Sharpe: Probably, but there are a couple of caveats. When you buy publicly traded equities, you're getting commodity exposure. Sometimes it's as an input, sometimes as an output. When you buy some of the energy companies, you're getting exposure to oil. Sometimes the companies are hurt more when oil goes up; sometimes the companies are helped when oil goes up. But it's not as if you don't have commodity exposure in a traditional equity portfolio.

Also, if you look at the value of the commodity exposure that maybe you don't have in your portfolio, that may not be a huge amount of market value. Things that don't have much market value—if they have low correlation with other assets and are therefore desirable on the risk front—in an efficient market would also not have particularly high expected returns.

IU: What do you think of ETFs?

Sharpe: In general, I think they're a great idea to the extent that they can provide a real index fund that makes sense and do it at least as cheaply as a traditional open-end mutual fund. I have nothing against them.

But I'm with Jack Bogle on the fact that people use them as trading vehicles. It's just obscene what the turnover is of ETFs. Of course, it's also these wildly narrow ETFs, short funds and tiny little sectors. What's that all about? You could say that they allow you to customize your funds so they complement your job, your house, your mortgage, etc., and maybe there's some of that. But I think, as with anything else, here's a good instrument for "investing" that a lot of people are using to make bets.

IU: Are people saving enough for retirement?

Sharpe: Many people are not saving enough. You have to start with what you think you are going to get from public programs like Social Security and Medicare. Then you have to work your way back to what you've got to provide on your own. Everyone who looks at the financial situation of the entitlement programs in this country realizes that somebody is going to have to put more money into this system or somebody is going to have to get less money out of the system.

You start with the publicly financed part of your lifestyle in retirement, and then you have to look at what you have to provide to complement that to provide for a sensible lifestyle after you retire. If people continue to put aside as little in their individual savings and in their 401(k) plans as they are now doing, then you come to the conclusion that they're either going to have a miserable retirement or they're going to work a lot longer than previous generations worked—or they're going to have to figure out a way to die sooner.

At Financial Engines, when we see what people are doing in terms of their investment strategy and their current savings or 401(k) plan, we sometimes show them if they keep doing what they're doing, the chances that they'll have a retirement with, say, more than 50% of their pre-retirement real income are 31%.

Once they see the implications of what their current course is, many will choose to save more. That's a pretty direct indication that many people are not being counseled or given good projections of the range of outcomes.

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