Bernstein: Don’t Bother With Int'l Bonds

June 24, 2014

Bill Bernstein gives free advice to young investors.

Bill Bernstein, the investor/author and ardent proponent of passive investing, has climbed his way to the top of online book sales this year with one of his latest efforts "If You Can" (Free PDF version). It’s a how-to manual he offered online for free that’s aimed at young adults to help them navigate the world of investments.

Packed with Bernstein’s customary take-no-prisoners turns of phrase, it’s really more of a pamphlet than a book. It’s 16 pages of incisive advice—complete with a pithy supplementary reading list—that attempts to cut through the fog of Wall Street marketing and get to the crux of the matter.

And with a passive investor like Bernstein, the crux is all about owning everything there is to own in the investment universe—or nearly everything—for as cheaply as possible. So the asset allocation components laid out in “If You Can” comes down to three funds, all from Vanguard:

What’s conspicuously missing from the asset allocation plan is international bonds such as those in the Vanguard Total International Bond ETF (BNDX | B-46). Managing Editor Olly Ludwig visited with Bernstein on the phone recently to find out, among other things, why. What was your motivation for writing “If You Can” and for making it free? It certainly was a nice gesture.

Bernstein: Basically, I wanted to do a good deed and, as usually happens, I completely missed my target. I was aiming at “millennials.” I wanted a 25-year-old with his or her first 401(k) to read this and act accordingly. But the people who have been reading this are mostly the parents and grandparents and aunts and uncles of those 25-year-olds. So how does that work out?

Bernstein: Well, we’re talking about three groups of people.

The biggest group of people by far is the one that says: “Oh my god, I have a kid, a grandkid or a nephew or a niece who needs to read this, and I’m going to send it to them.”

The second group of people were the ones for whom the booklet validated what they were doing. These are people who’ve saved a lot of money, who have been saving a lot of money and investing fairly competently and derived a modest amount of schadenfreude from reading the book.

The third group of people is those who read it and said: “I’m screwed; I better get on the stick.” That’s probably the smallest group of people.

But I got very little feedback from actual millennials who read the book and said: “This is fantastic, I’m going to do just this!” Well, most millennials may not be financially literate enough to truly take measure of what you’ve laid out. I would say those are 16 very dense pages you’ve written—and not because your prose in unreadable, but because those are new concepts to the average 25-year-old.

Bernstein: Well, yes. And the other thing that really, really surprised me is that I thought I was just getting the gospel out there about keeping costs down and about the importance of asset allocation.

But no; what really resonated with readers is the simple realization that if they don’t start saving, or if their nieces and nephews don’t start saving large portions of their salaries, they’re going to be eating cat food when they’re 70! It was much more basic than “Jack Bogle 101.”


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