Question 1
Bernstein recommended Millennial to save 15% of his salary starting from the age of 25 into 401(k) plan, an IRA, and a taxable account. It is implemented by putting equal amounts of the 15% of his savings into mutual funds. The 15% of the salary should include A.U.S Total Stock Market Index Fund, International Total Stock Market Index Fund and A.U.S Total Bond Market Index Fund. The total amount should be adjusted once per year to equalize them. According to Bernstein argument, youth should use the simple recipe of their entire working career by enrolling in an automatic saving plan to save more comfortably and avoid economic critics.
Question 2
Young people believe that social security won't be there for them when they retire hence they fear to save for their retirement. They lack adequate information on the appropriate savings plans. Over the years, the youth has depended on their parent's pension.
Question 3
The following include the list of books recommended by Bernstein to be read by young people; "The Millionaire Next Door" by Thomas Stanley and William Danko, "Common sense on mutual funds" by Jack Bogles, "How a second Grader beats Wall Street" by Allan Roth, "Devil Take the Hindmost" by Edward Chancellor, "All about Asset Allocation" by Rick Ferri, "Your money and your Brain" by wall street journal's Jason Zweig. They emphasize the point that there is an inverse correlation between spending and saving.
Question 4
The financial history helps young people to avoid disorientation and market confusion by market turbulence and the cause of economic crisis. It enhances the ability to know the landscape of the market. The history shows when there is economic blue sky, and future returns are low and when the economy is on the skids. In addition, it gives knowledge as emotional stabilizers that keeps a person portfolio on an even keel and prevent him or her from going all- into the market when everyone is euphoric selling their shares. In other words, it guides investors during situations when the world seems to be going to hell in all hand –basket. It encourages people the sell at high prices and buys at low prices mandated by the discipline of sticking to a fixed stock or bond allocation (Bernstein, 12).
Question 5
Settling all outstanding loans or debt, set aside at least 15% of the salary, Eliminate the credit card debt followed by the car loan. Max out means maximize the output on your retirement contribution plan getting rid of all your debts to realize saving for retirement
Question 6
Expected return means that accumulated interest of the 5% retirement saving. It would institute the amount of money expected from the savings. Real returns are returns adjusted for inflation while nominal are not adjusted for inflation. Bernstein suggests the use of real returns.
Question 7
Monsters are persons who have unique characters that discourage financial industries by their self-interest and fooling the customers. They should be cleared to discourage stagnancy of morals in order to execute successfully the three fund strategy
Question 8
The recommended funds by Bernstein include; A.U.S Total Stock Market Index Fund, International Total Stock Market Index Fund and A.U.S Total Bond Market Index Fund. He emphasis on the index funds because bond owners of interest and principal have no other upside beyond the full repayment
Question 9
The retirement funds includes; Vanguard fund, The U.S Total Stock Market Index Fund, Total International Stock Index Fund, The Short Term Bond Index Fund, Total Bond Market Index Fund, The Fidelity Spartan Series where the vanguard offers a target of 0.16%-0.18%, and the target fund which aims at those retiring between 2010 and 2060 in five years interval increments. It implies that in 2060, 2055, 2050, the 2060 fund has a 90% allocation to stocks. The Fidelity Spartan, which also equivalent to Vanguard, especially when the expense is lower than 0.5%, a person might consider making significant voluntary contributions of the match limits. The funds are chosen as they enable young people to max first out of their 401k match (Bernstein, 24).
Question 10
The estimated benefit without saving using AARP is $1,806 on a monthly basis. The lifestyle after that is the same if one expect to continue spending similarly to now. The minimum amount needed to retire then comes to $811,358.19. Savings would have been $0.00. Using the recommended strategy; therefore, the minimum quantity required to retire comes to $522,182.93, savings would have been: $2,299,268.42.
Question 11
Using the above Bernstein's method of saving, from the day one start saving, the retirement benefit profoundly increases as compared to when not saving. A person would have saved $522,182.93 up to an estimated retirement of 45 years which is useful than when he or she would have saved $0.00. The lifestyle would be modest of 25% of income to extravagant lifestyle (100% of income).
Question 12
The assignment was very persuasive and motivational to the young people who aspire to live a better life in the future. It outlines the available opportunities for the young people to investment. Using the mentality of monsters in the market gives one a better platform to discourage these individuals to realize profits.
Works Cited
Bernstein, William J. If You Can: How Millennials Can Get Rich Slowly. Portland: William J. Berstein, 2014. Print.
