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You may want to check out Jon Chevreau’s interview with finance professor Ziv Brodie , author of “Worry-Free Investing”, who calls into question most of todays widely held financial wisdom: Prof. Brodie argues that ordinary investors do not have to take any stock market risk when there is a safe, guaranteed long-term investment in the form of real return bonds. He doesn’t view stocks or gold as inflation hedges and points out that REITs have a slightly positive correlation with inflation but cannot be counted on to go up in proportion to inflation. Prof. Brodie points out that since you can’t get a higher return without taking on higher risk, the investment industry’s claim that people can just save less and invest in stocks for the long-term is a lie. By taking risk, investors are also exposed to the possibility that they could do worse. He calls the conventional wisdom that over the long-term there is little risk in equities as a fallacy. “If you spread risk across uncorrelated assets then yes you get diversification of risk but over time there is no diversification because the good years don't necessarily cancel out the bad”. [ABSTRACT FROM PUBLISHER] |
