If You Can

Bill Bernstein wrote a famous short book called “If You Can”. It’s available

In 26 pages, it tells you how you can outperform most of the financial industry and save your retirement.

“All they’ll have to do is to put away 15% of their salaries into a low-cost target fund or a simple three-fund index allocation for 30 to 40 years.”

You just need to clear the “5 hurdles”.

5 simple hurdles.

But simple doesn’t mean easy.

Hurdle 1: You Spend Too Much

You can’t save if you spend it all.

To grow your money, you have to save.

This is non-negotiable.

“Pay Yourself First”.

Without this, your money will never grow.

Hurdle 2: You don’t understand finance

Most people don’t understand investing.

That includes financial professionals. In fact, it probably includes over 90% of them.

Understanding indexing and stock and bond returns is not that hard.

But they are supremely counter-intuitive.

In fact, the less you know, the better off you might be.

Hurdle 3: You don’t understand financial history

This goes hand in hand with the previous point.

Everyone is a risk taker until they aren’t.

When markets tank, everyone runs for the hills.

They’d have to, or the market wouldn’t tank!

Thinking that you are different from everyone else is clearly impossible.

It’s like everyone saying that they are better than average drivers. Some of them are definitely wrong.

Stocks and bonds can crash, and they can crash at the worst possible times, and by a lot. (We’re speaking over 50% for the overall stock market, and 15% for bonds.)

You need to understand history to ensure you don’t repeat it.

Hurdle 4: You don’t understand yourself

We are bad at saving and investing.

But until we confront that fact, we will continue making the same mistakes over and over.

Costing us over a million in lost retirement dollars.

Like I said, investing is counter-intuitive.

Hurdle 5: The financial industry is not here to help you

And yet we turn to the “professionals” to help us.

Because in other fields, this makes sense. Professionals have more knowledge and more skills.

In personal finance and investing, this is the one field that doesn’t hold. More knowledge and more skills doesn’t translate to better outcomes.

Part of that is because of how financial “professionals” are compensated.

They are paid based on how much they sell, NOT the quality of their advice.

But not only that, they truly believe in the bad advice they are giving.

If you wish to select a good financial advisor, this Rational Reminder episode has great advice on how to do so.

An Aside

I am now a financial planner.

I want to give better advice than the insurance agents and relationship managers out there.

I’m not paid by commission.

And I will always give my thoughts for free on this blog.

If you’re looking for unbiased, factual information on saving and investing, you know where to find it.

Right here always.

Thank you for reading.