Investing For A Lifetime Website An Interactive Education In Managing Wealth For The New Normal

A comprehensive guide to lifelong financial planning best practices Investing for a Lifetime +Website: An Interactive Education in Managing Wealth for the ""New Normal"" is the comprehensive guide to planning for lifelong financial security. Written by a Wharton Professor for the Private Wealth Management Program, the book provides professionals with the facts they need to serve their clients' best interests. Taking into account the most common concerns clients express, the book details retirement preparation from the perspectives of saving and investing, investment choices. � Read more... Abstract: Investing for a Lifetime is designed to make saving and investing understandable to the investor. Wharton Professor Richard C. Marston, 2014 recipient of the Investment Management Consultants Association s prestigious Matthew R. McArthur Award, guides an investor through the main investment decisions throughout a lifetime. � Read more... Investing for a Lifetime 3 Contents 9 Preface 13 Acknowledgments 17 PART ONE Saving and Investing 19 CHAPTER 1 Introduction: Investing for a Lifetime 21 THE NEW RETIREMENT REALITY—WE ARE ON OUR OWN 22 LONGEVITY 22 THE SQUIRREL MODEL OF SAVING AND SPENDING 24 OUTLINE OF THE BOOK 27 NOTES 27 REFERENCES 28 CHAPTER 2 The Building Blocks of a Portfolio: Bonds and Stocks 29 BONDS AND STOCKS SINCE 1951 30 THE IMPORTANCE OF ADJUSTING FOR INFLATION 31 BONDS AND STOCKS ADJUSTED FOR INFLATION 33 ASSET ALLOCATION DECISIONS FOR YOUNG INVESTORS: THE CASE OF TIAA-CREF 35 WHAT ARE THESE LONG-RUN AVERAGES MISSING? 38 NOTES 39 REFERENCES 39 CHAPTER 3 Long Swings in Returns: Are We in a “New Normal?” 41 LONG SWINGS IN RETURNS 41 WERE YOU LUCKY ENOUGH TO INVEST DURING THE 1980S AND 1990S? 45 THE NEW NORMAL FOR THE BOND INVESTOR 47 Yields Stay Low 47 Rising Rates 48 THE NEW NORMAL FOR THE STOCK INVESTOR 49 WHAT CAN INVESTORS DO? 52 NOTES 52 REFERENCES 53 CHAPTER 4 A Savings Goal for Retirement 55 WHAT IS RETIREMENT SAVINGS TRYING TO ACHIEVE? 56 IS THERE A RULE OF THUMB ABOUT HOW MUCH YOU HAVE TO SAVE? 57 WHAT RATE OF SPENDING IS SAFE IN RETIREMENT? 58 WHAT IF THERE WERE NO SOCIAL SECURITY? SOME SIMPLE ARITHMETIC 60 SAVINGS GOAL WITH SOCIAL SECURITY 61 RETIREMENT SAVINGS GOAL AT HIGHER OR LOWER LEVELS OF INCOME 63 HOW DO WE REACH THE SAVINGS GOAL? 65 NOTES 65 REFERENCES 66 CHAPTER 5 What Rate of Savings? 67 HOW MUCH DOES THE RATE OF SAVINGS MATTER? 68 HOW MUCH IS ENOUGH? 69 THREE KEY FACTORS IN SAVING 70 HOW IMPORTANT IS IT TO START SAVING EARLY? 71 WHAT IF SAVINGS ARE WITHDRAWN FOR COLLEGE? 73 WHAT IF THE PORTFOLIO RETURNS FALL SHORT? 75 HOW DO TAXES AFFECT SAVINGS? 78 NOTES 78 CHAPTER 6 Savings and Taxes 79 HOW TAXES REDUCE INVESTMENT RETURNS 79 TAX EFFICIENCY 82 HOW IMPORTANT IS TAX DEFERRAL? 84 ASSET LOCATION 87 CONCLUDING COMMENTS 88 NOTES 89 REFERENCES 89 PART TWO Investment Choices 91 CHAPTER 7 Investing in U.S. Stocks 93 MUTUAL FUNDS AND ETFS 94 WAYS TO SLICE UP THE U.S. STOCK MARKET 95 WHAT DO WE MEAN BY SMALL-CAP STOCKS? 