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Lifecycle Investing: A New, Safe, and Audacious Way to Improve the Performance of Your Retirement Portfolio Hardcover – May 4, 2010

3.7 out of 5 stars 22 customer reviews

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Editorial Reviews


Robert Shiller, author of Irrational Exuberance
" A most provocative book. The real advantages of time diversification have never been laid out so clearly or with such a program of action."

Tim HarfordFinancial Times
"Here are the chief investment lessons of the financial crisis for today’s young people: they should be buying more shares and running up debts to do so. . . . [T]here is nothing intrinsically risky about regular borrowing to get that fund off to an early start. . . . Not only does the concept make sense, it has paid off in the past. . . . Ayres and Nalebuff have looked at historical stock market data. . . . For every single cohort, the early leverage strategy beat the conventional wisdom."

Moshe A. Milevsky, Ph.D., Finance Professor, York University, and author ofAre You a Stock or a Bond?
“This bold book promotes more early equity exposure for the masses, precisely at a time when many practitioners are re-thinking the ‘buy and hold stocks for the long run’ mantra. Whether you are comfortable with this strategy or not, the book is a must read for anyone who claims to think about their personal finances in a rigorous and logical manner.”

About the Author

Ian Ayres is an economist, a lawyer, and the William K. Townsend Professor at Yale Law School. He has written for the New York Times, Wall Street Journal, Financial Times, Slate, and The New Republic, and his research has been featured on PrimeTime Live, Oprah, and Good Morning America. He is the author of ten books, including the bestseller Super Crunchers. A graduate of Yale and MIT, he was recently elected to the American Academy of Arts and Sciences. He lives in New Haven, Connecticut.

Barry Nalebuff is the Milton Steinbach Professor of Economics and Management at Yale School of Management. He is the author of fifty scholarly articles and multiple books—including Co-opetition and The Art of Strategy—and is the cofounder of Honest Tea. A graduate of MIT and a Rhodes Scholar, he earned his doctorate at Oxford University. He lives in New Haven, Connecticut.

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Product Details

  • Hardcover: 240 pages
  • Publisher: Basic Books (May 4, 2010)
  • Language: English
  • ISBN-10: 0465018297
  • ISBN-13: 978-0465018291
  • Product Dimensions: 6.1 x 0.9 x 9.2 inches
  • Shipping Weight: 15.2 ounces
  • Average Customer Review: 3.7 out of 5 stars  See all reviews (22 customer reviews)
  • Amazon Best Sellers Rank: #1,015,323 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

Format: Hardcover
I have been getting flak for endorsing the Ayres and Nalebuff book (see above on Amazon.com), just as the authors are for writing it. People are thinking it certainly sounds reckless for young people to leverage two to one into stocks. For some young people, it certainly is. Those who do this with their personal savings and are contemplating buying a house soon could lose their down payment, and thus be unable to buy. This factor is increasingly important after the subprime crisis since no-down-payment mortgages are hard to find now. But Ayres and Nalebuff are advocating such aggressive stock market investing only for retirement portfolios. Most young people could survive an annihilation of their retirement savings; they still have plenty of time to rebuild it later and it may generally be a good bet to take just such a risk. This is the basic point that Ayres and Nalebuff make, and it is right. I worry that this book in the wrong hands (of people with a gambling impulse or who are really more precarious in their financial situation) the book could encourage irresponsible investing. At the present time, the stock market looks rather pricey, and I am less optimistic about young people leveraging stock market investments right now. But, as a general, long-haul advice book, for savvy people who can judge their situation and not get themselves into a corner, the book is indeed valuable. This is not "Dow 36,000" again, as one reviewer says. This is a book about overcoming standard prejudices about investing, and as such it is an important book.

Robert Shiller
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Format: Hardcover Verified Purchase
This book advises twenty-somethings to put not just 100% of their retirement savings in stocks, but 200%. 2:1 leverage. Young workers, they say, should buy twice as much stock as they can afford, either by buying on margin, or, since the law (which the authors would like to change) prohibits buying on margin in a retirement account, by using "deep-in-the-money LEAP call options." Either way, 2008 would have wiped out everything they had saved, but this, the authors say, is to be expected from time to time and is no big deal in their simulated total-lifecycle statistics. Young workers don't have very much saved, so a total wipeout isn't much of a loss in dollars, and they have enough time to start all over and save it all again.

Before you try this, be aware of some red flags.

Red flags #1, #2, #3, #4, #5, and #6 come from Ayres and Nalebuff themselves, who say you should not try their strategy if ANY of these situations apply to you:

* You have credit card debt.
* You have less than $4,000 to invest.
* Your employer matches contributions to a 401k plan.
* You need the money to pay for your kids' college education.
* Your salary is correlated with the market.
* You would worry too much about losing money.

If any of these apply to you, save your time: you don't even need to read the book.

Red flag #7 is the book's title. It's self-contradictory! The dictionary says "audacious" means "fearless, often recklessly daring." Something cannot be both "safe" and "audacious." You'd better darn well decide for yourself which this plan is. Personally, I think it's audacious.

Red flag #8: the strategies they recommend involves the use of either investing on margin, or the use of "deep-in-the-money LEAP call options.
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Format: Hardcover Verified Purchase
I believe that this is a ground-breaking book.

Here's a summary:
1) Most folks tend to have the overwhelming majority of their exposure to the stock market (i.e., most dollar-years of stock market exposure) during a one-to-two decade period late in life (e.g., perhaps during their 50s). The reason for this is that folks tend to accumulate wealth exponentially -- they save exponentially and their investments tend to grow exponentially.
2) This generally works fine UNLESS they are unlucky and the stock market suffers through a bad decade when they have the most dollars exposed thereto.
3) The main idea here is that you would be better off, conceptually, if it were somehow possible to more evenly spread out your stock market exposure over your entire life. This idea of "time diversification" is quite sound. If you were somehow able to do that, and during the decade of your 50s the stock market goes to h*ll, so what! You've hot lots of other decades of stock market exposure to make up for it!
4) Of course, the devil is in the details. Is it possible to more evenly spread out your stock market exposure through your entire life? Yes.

a) The authors go into great detail about how you can move towards that goal by having greater than 100% exposure to stocks early in life. This can be done in many ways -- using options, futures, or buying on margin. And yes, this sort of thing can be dangerous for the layperson to attempt. I don't recommend it -- but keep reading.

b) Their recommended approach is to get roughly 200% stock exposure early in your adult life by buying deep-in-the-money call options on stock indexes, or perhaps broad market ETFs.
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