Quotes from William J. Bernstein

If your portfolio risk exceeds your tolerance for loss, there is a high likelihood that you will abandon your plan when the going gets rough.

Because we cannot predict the future, we diversify. —Paul Samuelson

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.

Risk, like pornography, is difficult to define, but we think we know it when we see it.

But in the investment arena, our social instincts are poison.

its city walls encompassed an area of over two square miles, with much of the city apparently lying outside those walls. This made Uruk the largest city not only of its age but for the next three thousand years.

For example, the most consistent bit of irrational investment behavior is the commonplace observation that we are less likely to sell losers than winners. This is known in behavioral finance circles as "regret avoidance." Holding onto a stock that has done poorly keeps alive the possibility that we will not have to confront the finality of our failure.

The incense trade catalyzed the birth of Islam, whose military, spiritual, and commercial impacts transformed medieval Asia, Europe, and Africa. Riding on a rising tide of global trade along the land and sea routes of Asia, Islam came to dominate that continent's spiritual as well as its commercial life.

Owning the U.S. "market" means the whole shooting match—the Wilshire 5000. The granddaddy of all "total-market" funds is the Vanguard Total Stock Market Index Fund. With rock-bottom expenses of 0.20%, it is a superb choice. Since its inception in 1992, it has done an excellent job of tracking the Wilshire 5000

The Danish experience remains to this day a powerful, though nearly forgotten, lesson on the appropriate government reaction to the challenge of global competition: support and fund, but do not protect.

Of all the communications technologies discussed in this book, radio and television are the most hierarchical; no preceding media could reach so many people so instantaneously and with so little feedback in the opposite direction.

First, a total-market index fund is an ideal "core" equity holding in a taxable account, because of its "tax efficiency." The Russell 3000 and the Wilshire 5000 have essentially no turnover. Stocks may leave the index via mergers and acquisitions, but these are often not taxable events. The only way a stock truly leaves these portfolios is feet first, by going bankrupt, in which case you don't have to worry about capital gains.

If you decide to buy bonds or a bond fund, make sure the average maturity is less than the time horizon of the savings.

the most profitable thing we can learn from the history of booms and busts is that at times of great optimism, future returns are lowest; when things look bleakest, future returns are highest. Since risk and return are just different sides of the same coin, it cannot be any other way.

Once we are aware of the connection between political power and access to communication technology, it becomes obvious throughout all of human history. These technologies are not in and of themselves oppressive or liberating. Rather, it is relative access to them that determines political reality.

But despite the ferocity and technical sophistication of the Muslim navies, they would ultimately prove no match for the alumni of the rough schools of the Hellespont, the Kattegat, Gibraltar, and the Channel.

For most of the period following the fall of Rome, the adherents of a powerful new monotheistic religion dominated medieval long distance commerce as completely as the West dominates such commerce today; the legacy of that former dominance is still all too visible.

One hoary investment company story describes a young broker asking an old one about the secret to his success. The latter replies, "It's simple; over the years I've slowly transferred my client's assets to my own name.

the stereotypical wealthy, swaggering "ugly Roman" soon became an object of Greek hatred.

Nowhere is historian George Santayana's famous dictum, "Those who cannot remember the past are condemned to repeat it," more applicable than in finance. Financial history provides us with invaluable wisdom about the nature of the capital markets and of returns on securities. Intelligent investors ignore this record at their peril. Risk

When Vasco da Gama breached the Indian Ocean, the playing field had just been vacated by the one force capable of repelling him.

The point of this whole historical exercise is to establish the most important concept in finance, that risk and return are inextricably connected. If you desire the opportunity to achieve high returns, you have to shoulder high risks.

When, and only when, you've gotten rid of all your debt are you truly saving for retirement.

Royal Adventurers into Africa