As for my weightier objections, first, I wish Mr. Larimore had been more helpful in his discussion of asset allocation. He is clear on the question of what percentage of your stock holdings should be invested outside the United States. His answer is 20 percent, which, intriguingly, is much less than Vanguard recommends. The company says you may want to have 40 percent of your stock holdings in equities not based in the United States.
The reason for the 20 percent figure, Mr. Larimore writes, is that he split the difference between Vanguard and Mr. Bogle, who stepped down in 1999 as the chief executive of the company, which he founded in 1975. Mr. Bogle argued for years that since so many United States companies had strong sales overseas, investors didn’t need to hold international equities. (In recent interviews, Mr. Bogle has been less emphatic.)
But after repeating that old investment chestnut that you should hold a percentage of stocks equal to 100 minus your age — for example, if you are 35, your portfolio should be 65 percent stocks and the rest bonds — he doesn’t really say more.
The problem with that is twofold. One size does not fit all. And second, subtracting your age from 100 produces what I think is a fairly conservative portfolio. My rule of thumb, if you need one, would be to subtract your age from 110 to establish a baseline for your stock holdings.
My second problem with the book is that the three-fund portfolio he advocates includes no corporate bonds or government bonds from countries other than the United States. If you are going to have international stocks in your portfolio, shouldn’t you have foreign bonds as well?
I have been writing and talking about personal finance as part of my living for more than 30 years, and one thing I believe passionately is that people like me — those who want to help you manage your money better — tend to make things more complicated than necessary.
We do it, I think, not to show off but because we find the subject fascinating. And so we go on at interminable length talking about basis points (one hundredth of 1 percent), inverted yield curves (when long-term debt pays a lower interest rate than short-term borrowings), and decumulation (how you use your savings to fund your retirement.)
As a result, we often scare or confuse people.
Mr. Larimore’s prose won’t scare anyone.
It’s accessible and his tone is friendly. And if it prompts people to create a diversified portfolio that keeps fees and taxes to a minimum and gets them to invest for the long haul, he will have performed a great service.