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The Ages of the Investor: A Critical Look at Life-cycle Investing (Investing for Adults Book 1) [Kindle Edition]

William J Bernstein
4.6 out of 5 stars  See all reviews (59 customer reviews)

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Book Description

"The Ages of the Investor: A Critical Look at Life-cycle Investing" is intended to be the first installment in the "Investing for Adults" series. Just as grown-ups do not believe in the Tooth Fairy, the Easter Bunny, or Santa Claus, “Investing adults” know that there is no such creature as the Stock-picking Fairy or the Market-timing Fairy. Further, there is no Risk Fairy who will write you cheap options that will protect your stock holdings against loss. Investing adults are familiar with Gene Fama, Zvi Bodie, Jack Bogle, and Burton Malkiel, and understand that a mean variance optimizer does not blend vegetables. In other words, this series is not for beginners. Future topics will, with luck, include the limits of market efficiency and diversification in increasingly non-segmented global markets.

Product Details

  • File Size: 1190 KB
  • Print Length: 55 pages
  • Page Numbers Source ISBN: 1478227133
  • Publisher: Efficient Frontier Publications (June 18, 2012)
  • Sold by: Amazon Digital Services, Inc.
  • Language: English
  • ASIN: B008CM2T2A
  • Text-to-Speech: Enabled
  • X-Ray:
  • Word Wise: Not Enabled
  • Lending: Enabled
  • Amazon Best Sellers Rank: #129,065 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Customer Reviews

Most Helpful Customer Reviews
68 of 73 people found the following review helpful
Format:Kindle Edition|Verified Purchase
William Bernstein is beginning an experiment of sorts. He is writing a series of low-cost e-books called Investing for Adults. The first of these is now available: The Ages of the Investor: A Critical Look at Life-cycle Investing.

As he notes, these books are not for beginners. They are for adults who have outgrown their beliefs in stock-picking fairies, market-timing fairies, and risk fairies. I think the first two are clear. The risk fairy tells you that the risks of holding stocks decline with time. Despite the name "expected returns," you cannot simply expect greater returns for having loaded more funds into volatile assets.

The book is relatively short and is fully of interesting insights. I think it is definitely worthwhile. He divides investing life into three phases: the beginning, middle, and end.

The Beginning

For the beginning phase, the overwhelming consideration is that one's human capital (the present value of future earnings) will likely dwarf in size one's portfolio of stocks and bonds. This is a justification for allocating more assets to stocks when young. As well, he discusses in detail the interesting issue of lump-sum investing versus period contributions. Young people are generally forced to contribute new funds as they age (they can't borrow their human capital at the start) and this reduces volatility and allows them to take advantage of market dips.
Bernstein discusses age-in-bonds, the Ayres/Nalesbuff strategy of leveraging to 2:1 in stocks when young in order to better balance stock holdings with human capital, call options on a stock index as another way to leverage assets, and also the Fama-French approach to focusing on risk factors related to small-capitalization and value stocks.
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97 of 108 people found the following review helpful
Format:Kindle Edition|Verified Purchase
Life-cycle saving and investing (LCSI) is the economics approach to personal finance. It is the only approach to personal finance consistent with economic and financial theory. So while I give Bill Bernstein high marks for being one of the first non-economists to tackle the essential topic of LCSI, material that financial advisors should have been writing about for several years now but have up to now almost completely ignored, I give him relative low marks for content.

There seem to be numerous misunderstandings in the book of how LCSI is applied, and also he appears confused about the history of the subject and the views of individual economists who have contributed to the development of LCSI.

For example

-Bernstein discusses at length the early Paul Samuelson & Merton papers on the life-cycle model from 1969-1971 and the implications for human capital. He appears unaware that there have been many papers in the last 40 years that have greatly updated the connection between human capital and the life-cycle model. In particular the best known and most influential of those papers, "Labor Supply Flexibility and Portfolio Choice in a Life-Cycle Model", by Bodie, Merton, and William Samuelson (Paul's son) written in 1992.

