 This one these two panelists need no introduction, but I'll I'll so I'll be short and sweet William Bernstein Bill Bernstein is Bogle Center board member. He's a neurologist turned financial advisor and author is as many of you know His books are Outstanding and he has written several of them most recently He updated what is still my favorite Bill Bernstein book the four pillars of investing came out with the second edition and As Bill has said the Shakespeare piece of investing and of our financial journeys has taken greater prominence in his latest book Jonathan Clements is also here. He is someone who we always welcome at this conference Jonathan is an author Long-time columnist at the Wall Street Journal now is in charge of the humble dollar Website where Jonathan makes his own contributions and also has a lot of other External contributors who contribute to a humble dollar most recently Jonathan Presided over a terrific book himself called my money journey Which is a series of essays from real people about how? They found their way to Financial wellness, so I'm thrilled to introduce these two. I just want to make a quick note because I keep forgetting about this we have questions Moderators in the audience here and Mel Turner. He's standing up. Mel is one of the original Bogle heads and Still a tremendous friend of the Bogle heads and former Bogle Center board member Mel is going to be here moderating your questions. He'll be collecting your questions for Jonathan and Bill, so Thanks to Mel and his wife Kathy for always being such a huge part of this event and for being such a huge Component of Bogle heads historically, so let's get into this discussion. Join me in welcoming Jonathan and Bill Bernstein Good morning everybody when Christine Emailed me about this session today. She said well, you know, what we'd like is For Bill Bernstein to spend 50 minutes asking you questions and my immediate reaction was that is completely inappropriate There's no way that I should be the one receiving the questions from Bill You know, I consider Bill to be easily my peer if not and suddenly my intellectual superior So I said we should be asking each other questions I've known Bill since the the late 1990s when I was the journal He was one of those people who would send me these emails with ideas But unlike most of the emails I got with article ideas. He's actually made sense And after about the 10th email I was like, okay there's this neurologist in North Bend, Oregon, and I'm gonna quote him in my my column and that has become the start of a great friendship, but you know, we've now known each other for a quarter century Bill has written forwards to two of my books. I've written forwards to two of Bill's books He really has become a wonderful friend You know, I've also got to know Jane over the years Bill's wonderful wife, so it's really a great pleasure to be up here and talking to Bill Yeah, I could I could easily return the compliment But with respect to the compliment coming in my direction, you obviously have not talked to my children Yeah, and again the format here is we're gonna be tossing questions at each other You know Jonathan has a wealth of knowledge and experience in the industry You know you saw that yesterday with his conversation with Charlie Ellis initially I was tapped to do that and I said no I said Jonathan, you know knows more about the investment business and about Charlie Ellis than I ever would and you could see what an Excellent job he did with that yesterday So without further due a Jew my first question for the bill So you're well known as an advocate for value investing and yet it's been a little bit of a thin 12 years So are you still a believer in the value effect? You think that maybe it would it's a Behavioral phenomenon that's been priced out or will value stocks come back? Yeah. Well, let me first say that I can't be right about everything and With respect to how well value has done I do want to point out that value has done very well Abroad both in developed markets and in emerging markets if you invested In the value components of total international of the total international with you know DFA if you had access to that or with Invesco Or even Vanguard had a relatively weak T version of International value. You're a pretty happy camper. You're better off With value exposure abroad now. Why is that? Well, it's because it's a risk premium and the risk shows up and Lower your sample size the higher that risk is so when you're dealing with the US you've only got one country Okay, whereas Internationally you are spreading your bets among the individual value effects of multiple countries and that is a much higher Probability bet so that's the first thing Has it been priced out? I do worry about that because 25 years ago you really only had one choice when you wanted the value exposure, of course, and that was dimensional fund Advisors and now everybody and their dog has small value and large value funds and they're easier So has that been arbitraged away? Well, if that were the case you would see the spreads between The the balance sheet metrics between value and growth stocks narrowing as people bought up growth stocks Value stocks and sold their value their growth stocks off. In fact that spread has increased to historically