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Risk Less and Prosper: Your Guide to Safer Investing Hardcover – December 27, 2011

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Product Details

  • Hardcover: 196 pages
  • Publisher: Wiley; 1 edition (December 27, 2011)
  • Language: English
  • ISBN-10: 1118014308
  • ISBN-13: 978-1118014301
  • Product Dimensions: 5.8 x 0.9 x 8.8 inches
  • Shipping Weight: 12.8 ounces (View shipping rates and policies)
  • Average Customer Review: 3.8 out of 5 stars  See all reviews (16 customer reviews)
  • Amazon Best Sellers Rank: #562,971 in Books (See Top 100 in Books)

Editorial Reviews

Amazon.com Review

Q&A with the Authors

Author Zvi Bodie
How can you personalize your investments?
Personal investing is all about YOU--your goals, your resources, your circumstances, and your values and preferences. People often lose sight of this fundamental premise: They start by focusing on investment opportunities--but this is a recipe for getting overwhelmed and distracted. Instead, start by examining yourself. What are your human resources, your career plans, earning potential, entrepreneurial ability and ambitions? What do you value most? Are you willing to postpone consumption for later? What spending you consider essential? Your answers to these questions will shape the investment path that is right for you.

Unfortunately, self-examination is more easily talked about than done. On top of that, your profile is dynamic. It will almost certainly change. To help you over these hurdles, Risk Less and Prosper takes you through six simple but high-impact steps toward picturing your personal investment profile in detail. It gives you target-practice exercises that you can return to year after year.

Common assumption is that investing requires taking on risk. Risk Less and Prosper disputes that. How can one find the balance between risk and safety?
The theory of lifetime investing, as developed by Paul Samuelson and Robert Merton in their canonical 1969 papers, assumes a risk-free asset and a single risky asset. The fundamental issue in investing is how much to invest in safe assets as opposed to risky ones. So investing involves a trade-off between safety and risk in search of higher returns.

In the book, we show you how to find your personal risk set point--or the trade-off that’s right for you. At a minimum, you will need a safety net that is strong enough to cover your most essential needs. You’ll learn here how to go about owning one. Your risk tolerance is also relevant, although it’s a separate and secondary matter. You'll gain some surprising insight into your own attitudes toward financial risk and why they may matter less than you think.

Are you "anti-risk"?
Author Rachelle Taqqu
Not at all. We are for risk transparency. People should be told that investing in a diversified portfolio of stocks exposes them to significant risk of loss, no matter how long their time horizon. The conventional notion that risk declines over long time periods is just plain wrong. Paul Samuelson wrote 27 articles on this over the years. He was frustrated that his warnings went unheeded in the popular media.

How can someone determine their investment profile?
Read the experiences of the five men and women in our group. See our chapter on how to find good advice, and try to get some if you can. Set aside time for introspection, and follow the six steps for effective target practice that are spelled out in Part I. Refresh as needed.

Assuming that they have already followed your suggestion to "know yourself," what one piece of advice would you give someone looking to invest in today's markets?
Start by asking what the safest strategy will do for you. That is your benchmark. If you decide to take risk, realize that by definition you can wind up with a worse outcome than your safe benchmark.

Who would benefit from reading your book Risk Less and Prosper
Anyone who is confused, overwhelmed, or dissatisfied with their personal investment situation. People who are concerned about falling short of their basic financial goals. Everyone who believes in the scientific method.


"Bodie and Taqqu have staked out important ground in terms of reconsidering the basic paradigm for long-term saving and investing and presenting a new approach in an engaging and thoughtful manner." (Portfolio.com, February 2012)

"...a good read for those of you who are skeptical of investing in today's stock market. But it is a must-read for those of you who actually think that you know what you are doing." (Huffington Post, January 2012)

