Risk Less and Prosper: Your Guide to Safer Investing

Praise For Risk Less and Prosper

"Conventional investment wisdom be damned′ could be the title to this outstanding book! The subtitle could be ′the key to sleeping well.′ Bodie–Taqqu present a path for individuals that can lead each of us to financial and retirement security."
DALLAS L. SALISBURY, President and CEO, Employee Benefit Research Institute

"Professor Bodie has been a tireless advocate for improving investors′ understanding of risk. In Risk Less and Prosper, he and Rachelle Taqqu have converted those principles into a practical, easily understood road map that individual investors can effectively implement. By demonstrating how individuals can develop their ′life balance sheet,′ Zvi and Rachelle provide readers with valuable tools to determine what risk means to them, evaluate their risk tolerance, and plan for their most financially important life goals."
STEPHEN M. HORAN, PHD, CFA, CIPM, Head, University Relations and Private Wealth, CFA Institute

"Many of the teachings in Bodie and Taqqu′s new book may seem unbelievable to novices and perhaps surprising even to professionals. Too many, for instance, believe equity risk dissipates over time, but the authors show that risk actually increases. Bodie and Taqqu define risk as the capacity a person has to fall short of a financial need or goal. Their redefinition or unveiling of the truth about investment risk is much needed and refreshing. Eyes wide open, investors can then go on to make sure they′re not risking more than they can afford to lose. If you are looking for a ′get rich quick′ formula, you won′t find it here. Instead, you′ll receive honest and sage advice on how truly to risk less and prosper."
STACY SCHAUS, Senior Vice President, PIMCO

"Bodie and Taqqu′s book Risk Less and Prosper is a masterful client–level financial guide to safety–first investing throughout one′s lifetime. It complements RIIA′s curriculum for the Retirement Management Analyst (RMA) certification and will soon be required reading."
FRANÇOIS GADENNE, Chairman and Executive Officer, Retirement Income Industry Association (RIIA)

"Bodie and Taqqu′s Risk Less and Prosper is a marvelous, easy–to–read guide to financial health. Buy two copies one for yourself and one for your financial planner!"
LAURENCE KOTLIKOFF, William Fairfield Warren Professor of Economicsat Boston University; author of Jimmy Stewart Is Dead: Ending theWorld′s Ongoing Financial Plague with Limited Purpose Banking

Foreword ix

Preface xv

Acknowledgments xxv

PART I All About You 1

Chapter 1 Changing the Game 3

Chapter 2 Picturing Your Destination 17

Chapter 3 Paying Up 31

PART II Risk Matters 47

Chapter 4 The Mismeasure of Risk 49

Chapter 5 The Allure of Hope 65

Chapter 6 Your Personal Risk Profile 85

PART III Building Blocks 99

Chapter 7 Finding the Safe Investment Zone 101

Chapter 8 The Art of Matchmaking 125

Chapter 9 Investing Safely for Education 139

Chapter 10 Choosing Risky Investments 147

Chapter 11 How to Choose an Advisor 167

Epilogue 175

Notes 181

About the Authors 189

Index 191

Zvi Bodie is the Norman and Adele Barron Professor of Management at Boston University. He holds a PhD from the Massachusetts Institute of Technology and has served on the finance faculty at the Harvard Business School and MIT′s Sloan School of Management. In recent years, Bodie has been a prominent advocate for the financial protection of small investors and has written widely on this subject. Professor Bodie has worked closely with numerous professional institutions, including the CFA Institute, the Federal Reserve Bank of Boston, the Retirement Income Industry Association, and the Society of Actuaries.

Rachelle Taqqu is a financial consultant with many years of experience in the financial services industry. In recent years, she has worked closely with several nonprofit institutions on their endowments.

"Bodie and Taqqu have staked out important ground in terms of reconsidering the basic paradigm for long–term saving and investing and presenting a new approach in an engaging and thoughtful manner." ( Portfolio.com, February 2012)

"...a good read for those of you who are skeptical of investing in today′s stock market. But it is a must–read for those of you who actually think that you know what you are doing." (Huffington Post, January 2012)