8 gems from one of the financial greats

William Bernstein has several good reads, including the one I’ve just finished The Investor’s Manifesto, Preparing for Prosperity, Armageddon and Everything in Between. (yes, I was lured by the title)

For those that haven’t heard of William Bernstein, his status is legendary in financial circles.  There’s a couple of things that I really like about him –

• ​his timeless approach to financial success
• he has the skill of all great teachers and that is to make things easy to understand and apply.

​He even tells a few gags.
 
Below I’ve shared a few “Bernstein’isms”, valuable reminders to us all:
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Markets can and will go mad

The best defence against madness is to understand the history of financial markets. Be comfortable that it’s all happened before.

Markets for individual shares are brutally efficient

Never assume you will make money investing in a single share. Always assume you are trading against someone smarter, more informed and working harder than you.

Portfolio theory is king

​Asset allocation is the key to achieving returns. You will never know when a market will do well or badly in advance. So buy them all and use diversification to your advantage

You are your own worst enemy

•  Overconfidence is the main cause of investment failure
• Don’t believe you can time the market
• Don’t buy in to the crowd. Just because your neighbour has it, doesn’t mean it’s any good

Be sensible and frugal

​Live modestly. Save as much as possible, for as long as possible

Teach your children well

Teach them how to spend, save and invest prudently

Pascal's Wager (not sure, more on Pascal's Wager here)

• Some risks are not worthy taking, particularly if you have all you need.
• Good investing won’t always make you rich. It maximises the chance of a comfortable retirement. It will minimise the chances of living in poverty.

Risk and return are intimately linked

​You don’t get high returns without bearing painful losses along the way. You cannot achieve perfect safety without accepting low returns

Bernnstein presents a brilliant case for keeping it simple: keep diversified, rebalance, start now, keep expenses low.
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He also says that to start with an honest assessment of where you are at is essential. See our offer below.

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