They maintain that the starting point for constructing an investment portfolio shouldn’t be its long-term expected return. Instead, Bodie and Taqqu say, you ought to take a goal-based approach. Weigh the earnings prospects of your career, then invest in ways that will limit your financial risks, so your standard of living won’t fall below a certain level in retirement. (The authors believe that stocks are too dicey to be the core investment of the average worker.)
I like their framework because it takes seriously the idea that how you save and where you save is all about what you want out of life.
Photo courtesy of LanKS/Shutterstock.com