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Worry-Free Investing A Safe Approach to Achieving Your Lifetime Financial Goals Hardcover – 2003

3.3 out of 5 stars 15 customer reviews

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Product Details

  • Hardcover: 242 pages
  • Publisher: Financial Times /Prentice Hall; 1 edition (2003)
  • Language: English
  • ISBN-10: 0130499277
  • ISBN-13: 978-0130499271
  • Product Dimensions: 6.4 x 0.9 x 9.2 inches
  • Shipping Weight: 1.4 pounds
  • Average Customer Review: 3.3 out of 5 stars  See all reviews (15 customer reviews)
  • Amazon Best Sellers Rank: #1,050,546 in Books (See Top 100 in Books)

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Customer Reviews

Top Customer Reviews

Format: Hardcover
Investment authorities have long recommended diversified portfolios of stocks, bonds, and cash as the best way for investors to pursue their financial goals without courting too much risk. In *Worry-Free Investing*, Zvi Bodie and Michael Clowes cast a gauntlet before this conventional wisdom. Most investors, they argue, should forget about traditional asset classes--especially stocks--and should abandon traditional approaches to risk management, like building a diversified portfolio and gradually decreasing its allocations to risky assets over time. Those saving for retirement or for a child's college education should instead invest in "risk-free" assets, such as inflation-protected bonds and annuities, and certificates of deposit with yields indexed to the cost of college tuition. By relying exclusively on such instruments, the authors contend, investors will never risk losing their nest eggs (as they would with stocks), will ensure that their purchasing power never diminishes (as it might with bonds or cash), will stand a much better chance of achieving their financial goals, and will sleep soundly at night. They will become, as the title promises, "worry-free."
While Bodie has been making his case in academic journals for several years, this book marks his first attempt to reach the masses. To both authors' credit, their manifesto is remarkably accessible--much more so than most investment books aimed at a popular readership.
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Format: Hardcover
The central theme of this book is that stocks are risky, even for long time horizons. In other words, you can't rely on "time diversity" to reduce risk. If you are depending on harvesting capital gains from a stock dominated portfolio to fund your retirement, you might outlive your assets. But, what about that more than 10% average return on the S&P 500 since 1926? The key word here is "average." The average is not necessarily what you will realize over any given span. It took decades for the Dow to return to its pre-depression level. The Dow also went nowhere from the end of the 1960's until the beginning of the 1980's. But at least you got a decent dividend yield in those days. That's why the net returns were generally positive in the past. In fact about half the historical return on the S&P500 was due to dividends. But today's S&P dividend yield is less than 2%. That's too small to compensate for the price risk. There are other reasons why future stock returns might not reach anything like 10%, and the book provides some discussion as to why. However, the authors are short on details, a little too short. If you want a more through discussion, see "Valuing Wall Street," which pretty much takes the same position with respect to the future prospects for stocks. The authors recommend inflation-indexed US Treasury bonds, both TIPS and I-bonds as the core of your retirement portfolio. This was good advice several years ago, but not today. The base rate on these bonds is much too small. Can you live on a 1.5% (real) return? So to some extent this book is already obsolete even though it was just published! Nevertheless, it's a valuable consciousness raiser for those who might not appreciate the flaws in the "cult of equities.Read more ›
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Format: Hardcover Verified Purchase
Investors still numb from their stock market losses in recent years will find some solace in the message of Worry-Free Investing by Zvi Bodie and Michael J. Clowes. They argue that stocks are "not safe in the long run" - a dismissal of Wharton School Professor Jeremy Siegel's extensively documented work on the subject. It is the nature of equity prices to be uncertain. The unpredictable risk of future stock market returns stems from the unexpected, 'random', flow of information that changes investor's perceptions of a company's value. Their argument is a bit heavy-handed. Equity prices may move unexpectedly in the intermediate term, but over the long run they appear to be positively linked with advances in our economy as measured by our GDP and mirrored in our standard of living. That should give some reassurance to long term investors, but the connection gets no mention here.
The authors make the case for investing in inflation adjusted, government protected I Bonds and TIPS (Treasury Inflation-Indexed Securities also called Treasury Inflation Protected Securities). Focusing on the major goals of saving for retirement and providing for college education costs, Bodie and Clowes show how much an investor needs to save today. If the calculations seem a bit heady, readers are referred to the book's companion web site 'calculator'. At the heart of worry-free investing as defined by the authors is the defense of an individual's future buying power rather than the building of incremental wealth.
Stocks have been widely touted as the only reliable hedge to inflation. However, during the 1970's sustained inflation ravaged stock market returns on an (inflation) adjusted basis. Had TIPS and I Bonds existed, they would have outperformed a diversified basket of stocks.
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