Bernstein recommends that investors starting to save at the age of 25 and wanting to retire at 65 need to put away "at least" 15% of salary throughout their working lives.People who believe that they can't save the requisite 15%, he writes, are people who "spend too much money." Cut back today so that you can have more tomorrow. Nobody needs the latest smartphone, the most fashionable clothes, the fanciest car, or the daily latte. "Life without these [luxury items] may seem spartan, but it doesn't compare to being old and poor, which is where you're headed if you can't save."Bernstein nudges investors in the right direction. Many individuals believe that they can invest their way to retirement, by overcoming inadequate savings with terrific investment results. Expecting alpha is a lot easier than socking away cash. That is living a dream--and Bernstein correctly delivers the wake-up call.

It's one thing to put money away and forget about it at age 25; it's quite another to do so when approaching retirement. The older investor will very much need to follow Bernstein's advice.He’s not suggesting that you need to get an MBA or even read a big, dull finance textbook. He believes that the essence of scientific finance, in fact, is remarkably simply and can be acquired.He asks readers if they know the difference between a stock and a bond. From the investors’ perspective, a stock is much riskier than a bond and so the stock deserves a higher expected return than a bond.The term “expected return” causes a lot of grief among neophyte investors. It’s only what’s expected, i.e. the average result; the risk is the chance that it will fall short. A coin toss that offers a dollar for heads and nothing for tails, for example, has an expected return of 50 cents, but there’s also the 50/50 risk you’ll get nothing.While he goes on to talk about risk aversion and deal with the subject of stocks and bonds in detail, he presents the argument in a nugget: If stocks and bonds were equally risky, no one would own the bond, with its limited upside. If stocks and bonds had the same return, no one would own the stock, with the higher risk.

Bernstein continues, "There is no greater cause of mischief to the small investor than the confusion between the health of the economy and stock returns. It's natural for people to assume that when the economy is in good shape, future stock returns will be high, and vice versa. The exact opposite is in fact true: Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high."There is also the related paradox that the more enthusiastic people are about stocks, the worse that stocks tend to perform. Bernstein relates the story of Joseph Kennedy Sr., who claimed to have exited the stock market when the shoeshine boys started giving him stock tips. Conversely, BusinessWeek's famed The Death of Equities cover was printed three years before the beginning of a 30-year bull market.Bernstein reminds us how in the late 1990s, people thought that the internet would change everything. It did, but it didn’t help the economy that much, and over the next decade stocks suffered not one, but two bone-crushing bear markets that resulted in more than a decade of negative real returns.The message is that novice investors fare best when wax is stuffed in their ears. The sooner they learn to ignore what they hear, and just let the portfolio run its course, the better off they will be.

Or, more colorfully, "Human nature turns out to be a virtual petri dish of financially pathologic behavior."Long-term planning is what investing is all about. Though 95% of what happens in finance is random noise, investors constantly convince themselves that they see patterns in market activity. Investors tend to be “comically overconfident”. For instance, 80% of us believe that we are above average drivers, a logical impossibility. This is the booklet's behavioral-economics section, carrying warnings about how people instinctively crave for action.As with the knowledge of market history, a basic understanding of behavioral issues will help investors from self-inflicted wounds. Learning how to avoid errors in decision-making is a lifetime skill and applicable to far more topics than merely investing.

Wait now, Mr. Bernstein, are you not a financial adviser, and do you not put your clients into investments than are managed by a financial-services firm (DFA)?

Well yes he is, and yes he does. But Bernstein didn't mean those members of the financial-services industry. Nor, surely, did he intend the financial advisers who read this column. The distinctly above-average can breathe a sigh of relief.The rest of the industry he beats with a large, metal-studded stick. Bernstein writes, "It's sad but true: By the time you've completed the reading for the previous four hurdles, you'll know more about finance than the average stock broker or financial adviser. ... In fact, the prudent investor treats almost the entirety of the financial industry landscape as an urban-combat zone. "One can argue with the severity of the message, but not its conclusion: keep costs low. Wall Street encourages investors to spend more and churn frequently. The savvy investor will realize that most of those arguments are wrong and will accept higher costs only rarely and reluctantly. With investing, less is more.