Are You a Stock or a Bond?: Create Your Own Pension Plan for a Secure Financial Future

by Moshe A. Milevsky

“Moshe Milevsky offers an original and clear re-thinking of the most fundamental concept in one’s financial lifetime: the management of risk, in all of its not-so-obvious dimensions.”—Nick Murray, author, Simple Wealth, Inevitable Wealth “This book is another example of Moshe Milevsky’s ability to make the complex understandable...an excellent primer—for both advisors and their clients alike—on the ‘How Tos’ of effective retirement income planning.”—Jim Rogers, CFP, 2008 President, The Million Dollar Round Table (MDRT) “In this new book, the author presents a holistic framework for investors and advisors to think about critical issues that impact investment decisions, such as human capital, mortality risk, and longevity risk. But even more importantly, Milevsky presents practical solutions that we can all follow to achieve financial security throughout our lives. This book is a must-read for everyone in the financial services industry.”—Peng Chen, CFA, Ibbotson Associates “This is an extremely timely and valuable book. Our financial lives have never been more complex, and the challenges for many are daunting. Milevsky provides a new perspective that can really help people make better financial decisions and attain a greater level of financial security.”—Matt Greenwald, President, Mathew Greenwald & Associates “The author has written an instant classic that will help people become better-educated retirement customers and also help financial advisors improve their professional skills.”—Francois Gadenne, Chairman of the Board and Executive Director, Retirement Income Industry Association (RIIA) “Milevsky delivers one of the best books to date on personal financial planning—a refreshing blend of content, conceptual correctness, and clarity. Buy it. Read it. Do it.”—Richard M. Ennis, Chairman, Ennis Knupp & Associates; Editor, Financial Analysts Journal In an era when traditional corporate pensions are disappearing, Social Security’ s sustainability is in question, healthcare costs are skyrocketing, and society is dumping more and more financial risk squarely onto your shoulders, Moshe Milevsky helps you comprehensively integrate all the opportunities and risks in your life: your career risks, your portfolio risks, your housing risks, and even your personal inflation and longevity risks that could lead you to financial regret and a ruined retirement. Then, he introduces a powerful, new framework for thinking about and managing your financial future that you can use to systematically reduce your vulnerability to each of these risks and, thus, generate long-term financial security. To maximize your investment returns and protect yourself and your family, you must learn to think of yourself as a small company, with assets, liabilities, a balance sheet, an income statement, and real shareholder equity. The composition and choices you make with your financial capital should reflect the nature and security of your career or job, which is your unique “human capital.” So, for example, if You, Inc. is like a “stock,” make sure your retirement savings are tilted toward “bonds.” If your job is more secure and You, Inc. is essentially a “bond,” then make sure your retirement savings are tilted toward “stocks.” Get personal with your investments and make your financial capital serve and protect your human capital. Factoring in your unique “human capital” adds a new dimension to financial planning which is a critical next step for sound and effective investing.

Genres: Finance, Personal Finance, Nonfiction, Business, Money

208 pages, Hardcover

First published August 27, 2008

Reviews

[Joseph · Rating 4 out of 5]

I have enjoyed Dr. Milevsky's books for several years. For anyone who is interested in retirement planning, I can think of no other individual who writes in such an engaging and informative manner. He explains that people can be short-sighted if they plan on making retirement decisions just based on investing in stocks and bonds. He argues that people should factor their employment into the mix and whether the income from employment is stable (a tenured professor) or unstable (a financier who relies on bonuses). People who have stable incomes enjoy a bond-like product and people who have more variable incomes are more like a stock. This should holistically impact how people invest, especially when young people have many decades before retirement. In addition, he examines how different products at retirement can serve like a pension with guaranteed income, which is important in the era of declining defined benefits and rising defined contribution retirement plans.
In the book he gives a helpful link to calculators that can assist individuals in examining fundamental concepts of how much retirement money you can have based on certain assumptions, along with the likelihood of how long your money will last you, etc. The final chapter of the book explains a concept on how people can maximize their product allocation to ensure they meet their wishes of whether they want to leave an estate, ensure that they don't outlive their retirement savings, or a combination of both.
I gave the first edition five stars because of the introduction of human capital which has influenced my retirement investing decisions, so it would have been hard for the second edition to be so revelatory. However, it is still a well-written book that most people can intuitively follow and understand. I highly recommend taking the time to reading his work as it will certainly positively influence your financial retirement decisions

[Enrique Eulloqui Jr · Rating 5 out of 5]

Learning and understanding the role that Human Capital plays in our total investment lives really expanded my thinking of investments past just asset allocation. It's about realizing the huge role that human capital plays and how it should be the center and starting point of any financial planning. Overall, Dr. Milevsky does a great job communicating the importance of human capital and making it intuitive.

[Bruce Reiter · Rating 4 out of 5]

Very good book. It made me respect a decision several years ago to go with a financial advisor. It is a worthwhile read for anyone but particularly for those groups that are retired or twenty years out from retirement. I was lucky in that most of the financial decisions made before having our advisor were caused by career choice.

[James · Rating 4 out of 5]

Decent basic intro guide to proper preparation for retirement. Goes over everything holistically. Fairly basic by design, and most likely for people with very little understanding of the issues at hand.

[Wanda · Rating 4 out of 5]

This book has a different way of considering your finances when preparing for retirement. I found it very helpful.

[Kurt · Rating 3 out of 5]

Enjoyable view of why we invest and good ideas on where to invest and insure.