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Customer Reviews

3.8 out of 5 stars

Most Helpful Customer Reviews

77 of 83 people found the following review helpful By dr on February 5, 2012
Format: Hardcover
One reason to be highly skeptical of all of these kinds of books written by distinguished scholars recommending one asset class over another is that a highly distinguished scholar at the time of the tulip craze in Holland could easily have published a book entitled "Tulips for the Long Run," and there was indeed substantial statistical evidence at that time that tulips were an excellent long term investment. An asset class always looks excellent at the top of the market.
In the late 1920s a number of books were written to the effect that stocks were a good long term investment. In 1994 Jeremy Siegel first published the book "Stocks in the Long Run" based on exhaustive analysis of the past statistics.
In turns out that since 1994 stocks have been quite volatile, its been 18 years now, sort of the long run for a lot of people. Probably the popularity of that book helped inflate the stock bubble that finally burst in the year 2000.
For six years after "stocks in the long run" was first published, stocks continued to do very well indeed, but from the year 2000 to today in 2012, for the last 12 years, stocks have been volatile and not the best long term investment.
As it turns out stocks in 1994 were an excellent 6 year investment, but not the best 18 year investment. They were in actual fact a good short term investment, and had an investor switched to long term government bonds in the year 2000, he would have been far better off.
Long term U.S. Treasury bonds were yielding around 8% at the time of that book's release, and zero coupon U.S. Treasury bonds would have been an excellent long term investment in 1994.
Part of this stems from what we mean by the "long run". For many of us the last 12 years of stock market volatility is the long run.
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46 of 48 people found the following review helpful By A. J. Bloom on December 30, 2011
Format: Hardcover Verified Purchase
Bodie and Taqqu make a lot of worthwhile points. Some of the most powerful have to do with highlighting the true risks of stock market investing -- even over the very long term -- and stocks' lack of suitability for funding the essentials in retirement. For the most part, the book is easy to read and full of concrete examples. The key recommendation is to invest for essential long-term goals using inflation-adjusted bonds (TIPS and I-Bonds) and to reserve more risky investments, such as stocks, for funding discretionary future expenses.

The book does an especially good job emphasizing the importance of goal setting and liability-driven investment strategies. It is also refreshing to find a de-emphasis on maximizing return on investments. Furthermore, the discussion of the importance of separating the "musts" from the "wants" in financial goals is truly excellent.

My key quibble is about the claim that TIPS bonds bought on the secondary market lack price transparency and hence TIPS should be bought only at the initial auction. In reality, brokerage sites such as Fidelity.com clearly list both the Bid (customer sell-back) and the Ask (customer buying) price for every secondary TIPS issue. The spread between the two is less than 1% across the board on Fidelity.com - not a large enough percentage nor indicative of price rip-offs to have to restrict oneself to just purchasing issues offered at auction.

Also, the argument for TIPS and I-Bonds could perhaps be tempered by acknowledging that this investing strategy is far from perfect. For instance, peoples' personal inflation rates may differ substantially from the Consumer Price Index used for TIPS and I-Bond adjustments.
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38 of 44 people found the following review helpful By Michael L. Loren on December 18, 2011
Format: Hardcover Verified Purchase
The main issue that Bodie has promoted for years is that the stock market is inherently more risky than we are lead to believe. He keeps the info at rudimentary level by using idealized worried individuals who are wondering, "What should we do?" Most of them were put into a tailspin since the recession of 2008. Bodie's answer for safety is buy TIPS or I bonds. He barely suggests how we might prosper.

A good suggestion the book made was how much money will you need for basic "survival" or basic plus survival? What will be your expenses? I imagine that the author is correct that most of us in the real world ignore this important step. This critical need should be protected from the unpredictable risky stock market. Only after you have this worked out, then you can invest a part of your portfolio with "risky" assets. However can the average person save enough money to cover the essentials and invest in only TIPS or I bonds?

An important question that the author leaves hanging is how practical is investing in TIPS and I bonds. Try buying individual TIPS for an IRA. They are infrequently auctioned by the US government. I bonds are limited to $5000/yr per individual and they can't be bought for an IRA. There are secondary market TIPS available, but even Bodie mentions how easy it is for us consumers to get ripped off buying these. The TIP ETF's and mutual funds seem the most practical way to buy them, but this type of ownerships of bonds is very sensitive to interest rates. If rates go up, you can watch the principal in the fund quickly diminish. You can't buy this type of investment and just ignore it.

What Bodie failed to mention is how hard it is for us ordinary people to save and keep our expenses down, so we can save. Especially today this is no easy task.
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