96 RELATIVE PERFORMANCE OF LARGE-CAP AND SMALL-CAP STOCKS 98 THE VALUE PREMIUM 100 RELATIVE RETURNS ON VALUE AND GROWTH STOCKS 102 IMPLICATIONS FOR PORTFOLIOS 104 NOTES 105 REFERENCES 105 CHAPTER 8 Foreign Stock Markets: Industrial Countries of Europe and the Pacific 107 RETURNS ON FOREIGN STOCKS 108 MARKETS HAVE BECOME MORE CORRELATED 110 WHY DOES IT PAY TO DIVERSIFY INTO FOREIGN STOCKS? 111 ROLE OF CURRENCIES IN RETURNS EARNED BY U.S. INVESTORS 113 IS THERE A SHORTCUT TO INVESTING IN FOREIGN STOCKS? 116 CONCLUDING COMMENTS 117 NOTES 118 REFERENCES 118 CHAPTER 9 Emerging Markets 119 WHAT IS AN EMERGING MARKET? 120 EMERGING STOCK MARKET INDEXES 123 EMERGING STOCK MARKET RETURNS 125 RISKS OF INVESTING IN EMERGING STOCK MARKETS 128 SO WHY INVEST IN EMERGING MARKETS AT ALL? 129 CONCLUDING COMMENTS 131 NOTES 131 REFERENCES 132 CHAPTER 10 Investing in Bonds: The Basics 133 BOND YIELDS AND BOND RETURNS 133 BUT WHAT IF I BUY AND HOLD? 138 BOND INVESTING WHEN INTEREST RATES ARE AT RECORD LOWS 140 LADDERING THE BOND PORTFOLIO 141 NOTES 145 CHAPTER 11 Investing in Bonds: The Wider Bond Market 147 CORPORATE BONDS 148 OTHER INVESTMENT GRADE BONDS 151 HIGH-YIELD BONDS 152 TREASURY INFLATION-PROTECTED SECURITIES (TIPS) 155 MUNICIPAL BONDS 155 CONCLUDING COMMENTS 160 NOTES 161 REFERENCES 161 CHAPTER 12 Investing in Real Estate: REITs 163 REAL ESTATE INVESTMENT TRUSTS (REITS) 164 HOW WELL DO REITs FIT IN A PORTFOLIO? 166 REITS AND THE FINANCIAL CRISIS 169 REITS AS A SOURCE OF INCOME FOR INVESTORS 170 CONCLUDING COMMENTS 172 NOTES 172 REFERENCES 173 CHAPTER 13 The Home as an Investment 175 CAPITAL GAINS ON HOUSING BY STATE AND METROPOLITAN AREA 176 THE HOUSING BUST 179 RATES OF RETURN ON HOUSING 181 CONCLUDING COMMENTS 185 NOTES 185 REFERENCES 186 PART THREE Wealth Management 187 CHAPTER 14 Choosing a Portfolio: Fitting the Pieces Together 189 WHY MIX BONDS AND STOCKS? 190 LONG-TERM “STRATEGIC” ASSET ALLOCATION 192 LIFE-CYCLE INVESTING 193 A MODEL PORTFOLIO 194 INVESTING FOR COLLEGE 197 REBALANCING DEFINED 199 Rebalancing When Times Are Good 199 Rebalancing When Times Are Bad 200 CONCLUDING COMMENTS 201 NOTES 202 CHAPTER 15 Best Practices for Investing 205 DRAGS ON RETURNS 205 MEASURING MANAGER PERFORMANCE 207 TO INDEX OR NOT 210 OVERALL PORTFOLIO PERFORMANCE 212 CONCLUDING COMMENTS 215 NOTES 215 REFERENCES 215 CHAPTER 16 Investment Income for Retirement 217 SOLUTION 1: BOND INVESTMENTS—MATURITY AND CREDIT RISK 218 SOLUTION 2: MUNICIPAL BONDS 221 SOLUTION 3: STOCKS WITH HIGHER DIVIDEND YIELDS 222 SOLUTION 4: REAL ESTATE INVESTMENT TRUSTS (REITS) 223 LIMITS OF INCOME STRATEGIES 224 WILL INCOME BE HIGH ENOUGH IN RETIREMENT? 225 NOTES 226 REFERENCES 226 CHAPTER 17 Spending in Retirement 227 A SPENDING RULE FOR RETIREMENT 228 TWO ISSUES WITH IMPLEMENTING SPENDING RULES 233 ADDING ANNUITIES TO ENHANCE SPENDING 234 THE BEGINNINGS OF A RETIREMENT PLAN 238 NOTES 238 REFERENCES 239 CHAPTER 18 Retirement: Putting Together a Plan 241 THE ROLE OF SOCIAL SECURITY 241 PUTTING TOGETHER A RETIREMENT PLAN: SPENDING OUT OF SOCIAL SECURITY AND SAVINGS 245 HOW DOES THE PLAN CHANGE IF I RETIRE EARLIER OR LATER? 248 A RETIREMENT PLAN INCORPORATING ANNUITIES 250 WHAT IF THE RETIREE HAS A DEFINED BENEFIT PENSION? 