Economist Zvi Bodie debunks standard investment advice - Sep. 16, 2009

Bodie has long advocated holding treasuries (technically TIPS) and if you really want to take risk using long term options).

Economist Zvi Bodie debunks standard investment advice - Sep. 16, 2009:

"Were retirement investors taking on too much risk before the crash?

Yes. The standard models that are used to give investment advice to millions of Americans are fundamentally wrong. We're told that over time, stocks get less risky, but that's bull. Stocks are always risky -- whether in the short or long run. Prices dropped by 37% last year. While improbable, there's nothing to say they couldn't drop by that much again next year or the year before you retire. And diversification doesn't take away that risk. That's why retirement money belongs in truly safe assets whose value won't go down -- not in stocks."

And later the gives us this sage advice:

"You should only invest in equities what you can afford to lose."

I am always amazed this idea has not caught on more for retirement planning. It is clearly safer and makes infinite sense. Why hasn't it caught on? Probably since the expected return is lower (especially for the TIPS only portfolio), so it puts the onus on the investor to save more (the article suggests upwards of 30% which many consumption addicts struggle with) or not retiring until later (which those who do not like their jobs really struggle with).