high Levels and as I you know basically talked about yesterday With respect to international versus us You can buy the US small value market now for about 10 or 12 times earnings. You're paying twice that Okay for the big names in the total stock market And so, you know to catch up with that basically the large growth stocks are going to have to grow Their earnings twice as fast over the next 10 or 20 years as the small stocks will that's not a bet I will wish to make now it is a bet. Okay. I think that value stocks and particularly small value stocks Will outpace the market over the next 10 or 20 or 30 years But like everything else in finance that at best is a 55 45 bet It's a bill to quick follow up questions on that first you say it's a reward for extra risk What is the extra risk in owning value stocks? Well, we sure as heck saw that risk during the global financial crisis when large value and small value stocks had even larger losses and we also saw that during the Great Depression as Well, why is that well the answer is very simple is is value stocks tend to be more heavily leveraged? they tend to have greater Exposure About to what to debt they're high more and more highly leveraged in other words and the other thing about a growth stock is that it's Cash flows are further off into the future and the lower that interest rates fall the more valuable those become All right, and that's what happens during a financial panic is rates fall Or at least one safe assets they fall So we saw that happen over the really the ten years between 2010 and 2020 and then unwound with a vengeance as rates rose in 2022 And my follow-up question so let's say I am a total stock market investor I've got a hundred thousand dollars in a total stock market index fund. It's in a retirement count There's no tax consequences to change you and I want to add a value tilt to my portfolio How much of that hundred thousand dollars would it be prudent to move towards value? 20-25% at most I would think Rick Ferry yesterday Had a you know talked about a very nice paradigm, which is that beta is free Okay, you pay nothing literally nothing to buy VTI to buy the total stock market with VTS ax And and so if you're going to get value exposure You don't want to buy somebody else's product that has large and small you want it concentrated You want to buy a small value fund say from a vantus for 25 basis points so a quarter of that No cost for the total stock market your overall stock exposure at least in the US is only going to cost you seven or eight Basis points and that's probably how you should and that's the major Strategic change I made between the two versions of my books. I was a slice and dice four-corner person large Small small value large value and now I think you really only need two funds total stock market and small value Is your name Paul Merriman? I When I when I heard Paul and Rick going at it yesterday, I thought to myself. I'm pretty much halfway between the two of them I agreed largely With with both of them. All right time for me to turn the tables Okay You know you've had this long and storied career despite the fact that you know you look so young You've had decades in in the industry and you start about with a conventional Career in journalism and now you are off in the venture your own private venture the humble dollar website What have you learned? from working with individual Investors on the humble dollar site more closely than you did Working at say the Wall Street Journal So I started writing my column for the Wall Street Journal in 1994 at the absurdly young age of 31 I mean to imagine I actually knew anything about finance at that point is embarrassing, but the journal didn't give me a column and I made my name as a columnist the journal in the 1990s by Pounding on the theme relentlessly that people should index Well, guess what? You know we won You know you will not get any credit for banging the table and telling people to index at this point Certainly, you won't make that as a financial writer. You know we have One and it's a credit to the bogal heads. It's a credit to everybody who looked at the evidence and said It is a fool's errand to try to beat the market My readers today in many cases the same people who read me during the 1990s they grew up with me and so in the 1990s You know, we were a merry band of individuals who were devoted to indexing and we're drinking the Kool-Aid together Now here we are almost 30 years later and You know we have a little bit more gray hair in fact some of it's pretty much white and Our interests have moved on so today in running humble dollar You know There's no need to fight over indexing that that argument has been won instead the real interest for my readers today is Retirement in all its facets and it's not just you know should I use the 4% withdrawal rate? It's thinking about you know Medicare Medicare Advantage Medicare plans thinking about long-term care thinking about what will make for a fulfilling retirement Now I've been masked all this money Now it's my time to enjoy it. How do I make sure I enjoy it? How do I go from being a saver to a spender? Those are the sort of issues that I Think about today and that my readers are concerned about which reverberate with them and the reason I Have this set