Comments on: Jon Chevreau Interviews Ziv Bodie

By: Henry Blodget Talks Sense | MoneySense

Henry Blodget Talks Sense | MoneySense — Thu, 25 Nov 2010 14:50:07 +0000

[...] Jon Chevreau Interviews Ziv Bodie [...]

By: Book Review: Worry-Free Investing

Book Review: Worry-Free Investing — Tue, 19 Feb 2008 11:59:56 +0000

[...] borrowed this book (affiliate link) from the local library after reading Jon Chevreau’s interview with one of the authors – Ziv Bodie. Prof. Bodie and co-author Michael Clowes suggest that investors would be better off eschewing [...]

By: Canadian Capitalist

Canadian Capitalist — Wed, 12 Dec 2007 20:09:25 +0000

Jon: I should have double checked the name. Thanks for pointing it out. I have Prof. Bodie’s book out from the library. Looking forward to reading it over the holidays.

By: Jon Chevreau

Jon Chevreau — Fri, 07 Dec 2007 21:26:23 +0000

The correct spelling is Zvi Bodie. Somehow a copy editor ended up inserting an R and made it Brodie but this should have been corrected in the online edition.

As for the rest of the interview …. we’ll see.

By: on real return bonds — award tour

on real return bonds — award tour — Wed, 28 Nov 2007 07:43:39 +0000

[...] Interview with Ziv Brodie on Real Return Bonds. Brodie wrote a book saying people should avoid the risk of equity markets in retirement accounts and instead use real return bonds which are priced to inflation. Something to think about once I’m back in Canada. [...]

By: FourPillars

FourPillars — Wed, 28 Nov 2007 02:13:26 +0000

Richard, I think you are making a reasonable assumption that over the long term ie 20-30 years, stock returns will probably be higher than RRBs. However, as CC said, it’s not guaranteed.

I think Brodie’s strategy is more suited for someone who just can’t handle any uncertainty. I think one of the biggest uncertainties of retirement involves how long you will live and the quality of that life, rather than the investment returns.

Mike

By: Richard

Richard — Tue, 27 Nov 2007 16:33:31 +0000

I’m sure there’s good arguments for this, but there seem to be some problems with the idea. Like Mike I would prefer the highest reliable return over the long term, but wanting success doesn’t necessarily make the stock market perform well.

What does is the history of risk dimishing over time – most of the risk in a stable stock market seems to be from short-term liquidity (you can sell but there’s bad times to do so) and market timing gone bad. Having the value of the whole stock market decline for a long period would take some pretty big changes.

If you’re worried that the stock market in a certain country won’t provide the highest returns, or that the economy won’t be stable, there’s lots of other countries to pick from. Unless things get really bad it’s not wrong to assume short-term volatility and long-term gains above bonds (the reward for having your money locked in) which means the worst thing that would happen is a good buying opportunity.

By: Canadian Capitalist

Canadian Capitalist — Tue, 27 Nov 2007 14:19:54 +0000

Mike: Personally, I’m assuming a 4% real return from my portfolio (which is tilted heavily towards equities) as well. But, I think the point Prof. Brodie is making is that by being in equities and expecting a higher return, we are taking a bit of risk that our returns could be lower than if we were in RRBs. I’m actually fine with that because with more than two decades away from retirement, I can be flexible or work a little bit.

One more thing about being entirely in RRBs is taxation. The income as well as the imputed inflation adjustment is taxed as ordinary income, so RRBs are suitable only inside a RRSP.

By: FourPillars

FourPillars — Tue, 27 Nov 2007 01:51:31 +0000

The problem (as I see it) with getting returns that equal inflation is that you have save a heck of a lot more dough in order to retire compared to if you are getting 4% after-inflation return (which is what I’m assuming).

Another problem might be the fact that the inflation index that the RR bonds are adjusted to might not be all that accurate compared to your personal inflation rate.

Mike