Investing for a Lifetime: Managing Wealth for the "New Normal"

" Investing for a Lifetime is packed not only with solid financial advice, but also vivid examples drawn from recent market history. This is the book that investors need to read as they reassess their finances after a tumultuous decade and a half for the stock and real-estate markets." —Jonathan Clements, author of The Little Book of Main Street Money and columnist for The Wall Street Journal Sunday Investing for a Lifetime saving, investing, and spending Investing starts with savings. A "savings goal" tells an investor how much must be saved by the time of retirement. How do investors reach these goals? By setting a rate of savings high enough to accumulate the required wealth by the time of retirement. Investing itself is much easier than saving, although investing has many pitfalls for the unwary. The two largest challenges for investors are to choose the right portfolio to begin with and to stick with investment strategies when markets tumble. Trying to fund retirement from investment income alone may lead to portfolios that are too risky for a retiree in this low interest rate environment. It's better to base spending on investment returns, not just on the income from investments, and to choose diversified portfolios of stocks as well as bonds to fund retirement. A "New Normal" may mean that stock returns in the future will fall short because of slower growth in the industrial world. A New Normal may also mean that bond returns will fall short as the thirty year bull market for bonds finally comes to an end. A New Normal with lower investment returns may make saving, investing, and spending that much more challenging. Younger investors may find that they have to save more than their parents did and older investors may find that their plans for retirement fall short of their hopes. Investing for a Lifetime addresses all of these issues.

Preface xi Acknowledgments xv PART ONE Saving and Investing 1 CHAPTER 1 Introduction: Investing for a Lifetime 3 CHAPTER 2 The Building Blocks of a Portfolio: Bonds and Stocks 11 CHAPTER 3 Long Swings in Returns: Are We in a “New Normal?” 23 CHAPTER 4 A Savings Goal for Retirement 37 CHAPTER 5 What Rate of Savings? 49 CHAPTER 6 Savings and Taxes 61 PART TWO Investment Choices 73 CHAPTER 7 Investing in U.S. Stocks 75 CHAPTER 8 Foreign Stock Markets: Industrial Countries of Europe and the Pacifi c 89 CHAPTER 9 Emerging Markets 101 CHAPTER 10 Investing in Bonds: The Basics 115 CHAPTER 11 Investing in Bonds: The Wider Bond Market 129 CHAPTER 12 Investing in Real Estate: REITs 145 CHAPTER 13 The Home as an Investment 157 PART THREE Wealth Management 169 CHAPTER 14 Choosing a Portfolio: Fitting the Pieces Together 171 CHAPTER 15 Best Practices for Investing 187 CHAPTER 16 Investment Income for Retirement 199 CHAPTER 17 Spending in Retirement 209 CHAPTER 18 Retirement: Putting Together a Plan 223 CHAPTER 19 The “New Normal” and Retirement 239 About the Author 249 About the Companion Website 251 Index 253

RICHARD C. MARSTON is the James R.F. Guy Professor of Finance at the Wharton School of the University of Pennsylvania. A graduate of Yale College and MIT, where he received his PhD, Marston was also a Rhodes Scholar at Oxford University. He has taught asset allocation for over twenty years in the CIMA Program sponsored by the Investment Management Consultants Association. In 2014 he received IMCA's Matthew McArthur Award for outstanding contributions to investment management. Since 1999, he has been Academic Director of the Private Wealth Management Program, a week-long program for ultra-high net worth investors. Marston has lectured on investments throughout the United States and in over a dozen foreign countries. He is the author of numerous articles and books, including his most recent book, Portfolio Design (Wiley, 2011).