William Bernstein Investing Wisdom

Screen Shot 2015-09-17 at 12.19.45 amWilliam Bernstein is one of the most celebrated financial thinkers and financial authors today. William Bernstein investing philosophy is highly regarded in the index investing / Boglehead community.

In The Investor’s Manifesto: Preparing for Prosperity, Armageddon and Everything in Between, Bernstein lists out the skills you need to be a successful investor.

Here is a short summary of William Bernstein's Investing Wisdom. I’d recommend having a read yourself - he is actually pretty funny too (Dad jokes kinda way).


Risk and returns are intimately linked 

  • You don’t get high returns without bearing painful losses along the way. You cannot achieve perfect safety without getting low returns


Markets can, and will, go mad. Be prepared

  • The best defence against the madness is to understand the history of financial markets. Be comfortable that it’s all happened before


Understand the difference between stocks vs bonds

  • They have vastly different risk / return profiles
  • Understand how to use the Gordon Equation to forecast expected returns
  • Stock returns = Dividend yield "+" Expected per share growth rate;
  • Bonds returns = Interest Rate "-" Risk Free Rate


Markets for individual stocks are brutally efficient

  • Never assume you will make money investing in a single stock. Always assume you are trading against someone smarter, more informed, working harder at it than you


Portfolio theory is king 

  • Asset allocation is the key in achieving returns (see more here)
  • You will never know when a market will do well or do badly in advance. So buy them all and use diversification to your advantage (see more here)


You are your own worst enemy

  • Over confidence is the main cause of investing failure
  • Don’t believe you can pick stocks, don’t believe you can time the market
  • Don’t buy into the crowd. When you start buying stocks because your neighbour has it, you should be very worried


Beware of investment professionals

  • Be weary of full service stock broking firms. They make money at your expense
  • Watch out for Managed Funds. Their main interest is to accumulate assets under management, not to invest well. Pick Managed Funds that are members owned


Be sensible and frugal 

  • Live modestly. Save as much as possible, for as long as possible


Design suitable asset allocation for yourself

  • Asset allocation should be based on your age and risk profile


Teach your children well

  • Teach them how to invest, spend and save prudently


Pascal’s Wager

  • The game of investing is not to get rich but avoid dying poor
  • Good investing won’t make you rich. It will maximise the chances of a comfortable retirement. It will minimise chances of living in poverty


That's the summary of William Bernstein Investing Manifesto. It's now up to you to put that into action and better manage your money.

About the Author


Cofounder & CEO of BetterWealth (@jeremykwonglaw). Former investment banker turned technology entrepreneur. muru-D alumni (Telstra startup accelerator). Passionated about leveraging technology to provide better financial products & services to consumers. Coffee snob, business book reader, and fitness fan.

Leave a Comment