Lifecycle investing

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1. tornato7Sep 2023
   This is interesting. The antithesis is probably the book Lifecycle Investing [0] which essentially concludes that you should be 2X leveraged stocks in your youth and slowly reduce leverage over time.

   0. https://www.lifecycleinvesting.net/

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2. divbzeroAug 2021
   > An controversial book on investing I recently read is Lifecycle Investing which argues that young people are often much too conservative in their investment strategy, because they should model their future earnings as a bond and allocate enough to equities to compensate for holding this bond, even leveraging up to 100% to get the right allocation.

   That’s a pretty interesting idea. I wouldn’t take the future earnings = bond concept literally, especially if you’re in a high volatility profession, but it seems useful as a mental check when assessing asset allocations.

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3. spekcularAug 2021
   The book "Lifecycle Investing," by Yale professors Nalebuff and Ayres, argues that a young person ought to invest 100% or even more (via leverage) in stocks. (More specifically, a young person with high future earning potential, which probably includes many people here with a career in tech.)

   I'm fairly risk averse and don't totally believe their leverage calculations. But it did convince me that any non-negligible bond allocation is probably suboptimal.

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4. spekcularNov 2020
   The book Lifecycle Investing by Nalebuff and Ayres, both professors at Yale, argues fairly convincingly that trading on margin is optimal for young people, especially those expecting high-earning careers (e.g. software developers).

   The calculations in the book use much more pessimistic annual interest rates than the 1% you quote, too.

   I'm too risk averse to actually do this, even though I believe their arguments. However, it has convinced me that at least 100% stocks, 0% bonds is optimal, if we avoid margin (for a young person expecting a good job).

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5. boluAug 2010
   I am better versed in the investment area than in the personal debt area, so I will let others speak to that. But a couple of thoughts on the investments front:

   1. In many ways it is about time horizon. If you are sure that you will not need access to the funds in the short term (conservatively, in the next 10 years) then you can invest in high risk vehicles. But remember, this is not necessarily because the funds are in a 401(k) or IRA account where there is a large early withdrawal penalty, but also because high risk instruments could have fallen greatly in value at the time you need the funds, and if you have to withdraw them at that time you’re forced to take a large loss.

   2. If you think you have a long time horizon make sure to do the math to actually be sure - ndimopoulos’s advice above about having an emergency fund is good.

   3. If you have a long time horizon, there is no need to discount 401 K plans and IRA plans. Tax-free growth, or tax deferred growth as depending on which flavor you choose, is an amazing thing.

   4. If you’re really interested in extremely risky investments in an effort to expose yourself to the largest upside, there’s been some recent work around lifecycle investing where some relatively well respected academics are proposing a model that includes some small amount of leverage for folks who have a long time horizon and a large amount of risk tolerance. This will road, if you choose it, bears quite a bit of research before you start. Take a look (as a start) at http://www.amazon.com/Lifecycle-Investing-Audacious-Performa...

   5. Remember that being rational with money is a lot easier when its not yours and when it’s not decreasing rapidly. It probably bears some effort on your behalf before jumping into any high risk investments to project yourself into the future and understand how you would feel if your life savings drop by 50% or even 80%. Make sure that you’re OK with this.

   Just a couple of thoughts, hope this helps.

   P.S. I am the cofounder of the recently launched YC Summer 2010 company FutureAdvisor. Our current product targets specifically optimizing an existing portfolio, so not much help in this situation, though this is definitely a scenario we hope to support in the future. Thanks for sharing your story, it helps us understand what folks might need out of a investing product.

   (written with the aid of speech recognition, please excuse the occasional bewildering error)

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