different kinds of investments, investors can earn the same return with lower risk (or a much higher return for the same amount of risk). This strategy, introduced nearly fifty years ago, led to such strategies as index funds. What if we were all missing out on another free lunch that’s right under our noses? In Lifecycle Investing, Barry Nalebuff and Ian Ayres—two of the most innovative thinkers in business, law, and economics—have developed tools that will allow nearly any investor to diversify their portfolios over time. By using leveraging when young—a controversial idea that sparked hate mail when the authors first floated it in the pages of Forbes—investors of all stripes, from those just starting to plan to those getting ready to retire, can substantially reduce overall risk while improving their returns. In Lifecycle Investing, readers will learnHow to figure out the level of exposure and leverage that’s right for youHow the Lifecycle Investing strategy would have performed in the historical marketWhy it will work even if everyone does itWhen not to adopt the Lifecycle Investing strategy Clearly written and backed by rigorous research, Lifecycle Investing presents a simple but radical idea that will shake up how we think about retirement investing even as it provides a healthier nest egg in a nicely feathered nest. CONTENTS Introduction Diversifying Time The Free Lunch Two Cheers for Home Ownership Our Plan CHAPTER 1 A Leap of Faith Gambling His Retirement? Total Dollar Years Use Leverage (Dis)counting Your Chickens Before They Hatch Discounting Your Income The Status Quo Beating the Status Quo CHAPTER 2 The Plan The Cookie Jar Two Numbers Three Phases Social Security Why Stop at 2:1? CHAPTER 3 Historical Performance Eureka Less Risk or More Return Show Me the Money The Crash The Dominance of Leverage Social Security Conclusions CHAPTER 4 What If . . . It’s a Wonderful Stock Market The FTSE and the Nikkei Pessimists Should Still Start Out Leveraged A Meaner Mean Fat Tail Fears But Is Now the Right Time? To P/E or Not to P/E CHAPTER 5 Starting and Stopping Starting Late Starting Early Ramping Up for Retirement CHAPTER 6 Contraindications Not Having Credit Card Debt: Priceless Minimum Investments Matching 401(k) Plans Saving for College (and a Rainy Day) Wall Street Is Close to Home Once Burned, Twice Shy Conflicting Advice CHAPTER 7 What’s Your Share? One Cheer for RRAs Inside (Wire) Job How Much Is Enough? Will I Have Enough? What Is My Income Stream? CHAPTER 8 The Mechanics 401(k), 403(b), and 457 Plans IRA How to Find an Option with 2:1 Leverage What Is the Cost of Borrowing? Another Approach Investing with ProFunds UltraBull Rebalancing Buying Stock on Margin Buying Bonds CHAPTER 9 What If Everyone Did It? A History of Housing Leverage Back to the Future Diversification Is Dangerous The Future Regulation of Asset Diversification The Goal Line