of readers it goes back to the 1990s and the journal and the people who followed me there because they've continued to follow Me through until this point Yeah, but the question that I have Jonathan is what have you learned from Your readers and your participants and you're you know the people who are writing for you also at humble dollar that you didn't learn At the Wall Street Journal and if I can be a little catty do you find one group more congenial than the others? Well again, Bill. I'll go back to the to what I said, which is my readers are older than they were in the 1990s and one of the things that we all learn as we grow older is how flawed we are and how many mistakes we've made and how There aren't answers always be found in spreadsheets, you know, not everything comes down to numbers There is a huge personal element to personal finance and I do believe that my readers today are Perhaps less arrogant Less sure of themselves than they were 30 years ago. There is a reason the site is called humble dollar these folks are much more interested in the human side of money and how to take their money and Build a meaningful life with it Okay, just so I can you know pound on me a couple more times Yeah, just one more fast question about that point It seems to me that they're not the same population of people, especially when I look at the comments section in the Wall Street Journal They seem to be as a group a good deal more self-confident than the people on your website. I Think that's true. I Moderate the comments pretty carefully on humble dollar and if there's anybody who's out there You know pounding some particular political point of view, you know, I either delete their comments or I screen them much more carefully, I don't want the sort of political infighting that goes on on so many websites on Humble dollar if there are any sort of vicious personal attacks You know, I make sure that those comments head into the trash can and then every couple of days I go and review them I mean, it's amazing what people will write. I had a contributor who talked about Her concerns and then included concerns for her daughter and Somebody wanted post a comment. Is your daughter a drug addict? And I guess on a lot of websites that comment would be allowed to appear and on humble dollar it isn't and so one of the consequences of carefully Moderating the comments is that the tone on humble dollars comment section is remarkably civil And I am bound and determined to keep that way. Keep it that way Yeah, and that's this is my opportunity to thank Sue Kennedy Lady Geek and her crew on the vanguard die-hards forum for doing exactly that same thing. It's remarkably civil and it makes the The forum exactly. Oh, there you are. Very good. There. Thank you, too You know to that makes the forum exactly what it is All right, Bill my turn So you've advocated that retirees keep perhaps 20 years of required portfolio withdrawals in a low risk investments Isn't that an awful lot of money? Yeah, it's it's aspirational and I've found myself having to backpedal a little bit but not very much From that maybe not 20 years of full living expenses, but certainly enough Money to keep you out from under a bridge or a soup kitchen for 20 years You should at least be able to keep your body and soul together But the plain fact of the matter is that the reason why the rich get richer is Because they have a large pile of Safe assets if you in fact do have 20 years of living expenses in perfectly safe assets you are much more likely to buy at the bottom from the person who doesn't have that and That is how the rich get richer as I said yesterday, and I'll say again You know, that's why Warren Buffett has 20% of his money in T-bills He doesn't care when the market crashes by 60% because he can still buy cheeseburgers So is that Aspirational 20 years of portfolio withdrawals sitting in cash investments is that so people can sleep at night and not panic during market declines Or is it a source of firepower so they can buy stocks from the markets down? It is both All right, and that pile now owns considerably Bill did I hear somebody shout market timer? I Plead guilty I plead guilty just because you believe in the efficient market Hypothesis and you believe that you can't time the market does not absolve you from the responsibility of estimating expected returns all right on the forum there was a very hardy debate a couple of years back Between people who thought that it was really a good idea to put 20% of your portfolio into long treasuries All right And on the theory that you would rebalance out of them at a profit When the market crashed and they ignored the fact that the real expected return of judge by tips On a 30-year treasury was in fact negative And in fact was as low as interest rates had been for 5,000 years of human history All right, maybe if that's market timing then then I I plead guilty All right, I think that that you have to you have to take Those sorts of things into consideration now the tips are yielding you know two and a half Percent I want to own more of them than I did last year and certainly more of them than I owned two years ago because their expected returns are simply Higher All right, do you want to follow that up or can I can I turn it around? All right, so the