253 WHAT COULD GO WRONG WITH THIS PLAN: THE NEW NORMAL 254 NOTES 254 REFERENCES 255 CHAPTER 19 The “New Normal” and Retirement 257 RETIREMENT IF THERE IS A NEW NORMAL 258 DID THIS RETIREMENT PLAN SURVIVE THE FINANCIAL CRISIS? 260 THE MOST DIFFICULT FEATURES OF THE PLAN TO FOLLOW IN PRACTICE 264 A FINAL WORD OR TWO 264 NOTES 265 About the Author 267 About the Companion Website 269 Index 271 Content: Investing for a Lifetime Contents Preface Acknowledgments PART ONE Saving and Investing CHAPTER 1 Introduction: Investing for a Lifetime THE NEW RETIREMENT REALITY-WE ARE ON OUR OWN LONGEVITY THE SQUIRREL MODEL OF SAVING AND SPENDING OUTLINE OF THE BOOK NOTES REFERENCES CHAPTER 2 The Building Blocks of a Portfolio: Bonds and Stocks BONDS AND STOCKS SINCE 1951 THE IMPORTANCE OF ADJUSTING FOR INFLATION BONDS AND STOCKS ADJUSTED FOR INFLATION ASSET ALLOCATION DECISIONS FOR YOUNG INVESTORS: THE CASE OF TIAA-CREF WHAT ARE THESE LONG-RUN AVERAGES MISSING? NOTES REFERENCES. CHAPTER 3 Long Swings in Returns: Are We in a "New Normal?"LONG SWINGS IN RETURNS WERE YOU LUCKY ENOUGH TO INVEST DURING THE 1980S AND 1990S? THE NEW NORMAL FOR THE BOND INVESTOR Yields Stay Low Rising Rates THE NEW NORMAL FOR THE STOCK INVESTOR WHAT CAN INVESTORS DO? NOTES REFERENCES CHAPTER 4 A Savings Goal for Retirement WHAT IS RETIREMENT SAVINGS TRYING TO ACHIEVE? IS THERE A RULE OF THUMB ABOUT HOW MUCH YOU HAVE TO SAVE? WHAT RATE OF SPENDING IS SAFE IN RETIREMENT? WHAT IF THERE WERE NO SOCIAL SECURITY? SOME SIMPLE ARITHMETIC SAVINGS GOAL WITH SOCIAL SECURITY. RETIREMENT SAVINGS GOAL AT HIGHER OR LOWER LEVELS OF INCOMEHOW DO WE REACH THE SAVINGS GOAL? NOTES REFERENCES CHAPTER 5 What Rate of Savings? HOW MUCH DOES THE RATE OF SAVINGS MATTER? HOW MUCH IS ENOUGH? THREE KEY FACTORS IN SAVING HOW IMPORTANT IS IT TO START SAVING EARLY? WHAT IF SAVINGS ARE WITHDRAWN FOR COLLEGE? WHAT IF THE PORTFOLIO RETURNS FALL SHORT? HOW DO TAXES AFFECT SAVINGS? NOTES CHAPTER 6 Savings and Taxes HOW TAXES REDUCE INVESTMENT RETURNS TAX EFFICIENCY HOW IMPORTANT IS TAX DEFERRAL? ASSET LOCATION CONCLUDING COMMENTS NOTES REFERENCES. PART TWO Investment ChoicesCHAPTER 7 Investing in U.S. Stocks MUTUAL FUNDS AND ETFS WAYS TO SLICE UP THE U.S. STOCK MARKET WHAT DO WE MEAN BY SMALL-CAP STOCKS? RELATIVE PERFORMANCE OF LARGE-CAP AND SMALL-CAP STOCKS THE VALUE PREMIUM RELATIVE RETURNS ON VALUE AND GROWTH STOCKS IMPLICATIONS FOR PORTFOLIOS NOTES REFERENCES CHAPTER 8 Foreign Stock Markets: Industrial Countries of Europe and the Pacific RETURNS ON FOREIGN STOCKS MARKETS HAVE BECOME MORE CORRELATED WHY DOES IT PAY TO DIVERSIFY INTO FOREIGN STOCKS? ROLE OF CURRENCIES IN RETURNS EARNED BY U.S. INVESTORS. IS THERE A SHORTCUT TO INVESTING IN FOREIGN STOCKS?CONCLUDING COMMENTS NOTES REFERENCES CHAPTER 9 Emerging Markets WHAT IS AN EMERGING MARKET? EMERGING STOCK MARKET INDEXES EMERGING STOCK MARKET RETURNS RISKS OF INVESTING IN EMERGING STOCK MARKETS SO WHY INVEST IN EMERGING MARKETS AT ALL? CONCLUDING COMMENTS NOTES REFERENCES CHAPTER 10 Investing in Bonds: The Basics BOND YIELDS AND BOND RETURNS BUT WHAT IF I BUY AND HOLD? BOND INVESTING WHEN INTEREST RATES ARE AT RECORD LOWS LADDERING THE BOND PORTFOLIO NOTES CHAPTER 11 Investing in Bonds: The Wider Bond Market.

