2025-10-01
7 分钟The Economist Hi, this is Ethan Wu, co-host of Money Talks, our business and finance podcast.
Welcome to Editor's Picks.
We've handpicked an article we recommend from the most recent edition of The Economist.
I hope you enjoy it. 15 years ago,
Ian Ayres and Barry Nellbuff published a book with an intriguing argument.
For decades financial advisors had suggested to retail investors that they take more risk when young,
investing heavily in stocks before gradually shifting to safer bonds as they edge towards retirement.
The pair of financial economists went one step further.
Young investors should actually borrow money to buy stocks, an idea they named life-cycle investing.
After all,
they pointed out the historical record indicated that investors would have been better off taking on such leverage over any lifespan from 1871 to 2009.
When Messas Air's and Nailbuff were first developing their ideas,
such a strategy would have been difficult to implement.
Online brokers were far less widespread.
Investors faced high trading fees and difficulty borrowing.
eTrade, an early broker, offered margin rates those it charged to borrowers of around 9% in 1999,
when the Federal Reserve's benchmark rate was just below 5%.
Even as they were writing the book in 2009,
the authors noted that margin rates at large brokers such as Fidelity and Vanguard were extortionate.
Leveraged investing was mostly the preserve of institutional investors or very wealthy individuals able to get a better deal on lending.