William J. Bernstein Quotes

We tend to extrapolate the recent past indefinitely into the future; in the 1970s, investors thought that inflation would never end, whereas now most people think it will never occur again. The first viewpoint was proven wrong within a few years, and the latter viewpoint most likely will be soon.

Looked at from another perspective, in the 30 years from 1952 to 1981, stocks returned 9.9% and bonds returned only 2.3%, while inflation annualized out at 4.3%. Thus, during this period, the bond investor lost 2% of real value on an annualized basis, while the stock investor made a 5.6% real annualized return. The last fifteen years of that period were years of high inflation, so this is just another way of saying that stocks withstand inflation better than bonds. Short-term

The definition of investment is the deferring ofpresent consumption for future consumption. So, you dohave to be willing to defer. And there are a couple of tricks that you can use to save money. One of them is simply to pay yourself first

Mutual fund manager performance does not persist and the return of stock picking is zero.

Although the modern image of the imperial city is dominated by the ruins of the Coliseum and the Forum, the economic life of ancient Rome centered on side streets filled with apartments, shops, and horrea.

all democratic societies based on the rule of law, on the Tinkerbell Principle: it functioned only so long as its participants believed in it.48

In ancient societies, the law functioned as a two-edged sword; while standardizing procedure and bringing it out into the open, the law also concentrated power in those few who could read and write.

The essence of effective portfolio construction is the use of a large number of poorly correlated assets.

In one of history's most bizarre chains of causation, the brutal, efficient newcomers were driven by a hunger for, of all things, culinary ingredients that today lie largely unused in most Western kitchens.

Bluntly put, there's no chance that your doctor, dentist, or attorney is a high-school dropout. Your stockbroker, however, just might be.

The easiest way to get rich is to spend as little as possible.

The ancient incense trade was thus no different from the modern cocaine and heroin trades: relatively safe around the raw agricultural source, but highly risky around the finished product and its ultimate consumers.

In Battuta's obsession with sharia and the Muslim world and in his lack of interest in nearly everything outside it we clearly see the double-edged sword of Islam so visible in today's world: an ecumenical but self-satisfied faith capable of uniting far-flung peoples under one system of belief and one regime of law, but also severely limited in its capacity to examine and borrow from others.

During bull markets, everyone believes that he is committed to stocks for the long term. Unfortunately, history also tells us that during bear markets, you can hardly give stocks away. Most investors are simply not capable of withstanding the vicissitudes of an all-stock investment strategy. The

most paleographers now believe that the "idea of writing" must have spread along with commerce, most likely from Sumer to Egypt.33

Arguably the most substantive domestic issue facing the republic is the fate of Social Security, with privatization the most frequently mentioned option. For the first time in history, a familiarity with the behavior of the financial markets has become a prerequisite for competent citizenship, apart from its obvious pecuniary value. Using

Bonds are even worse, since their returns do not mean revert - a series of bad years is likely to be followed by even more bad ones, as happened during the 1970s. This is the point made by Jeremy Siegel in his superb treatise, Stocks For The Long Run. Professor Siegel pointed out that stocks outperformed bonds in only 61% of the years after 1802, but that they bested bonds in 80% of ten-year periods and in 99% of 30-year periods. Looked

There are only two kinds of investors: those who don't know where the market is headed, and those who don't know that they don't know. Then again, there is a third kind: those who know they don't know, but whose livelihoods depend on appearing to know.

When it comes to fund managers and market strategists, this year's hero usually turns into next year's zero.

A decade ago, I really did believe that the average investor could do it himself. I was wrong. I've come to the sad conclusion that only a tiny minority, at most one percent, are capable of pulling it off. Heck, if Helen Young Hayes, Robert Sanborn, Julian Robertson, and the nation's largest pension funds can't get it right, what chance does John Q. Investor have?

Combating myopic risk aversion is the most difficult emotional task facing any investor. I know of only two ways of doing this. The first is to check on your portfolios as infrequently as possible. ... The other way to avoid myopic risk aversion is to hold enough cash so that you have a certain equanimity about market falls.

If your broker or investment advisor is not familiar with the concept of standard deviation of returns, get a new one.

An index fund is a fund that simply invests in all of the stocks in a market. So, for example, an index fund might invest in every single stock or almost every single stock in the U.S. market, it might invest in every single stock abroad, or it might invest in all of the bonds that are out there. And you can make a perfectly fine investing portfolio that mixes equal parts of all three of those.

Although the Romans knew Chinese silk, they knew not China. They believed that silk grew directly on the mulberry tree, not realizing that the leaves were merely the worm's home and its food.

The typical fund company services 401k plan participants in the same way that Baby Face Nelson serviced banks.

The Story of the Telegraph and a History of the Great Atlantic Cable, in which they breathlessly proclaimed, How potent a power, then, is the telegraphic destined to become in the civilization of the world! This binds together by a vital cord all the nations of the earth. It is impossible that old prejudices and hostilities should longer exist, while such an instrument has been created for an exchange of thought between all the nations of the earth.46

It's pretty clear that there's a relationship between return and risk - you enjoy high returns only by taking substantial risk. If you want to earn high returns, be prepared to suffer grievous losses from time to time. And if you want perfect safety, resign yourself to low returns.

The highly decentralized nature of the medieval world of Indian Ocean trade produced a bubbling stew of Darwinian economic competition, in which those states whose political "mutations" were best suited to trade and commerce thrived, and those whose institutions were not withered.

The key thing about any fund is to make sure its expenses are low. You know, if you look at the funds in your plan and you see that they're all charging 1.5 and 2 percent,you've gota bad plan.

Humans abstract and record information in five major ways: with writing, mathematical notation, painting/photography/videography, maps, and clocks - that is, we can abstract and record verbal, numerical, visual, spatial, and temporal information.

99% of fund managers demonstrate no evidence of skill whatsoever.

Wall Street is littered with the bones of those who knew just what to do, but could not bring themselves to do it.

Paradoxically, in the long run, bonds are at least as risky as stocks. This is because stock returns are "mean reverting." That is, a series of bad years is likely to be followed by a series of good ones, repairing some of the damage.

Christians and Jews often taunted the Arabs about their polytheistic beliefs and their lack of an overarching creed and an afterlife. Consequently, a sense of religious inferiority arose among the desert dwellers, along with a pent-up desire for a comprehensive belief system of their own.

If you find yourself stimulated in any way by your portfolio performance, then you are probably doing something very wrong. A superior portfolio strategy should be intrinsically boring.

You have to understand your own psychology. You have to understand that human beings weren't really designed to invest. We have all these emotions that are appropriate responses if you're being chased by a tiger, but they're terrible responses if you've got a 30-year time horizon to think about investment or when you're trying to manage investment over 30 years.

Athens, while remaining nominally independent, no longer commanded its lifelines or its fate. Just as it had invented many Western institutions and intellectual and artistic endeavors, so did it pioneer a less glorious tradition. In the centuries following the Peloponnesian war, Athens became the first in a long line of senescent Western empires to suffer the ignominious transformation from world power to open-air theme park, famous only for its arts, its architecture, its schools, and its past.

Personal finance, like most important aspects of life, is a never-ending quest. The competent investor never stops learning.

The deeper one delves, the worse things look for actively managed funds.