*Lifecycle Investing*

That's the title of the new book by Ian Ayres and Barry Nalebuff and the subtitle is A New, Safe, and Audacious Way to Improve the Performance of Your Retirement Portfolio.  Their point is simple: if diversification across asset classes is so good, why not also seek greater diversification across time periods?  In other words, you should want to hold stocks for longer periods of time and to do this when you are young you should incur additional debt to play the market.


They propose a fifty percent down payment on stocks when you are young, with the rest financed by leverage.  At another place in the book, they mention aiming to spend a constant fraction of lifetime savings on stock.

But is this less risky?  To what extent is this multiplication of risks (adding more time periods) and to what extent is it subdivision of risk (spreading a given sum of money across more stocks or across more time periods)?  To what extent does early investment sidestep the price risk of later periods, if you're holding the assets through that period anyway?  The authors do present various simulations where this strategy works out well.  They also argue that if you are pessimistic you should invest less in stock, but still spread out your investing over time.

If I were a young man, I would not take this plunge, mostly out of fear that a historically unique equity premium configuration was doing the major work of the argument.  Still, I found this to be a stimulating and well-written book with a clearly demarcated proposal for betterness. 

It was published by Basic Books, which also is putting out Jeff Miron's Libertarianism: From A to Z.


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