Are You a Stock or a Bond?: Create Your Own Pension Plan for a Secure Financial Future
Product Author Bios
Moshe A. Milevsky, Ph.D., lectures at the Schulich School of Business, where he earned his Ph.D., and has been nominated for teaching awards. He is Executive Director of the IFID Centre, a nonprofit corporation that is dedicated to research at the intersection of wealth management, personal finance, and insurance.
Dr. Milevsky has published five books and over fifty peer-reviewed articles on pensions, insurance, investments, derivative pricing, and retirement income planning. He co-founded the Journal of Pension Economics and Finance, authored The Calculus of Retirement Income, and has delivered seminars at the London School of Economics, The Wharton School of the University of Pennsylvania, University of Michigan, and universities throughout Europe, South America, and Asia.
Dr. Milevsky recently received a Graham and Dodd scroll award from the CFA Institute in recognition of his research on comprehensive life cycle investing, and in 2006 he was co-awarded a U.S. patent for inventing techniques designed to optimize asset allocation during retirement through the use of life annuities.
“Moshe Milevsky offers an original and clear re-thinking of the most fundamental concept in one’s financial lifetime: the management of risk, in all of its not-so-obvious dimensions.”—Nick Murray, author, Simple Wealth, Inevitable Wealth
“This book is another example of Moshe Milevsky’s ability to make the complex understandable...an excellent primer—for both advisors and their clients alike—on the ‘How Tos’ of effective retirement income planning.”—Jim Rogers, CFP, 2008 President, The Million Dollar Round Table (MDRT)
“In this new book, the author presents a holistic framework for investors and advisors to think about critical issues that impact investment decisions, such as human capital, mortality risk, and longevity risk. But even more importantly, Milevsky presents practical solutions that we can all follow to achieve financial security throughout our lives. This book is a must-read for everyone in the financial services industry.”—Peng Chen, CFA, Ibbotson Associates
“This is an extremely timely and valuable book. Our financial lives have never been more complex, and the challenges for many are daunting. Milevsky provides a new perspective that can really help people make better financial decisions and attain a greater level of financial security.”—Matt Greenwald, President, Mathew Greenwald & Associates
“The author has written an instant classic that will help people become better-educated retirement customers and also help financial advisors improve their professional skills.”—Francois Gadenne, Chairman of the Board and Executive Director, Retirement Income Industry Association (RIIA)
“Milevsky delivers one of the best books to date on personal financial planning—a refreshing blend of content, conceptual correctness, and clarity. Buy it. Read it. Do it.”—Richard M. Ennis, Chairman, Ennis Knupp & Associates; Editor, Financial Analysts Journal
In an era when traditional corporate pensions are disappearing, Social Security’ s sustainability is in question, healthcare costs are skyrocketing, and society is dumping more and more financial risk squarely onto your shoulders, Moshe Milevsky helps you comprehensively integrate all the opportunities and risks in your life: your career risks, your portfolio risks, your housing risks, and even your personal inflation and longevity risks that could lead you to financial regret and a ruined retirement. Then, he introduces a powerful, new framework for thinking about and managing your financial future that you can use to systematically reduce your vulnerability to each of these risks and, thus, generate long-term financial security.
To maximize your investment returns and protect yourself and your family, you must learn to think of yourself as a small company, with assets, liabilities, a balance sheet, an income statement, and real shareholder equity. The composition and choices you make with your financial capital should reflect the nature and security of your career or job, which is your unique “human capital.” So, for example, if You, Inc. is like a “stock,” make sure your retirement savings are tilted toward “bonds.” If your job is more secure and You, Inc. is essentially a “bond,” then make sure your retirement savings are tilted toward “stocks.” Get personal with your investments and make your financial capital serve and protect your human capital. Factoring in your unique “human capital” adds a new dimension to financial planning which is a critical next step for sound and effective investing.
11 of 12 people found the following review helpful
An excellent, easy to read primer, on the issues of retirement planning,
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This review is from: Are You a Stock or a Bond?: Create Your Own Pension Plan for a Secure Financial Future (Hardcover)Dr Milevsky does an excellent job discussing the dual uncertainties of retirement planning: uncertainty of longevity, and uncertainty of portfolio duration. Both deal with trying to determine how long you or your money may last, while recognizing that both time periods need to overlap - in fact one might argue that the portfolio time period needs to be nanoseconds (ideally with perfect knowledge) longer than your longevity. The human capital approach is excellent since it relates the long term economic value of a person's labor, as a total dollar value; to the total dollar value that person needs to sustain their living standard throughout retirement.
There is controversy in the profession concerning the allocation of assets considering the nature of a person's source and nature of their income along with those assets. However, putting concepts out there for discussion is how incremental improvements occur. Another controversial approach has been forwarded in... Read more
7 of 7 people found the following review helpful
Are you SURE that you won't outlive your money?,
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This review is from: Are You a Stock or a Bond?: Create Your Own Pension Plan for a Secure Financial Future (Hardcover)The horrible bear market that began in Oct. '07 and continues into early '09 has shaken traditional concepts of asset allocation and diversification to the core. There were no shelters that worked other than treasuries. Only 1 equity mutual fund MADE money in '08 and that one didn't even earn 1%. The brilliant Mr. Milevsky (Ph.D at age 27) presents
numerous ideas that can help you plan to make sure that you do not outlive your money even if faced with another brutal downturn once the workplace paychecks have ceased. "A large sum of money in an investment plan-however you define large-doesn't guarantee you a secure retirement. The strategy you employ and the products you purchase with your nest egg will be more important than the size of that nest egg."-Taken from the Introduction pages and probably the compelling reason why you should give this book a read, and highlight key points for your specific situation, and re-read, re-refer and get your retirement income plan RIGHT... Read more
6 of 6 people found the following review helpful
Decent treatment of securing retirement stability,
This review is from: Are You a Stock or a Bond?: Create Your Own Pension Plan for a Secure Financial Future (Kindle Edition)Moshe's background is mathematical, so some of the book tends to academic discussion of Monte Carlo simulations and long formulas that bored me. His most interesting insight is the treatment of your human potential and earning power as a financial asset. He describes how to extract the greatest potential out of your lifetime earnings, and how to allocate the risk appropriately.
The one thing that gives me pause -- the conclusions his mathematical expertise produce tend to look very bad. For instance, he states in his book that he is 150% exposed to equities. That means he has borrowed 50% above his own money and put it into the stock market. Since the publication date was 2008, you can imagine that his nest egg is totally wiped out, if it wasn't carefully hedged.
As smart as Moshe is, I wonder if he'll write a different book as a result of the "Crash of 2008".
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Online Sample Chapter
Table of Contents
Preface: How Much Risk Are You Really Handling? xiii
Introduction: Pensions are Dying; Long Live Pensions xvii
Chapter 1: You, Inc. 1
Chapter 2: Insurance Is a Hedge for Human Capital 21
Chapter 3: Diversification over Space and Time 37
Chapter 4: Debt Can Be Good at All Ages 59
Chapter 5: Personal Inflation and the Retirement Cost of Living 75
Chapter 6: Sequence of Investment Returns 87
Chapter 7: Longevity Is a Blessing and a Risk 107
Chapter 8: Spending Your Retirement in Monte Carlo 117
Chapter 9: Annuities Are Personal Pensions 141
Chapter 10: Product Allocation Is the New Asset Allocation 163
Chapter 11: Conclusion: Plan for Managing Your Retirement Risks 185
Appendix: Additional References and Notes 195
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