Ifucan

How Millennials Can Get Rich Slowly

William J. Bernstein

Introduction

  • an investment strategy that a seven-year-old could understand, will take you fifteen minutes of work per year, outperform 90% of finance professionals in the long run.

  • Start by saving 15% of salary at age 25 into a 401(k) plan, an IRA, or a taxable account (or all three). Put equal amounts of that 15% into just three different mutual funds:

  • A U.S. total stock market index fund
  • An international total stock market index fund
  • A U.S. total bond market index fund
  • Once per year, you'll adjust their amounts so that they're again equal.
  • The real reason why you're going to have a crummy retirement is that the conventional "defined benefit" pension plan of your parents' generation, which provided a steady and reliable stream of income for as long as they livd, has gone the way of disco.
  • Five hurdles must be overcome if you are to succeed and retire successfully

  1. People spend too much money

  2. You'll need an adequate understanding of what finance is all about (working knowledge of the theory and practice of finance)

  3. Learning the basics of financial and market history (studying investing history is akin to reading aircraft accident reports)

  4. Overcoming your biggest enemy - Know thyself

(the failure to maintain strict long-term discipline in saving and investing)

  1. Most "finance professionals" don't even realize that they're moral cripples.

Hurdle #1 : Even if you can invest like Warren Buffett, if you can't save, you'll die poor

  • If you're starting to save at age 25 and want to retire at 65, you'll need to put away at least 15% of your salary.
  • First, no matter how much debt you have, always, always max out the employer match on you 401(k), 403, or other defined contribution retirement plan.
  • Next, eliminate you credit card debt, followed by your car and educational loans.
  • Our neighbors owned a lot, but didn't have a lot.