Efficient Frontier 
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William J. Bernstein

Investing For Adults

Introducing My Latest Project

Investing for Adults is an online series of short e-books aimed at those who hunger for a more advanced appreciation of finance. I use the word "adult" figuratively, as it stands in metaphorical contrast to investment "children" who believe in the financial equivalents of Santa Claus, the Tooth Fairy, and the Easter Bunny: the market timing fairy (strategists who can predict future price changes), the returns fairy (managers who can generate alpha), and the risk fairy (options counterparties who will cheaply insure you against market losses).   

I could certainly publish yet another traditional-format investment book with this goal in mind, but I've decided on a different route. This project is, if you will, a bet that finance publishing is different from most other nonfiction and closer to what the writing of short stories and novellas has been evolving towards online: brief and less expensive works that readers can select from. Over the next year or two I hope to produce several such short essays, each perhaps the size of a longish New Yorker piece, tightly focused on one particular area.  I don't expect anyone to read every one, but rather to pick and choose among them, depending upon his or her interests and needs.

This series makes a further assumption beyond investment adulthood: it assumes that the reader has at least a passing familiarity with basic academic finance. When I mention Eugene Fama, for example, I am not going to add the descriptive phrase, "famous University of Chicago financial economist and inventor of the efficient market hypothesis and three-factor model." I assume you already know who he is, what he's done, and what it all means. The same goes for Harry Markowitz, Zvi Bodie, Paul Samuelson, mean-variance analysis, kurtosis, and time-period dependency.

If the above list is Greek to you, then you are skydiving in the capital markets without a parachute. Do not pass go, do not collect two hundred dollars, and most certainly do not invest another penny until you have properly educated yourself. Which is not, as I've already mentioned, what I'm doing here; if you are not up to speed on these issues, then you won't benefit from this series yet.

Don't be discouraged; I've put together a reading list for those who need to start with the basics. The list looks a bit daunting, I know, but remember, you have all the time in the world to get this right. Read just one of the books on the list every month or two, and within a year you'll know more about finance than most professionals. You won't be sorry.

That preamble out of the way, here's the first in the series, "The Ages of the Investor: A Critical Look at Life-cycle Investing," a look beyond the "Age equals bonds" rule towards an asset allocation framework that changes qualitatively, as well as quantitatively, as the investor navigates his or her way through storm-tossed markets towards retirement. It's available in Kindle and paperback formats.

I anticipate at least a few more in the series over the coming year or two; be on the lookout in several months hence for a booklet on a more investor-friendly version of the efficient market hypothesis.

Oh, one more thing to share. Following the publication of A Splendid Exchange four years ago, I began work on a project on communications technology, from 100,000 BC to the present. The book, Masters of the Word: How Media Shaped History, is now in the final stages of editing, and will be published by Grove/Atlantic shortly after the new year. Stay tuned.


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