question that I have for you is you know the thing that's been the hallmark of your Journalistic and humble dollar career and the thing that I think sets you apart from Almost all other personal finance writers is how deftly you handle the subject of happiness And so you and I were first conversed about this, you know 25 years ago. We've been talking about this The two of us, you know really since we we we got first got to know each other and I'm wondering how Your feeling about that has evolved from two different perspectives number one is your interactions with your readers and number two And I don't want to get too personal, but your own personal experiences as well So when I think about happiness, they're really in my mind three components of Happiness three things that will ensure that you have a happier financial life I mean one is that you want this sense of connectedness You want to have a robust collection of friends and family second you want to be able to Spend your days on activities that you know give you a sense of purpose that you find fulfilling that you think are important That you find challenging that you think you're good at and Third you want a sense of financial security You want this feeling that you know whatever goes on in the world that you are going to be alright But the biggest change I think in my thinking over the past ten years is that even if you work at all these things Even if you've got a nice pile of cash Even if you have a robust network of friends of family even if you devote your days to things that you're passionate about There is a limit to how much you can move the needle So many of you may have seen sort of the happiness pie chart where you know half of happiness is Determined by your so-called happiness set point 10% is determined by sort of conditions in your life and then 40% is what's called volitional that if you put your mind to it you can make Your life happier. I think this really overstates the case for how much You can improve the happiness of your life and we all know this intuitively I mean you think about the people you know there are some people you know Doesn't matter how much money they have it doesn't matter how wonderful the party is They are Gonna be grumpy. It's just the way they are and then there are other people You know life can throw all kinds of horrors at them and somehow they come out smiling and indeed this happiness Pie chart which has got so much publicity People are starting to fire back at it and saying you know This is really just a pie chart designed for the personal growth industry in order to say hey You can make a big change to your life by doing this this and this I think that probably The happiness set point from what I've read accounts for maybe 80% of your happiness and That in terms of what you can do, you know 10% is gonna be 10 You know your life circumstances and maybe 10% is Volitional the fact that you do actually do things like shorten your commute, you know Try to be grateful about the good things in your life and so on So I think there's far less room to improve your happiness than we are led to believe So what was your second question? Well, no actually I was gonna I was going to make a Comment on that is I largely agree with that is it it's your set point You know whether you're just your glass half full or a glass half empty kind of guy or gal that does that But I think there is an environmental component to that set point that has to do with the values I look around this room and I see pretty happy people. I don't see a lot of grumpy people here And the reason that is because it's the bogal head ethic is most everybody in this room is perfectly happy To you know to to not fly business class They don't feel awful when they pass that by the people in business class And they don't think they're what they wear or what they drive or what kind of house they live in You know happiness One of the one of the definitions of happiness that I that I like I think I've described this to Scott Burns Who's a finance writer in Dallas, Texas? Is that a happy person is one for whom more money won't make any difference with what they wear what they drive where they live Or who they sleep with all right And and you know, I think that if you really want a prescription for misery, it's to collect art okay Because because because if you collect art no matter how wonderful your art and your sculpture and paintings are There's always somebody who's got one nicer something nicer, you know, even if you're a multi-billionaire There's always somebody who's got you know more paintings than you do and that will make you on unhappy just like a quick digression to take issue with your art Example yes, if your sense of self-worth It's gonna hinge on the car you drive and we all know that certain cars are more expensive than others and so on and Yes, I can see that totally I can see that with Holmes totally but with on everybody has different taste in art and You may have this great collection of modern art and I may think you know my three-year-old grandson could have done that So I'm not sure art is as good example as sort of commonly available goods like homes and cars but to come back to your point which I generally agree with is I Think the money is less good at buying happiness