-He seems unaware that the life-cycle model developed by Merton in 1971 shows that the rational household will plan for both a floor and aspirational level of future retirement income. That hasn't changed over time. So it is not something that Bodie and others have only recently been advocating, but instead comes directly from Merton's work of over 40 years ago.
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33 of 34 people found the following review helpful
4.0 out of 5 stars Faith in the Insurance agencies June 26, 2013
First, let me just say that overall, Bill Bernstein is my favorite among personal finance and investing authors. I have very much enjoyed his work over the years.

I like the majority of this short book except the following items. I'd rather focus on those rather than hash out what's right, which I'm sure has already been sufficiently covered given the average rating (4.7 of 5) at the time of this review:

1. Chief among my criticism, I found his support of Single-Premium Immediate Annuities (SPIAa), and their presentation as part of a "no-risk" solution (part of the LMP) to be just downright disappointing. I could innundate this review with links which go into great detail about the extreme costs of SPIAs, as well as the associated risks involved. Cost-wise, insurance companies (I refuse to refer to them as investment companies) make an absolute fortune off of these. In fact, you can do some real simple math and determine how many years has to pass before these companies do nothing more than give you your principle back. If you retire early enough (say 60, or less), and at today's interest rates, you're going to have to be retired almost 20 years before you break even NOT counting interest. The average health of an individual that buys a SPIA is not the same as the average health of the general population. Most people who can break 100 on an IQ test will (or their advisor will) realize that you don't buy these unless you believe yourself to be VERY healthy. So the "risk pooling" average is probably going to be pushing 85 or more on actuary tables. I don't care how healthy you are, I would consider one arrogant, naive, or some combination of both to assume one would definitely break that. What does that mean?
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Most Recent Customer Reviews
5.0 out of 5 stars Phenomenal and eye opening
In approximately 50 pages, William Bernstein nails the life cycle of an investor in the most coherent and easy to read way I've ever seen. Read more
Published 2 months ago by Marko
5.0 out of 5 stars Age of the Investor: A Critical Look . . .
Bernstein is always thought provoking and this book doesn't disappoint. The concept of LMT is a bit different than how I have proceeded which is more based on his earlier books... Read more
Published 3 months ago by Larry
4.0 out of 5 stars fairly short book with good content for the intend topic coverage --...
I've read most of Bill Bernstein's previous books so I have the basic knowledge to tackle what he describes in this first of a four book series [Investing for Adults]. Read more
Published 4 months ago by R. Sheldon
5.0 out of 5 stars Short and practical, but assumes some technical background
I am a huge Bernstein fan and this novella delivered as expected. Practical advice for how to approach your investment life. I wouldn't consider this a stand-alone work... Read more
Published 5 months ago by Clint
5.0 out of 5 stars I bought the entire set of his books.
A wealth of information. How the author can convey so much information and meaning, using so few words, is remarkable. I'll give these away as gifts to my smarter friends.
Published 5 months ago by M. Lasky
3.0 out of 5 stars A quick read, but not necessarily very good. Useful only as food for...
Review: The Ages of the Investor
The Ages of the Investor is the first book in William Bernstein's "investing for adults" series. Read more
Published 6 months ago by Piaw Na
3.0 out of 5 stars A good discussion of the amount of risk to take early ...
A good discussion of the amount of risk to take early and midway through your adulthood. The 3 star rating relates to how the book deals with the retirement years. Read more
Published 7 months ago by TDOMotFT
5.0 out of 5 stars More thoughts from the reclusive neurologist from Oregon - worth every...
These are excellent publications, the Ages of the Investor particularly so. In "The Ages.." Bernstein particularly addresses the issue that Buffett has mentioned about if... Read more
Published 7 months ago by Happy Husband!
4.0 out of 5 stars Clear and straightforward guidance
Short and to the point. Definitely for someone who knows a good deal about investing already. I didn't feel like it had enough material to justify the $5 price.
Published 9 months ago by A. Olesen
5.0 out of 5 stars Five Stars
Bernstein is always helpful. End of story.
Published 10 months ago by Ken Florian
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More About the Author

William Bernstein, Ph.D., M.D., is a retired neurologist in Oregon. Known for his website on asset allocation and portfolio theory Efficient Frontier, Dr. Bernstein is also a co-principal in the money management firm Efficient Frontier Advisors, has authored several best-selling books on finance and history, and is often quoted in the national financial media.


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