Investing for a Lifetime is designed to make saving and investing understandable to the investor. Wharton Professor Richard C. Marston, 2014 recipient of the Investment Management Consultants Association's prestigious Matthew R. McArthur Award, guides an investor through the main investment decisions throughout a lifetime.

Investing for a Lifetime shows:

• how younger investors can set savings goals
• how both younger and older investors can choose investment portfolios to achieve these goals
• how investors can sustain spending once reaching retirement.

Younger and older investors alike should understand savings goals that will provide enough income to sustain spending in retirement. They should devise rates of saving that allow them to reach their goals by the time of retirement. Though retirement is often the main goal of investing, it's not the only one. Marston discusses how funding a child's education or saving for a down payment for a home affects overall saving.

Sensible investing is also necessary for savings goals to be realized. Investing need not be complicated, but Marston explains that a diversified portfolio should include a mix of different types of U.S. stocks, foreign stocks, real estate as well as bonds.He describes each of these asset classes and shows how they fit in an investor's portfolio. He shows how investors can monitor the performance of their portfolios by establishing benchmarks for each asset class to judge how well their investments are doing.

He focuses particular attention on those investors nearing retirement. In today's low interest rate environment, he discusses whether it is possible to fund retirement from interest and dividends alone.He shows how savings combined with Social Security can fund retirement spending. And he asks how the "New Normal" of lower returns might force investors to save more than in past decades, and to spend less in retirement than in the past.

Investing for a Lifetime is for investors who want to understand more about the savings and investment process, particularly those who worry about whether their retirement savings will last a lifetime.

Investing for a Lifetime is designed to make saving and investing understandable to the investor. Wharton Professor Richard C. Marston, 2014 recipient of the Investment Management Consultants Association's prestigious Matthew R. McArthur Award, guides an investor through the main investment decisions throughout a lifetime. Investing for a Lifetime shows: how younger investors can set savings goals how both younger and older investors can choose investment portfolios to achieve these goals how investors can sustain spending once reaching retirement. Younger and older investors alike should understand savings goals that will provide enough income to sustain spending in retirement. They should devise rates of saving that allow them to reach their goals by the time of retirement. Though retirement is often the main goal of investing, it's not the only one. Marston discusses how funding a child's education or saving for a down payment for a home affects overall saving. Sensible investing is also necessary for savings goals to be realized. Investing need not be complicated, but Marston explains that a diversified portfolio should include a mix of different types of U.S. stocks, foreign stocks, real estate as well as bonds. He describes each of these asset classes and shows how they fit in an investor's portfolio. He shows how investors can monitor the performance of their portfolios by establishing benchmarks for each asset class to judge how well their investments are doing. He focuses particular attention on those investors nearing retirement. In today's low interest rate environment, he discusses whether it is possible to fund retirement from interest and dividends alone. He shows how savings combined with Social Security can fund retirement spending. And he asks how the "New Normal" of lower returns might force investors to save more than in past decades, and to spend less in retirement than in the past. Investing for a Lifetime is for investors who want to understand more about the savings and investment process, particularly those who worry about whether their retirement savings will last a lifetime.