than it is at staving off unhappiness and Coming back to the three components of a happy not life, you know friends and family sense of purpose sense of financial security I believe that that third one is the One that gets the least respect because there's Nothing like knowing that you don't have to worry about money. I mean Being financially stable is like being is like dealing with your health. It's only when you're sick That you want to be healthy Similarly, it's only when you're broke that you want to be in good financial shape Once you're in good financial shape, you're at the point where you don't have to worry about money and that is is a wonderful thing I Never worry about money. I have never Wake up in the middle of the night Worrying about money. I worry about a lot of other things in the middle of the night but money is not one of them and I think that's probably true for Everybody in this room. It is not unfortunately true for the vast majority of people in this country A lot of people spend a lot of time worrying about money Even as they head off to the shopping mall on Saturday and spend the money That could give them that sense of financial security if you want to know what will give you more happiness $5,000 sitting in the bank or $5,000 spent at the shopping mall You already have the answer Okay So if I can turn one more question around to you Which is that you've also written about how experiences are Have the better payoff a higher payoff in terms of well-being Then do consumer purchases direct material consumer purchase and I wonder, you know, are there any other things? That money buys that makes you happy aside from you know being able to to to go to sleep at night and not worry about money well first of all in terms of the Experiences versus possessions thing. I think we should be a little bit more nuanced about that I mean first of all as you get older It's understandable that experiences start to be more valuable than possessions because at this point we have less time We have less time to enjoy the possessions that we purchase. So it's not surprising that younger people You know Tend to value possessions more than older people You know, it isn't simply that they're young and stupid and haven't had a chance to learn It's also that they do indeed have More time to enjoy those possessions. The second thing about The experience versus possession question is there are a lot of possessions that in fact facilitate experiences. I I don't own a car But I know that if I had a car it would have the potential to facilitate experiences You know, we could get in the car and you know drive into the country for the weekend You know, we could more easily, you know Go on vacation driving vacations So to the extent that you value a car for what it can do for you As opposed to being a status symbol that you can show off to the neighbors. I think the possessions Can indeed be useful towards experiences and we shouldn't be that dismissive of possessions We should just think about the in terms of what are they going to do to make our lives happier rather than what are they? going to do to impress the neighbors Let's see. So what beyond experiences? Beyond the experience versus possession question, what else should we do to boost our happiness? Yeah, exactly. I mean, I think I think where we're you know reaching the point of diminishing returns I think you've pretty much covered all the things you'd want to but if you can think of anything else Let me know I think the only other thing that I think is important again It's actually becomes more pressing as one gets older is that the thing that money can do for you is Buy you time. Obviously you can never buy more time, but you can buy control over your time So to the extent that you can use your time to unload Chores that you find distasteful if you really hate cleaning the house if you rate really hate cutting the lawn whatever it is If you can buy your way out of that problem so you can use that time Do things that you enjoy? I think that is a very valuable use of money Yeah, I mean, you know again We've sort of skewered it around the edges of something. It's called self-determination theory Jonathan is Hinted at it. I've hinted at it Mike Piper talked a bit about it Which is the three things that everyone needs to have to be happy are connectedness Okay, and the second thing is competence Which I think gets to a lot of the Boglehead ethic, you know Jim Dolly talked last night about you know, like you really have to you know, keep you know Cheaping out at the supermarket if you've got you know a seven or an eight figure portfolio And I think you do because I think that that gets to my sense of competence Okay, if I go to a supermarket and I pay five dollars for a brick of cottage cheese I have morally failed as a human being all right You know, it's just as if I were you know in the clinic with a patient And I did a bad job or in the wood shop and did a bad job there You you want to exert competence but the third thing and the most important thing doesn't get talked about enough is autonomy And that may be the most important thing that money buys. It's the FU money. Okay That may be the most important money that we have So my turn to ask Bill a question You may have seen at various points over the weekend that Bill has got excited and it's normally at the mention of tips Tips is the one thing that apparently Bill is most excited about right now so Bill Tell us why you are so enthusiastic and for those of us out there who are not gonna bar build a 30-year complicated tips ladder What would you suggest that we do I? Would you know first of all that is the ideal way to do it? It's a lot of work up front, but once you've got that tips ladder Set up and they're maturing and you've told your kids and your spouse about it You know if you become demented that thing will just follow all the way through It's basically a fire and forget portfolio now the alternative to a tips portfolio is to buy a couple of funds a short fund and a long fund and The problem is you're constantly rebalancing that the theory is this let's say you've got a 30-year Survival horizon that you want to fund okay, you want the average maturity of That ladder or of the funds that you're buying to be half that Okay, so you basically want an average maturity of 15 years whether it's tips or whether it's nominal bonds to defuse A 30-year lifetime you want it you want to basically split the middle So that's what you could do and it's a little bit less work up front just to buy two funds And there's a short you know Vanguard has a good short-term tips fund Unfortunately, there's only one even half decent long-term tips fund and that's from boo hissed PIMCO Okay, and they charge 20 basis points. Hopefully that will that will change, but why am I excited about tips? Because you can guarantee yourself at maturity a 2.5 percent real return All right, that is more than historically the real return of bonds anytime that I can get Historical guaranteed a historical good historical rate of return I'm going to do it and when you look around the world and you say what can I get with stocks? 2.5 percent is not far from lower bound Yes, the u.s. And a lot of other developed nations have had returns of five to seven percent But there are any number of countries that over the course of the 20th century had real returns on stocks that were below that So I just find them wildly attractive not necessarily maybe for a young accumulator Who should be more aggressively invested in stocks, but if you're an older person who is worried about your burn rate? Then that is why I am very excited about this I mean we're like telling people a couple of years ago is I would have given my right arm to be guaranteed a zero percent real return on my Portfolio at that point All right, and now I can get two and a half percent. I'm pretty happy about that So bill if someone's retiree and they're 60s their 70s they've got a mix of stocks and bonds would you And they have a they're comfortable with their portfolio their mix of stocks and bonds Would you advise them to sell stocks at this point to buy tips? It depends upon their burn rate Okay, and that's the thing that gets really left out in the discussion of what should my portfolio look like in Retirement if your burn rate is one or two percent And I'll bet there are a whole lot of people out here that I'm looking at that have one or two percent burn rates It doesn't matter what you're invested in You're probably going to be fine You can even have a hundred percent stocks if you can stomach the losses because you know your global portfolio is now going to be yielding a two and a half percent Average dividend yield two and a half three percent depending upon how much foreign you have and not alone Will be enough to pay your expenses and as we know Except in the very very worst of times that dividend stream really doesn't fall if your burn rate though Looks like it's going to be four five six percent And you have good space in the sheltered part of your portfolio Which is really where tips belong they belong in a traditional IRA for the most part Then I think that tips need real consideration in your portfolio And as I said yesterday, you know personally I don't need tips in my portfolio. I'm fine without tips But I really like sleeping at night Your turn Okay one last question Which is That you know, this is you know sort of my bottom of the barrel question here before you turn to the turn You know before at least I run out Which which which is that? Consumption smoothing is something it gets talked about a lot by financial economists In other words, you want to in the most extreme version of it You want to be borrowing money when you're young so you can have the bigger house in the nicer car And then you'll pay back that that debt when you're older Okay, you know, so that's what an extreme form of consumption smoothing another form of consumption smoothing is borrowing money For educational expenses, which have done prudently is a good idea Where do you fit on that spectrum? so obviously some level of consumption smoothing is a smart idea right in your Late teens early 20s There's nothing wrong with borrowing money to go to college so that you can have higher lifetime earnings There's nothing wrong with having to take out that car loan so you have a vehicle to get to work There's nothing wrong with taking out a mortgage so you can buy a house What you're doing there is consumption smoothing you're buying things that you can't currently afford in order to jumpstart your financial life But this notion that you want to have essentially the same income throughout your life Does not speak to human psychology. I Am absolutely thrilled to be staying in a Marriott because you should see some of the places I stayed early in my adult life If I had been staying in Marriott's in my 20s, you know, if this wasn't happening the four seasons I would be really disappointed. You know, you want that gradually rising standard of living You know, if you're used to flying coach on those few occasions when you can use your points to get upgraded to business class It is a real treat. I have eaten in some really dumpy restaurants Over the years the fact that I can actually go out to the most expensive restaurants in Philadelphia And afford it and not worry about the size of the the meal the bill at the end of the meal That is a wonderful thing a gradually rising standard of living is a huge source of happiness And if you want to feel sorry for anybody Feel sorry for the children of super wealthy families who will never get that pleasure You know, if you grew up with the silver spoon in your mouth It's basically all downhill from there Yeah, yeah, I I couldn't have put it put it better. My favorite line From the succession tv series was from tom wams gam's if I can get his name work the matthew mcfadden character Who was was just terrified at the prospect of losing a lot of his money and losing his job and having to eat at three star italian restaurants You know when I go to a three star italian restaurant, I hug myself So so I think what we'll do at this point Yep, I got your I got the first question for you. Um, if there are any more A metal has a fistful more but we'll start with this one and I'll take those from you So bill Okay, thank you bill You keep saying if you've won the game stop playing or stop playing with money that you really need I think is the exact quote What does that portfolio look like and what percentage is in stocks? It really depends upon what your burn rate and of course your risk tolerance are and of course your age as as well How many years of living expenses do you have to fund and if you've got the one or two percent burn rate You've won the game and you're probably fine. Okay, and it really doesn't matter. You can keep the same portfolio but if you are 55 60 years old and your burn rate looks like it's going to be Four or five percent. That's the time when you have to seriously think about lowering Your stock allocation so you don't wind up with a bad sequence of returns problem, which is you know, what? Wade wade talked a lot about Yesterday so it really depends and of course, you know, if you're if you're 70 or 75 years old That's less of a problem because you don't have as many years to fund Uh, you in other words what you have to do is is do the sequence of returns test Ask yourself if I had you know, if we get the same sequence of returns that we got starting say in 1966 How am I going to do and if the answer is you run out of money in five or ten years? You want to start bailing out of stocks All right, so we're into the weird part of the uh the session The point at which I ask a question to myself Uh, this is one of the questions that came in How do you overcome the sense of insecurity about money even when you're financially independent? And this is as question to jonathan though. Do you have any thoughts on that bill? So I think that you know, even if you have a massive decent amount of money I know that people do still still feel financially insecure Um, I think there are a couple of different ways to try and address that One is to bucket your portfolio so that you have a certain amount of money for the years ahead and then A larger pool for the years beyond that so you might say okay I want to make sure I'm absolutely certain that I know where money's going to come from for the next five years Or seven years or 10 years and you put that into a portfolio of relatively conservative investments And you know that's how you're going to pay the bills over the next 10 years And then you look beyond that and you invest that money more aggressively. I think you can also address Concerns by simplifying your portfolio the larger and more diverse the funds you own Uh the less reason you're going to have to fret over your investment performance I mean my largest Single stock holding or fund holding is the vanguard total world stock index fund Who knows on any given day? What sort of chaos is going on within that portfolio? But when I look at the share price it moves relatively sedately. I don't see All of that Sturm and drung that's under the surface And the final thing I would say is there's great comfort in just having a big pile of cash in the bank The consumer of financial protection bureau has this financial well-being study and they Have dozens of questions in that and what they found was that the Leading correlate with people's sense of financial well-being with so-called liquidity basically the amount of money they have sitting in the bank And if you have five thousand dollars or more sitting in the bank Your sense of financial well-being is Something like 50 percent higher than people who only have 250 dollars and the more you have in the bank the better it gets so if you have a sense of Financial sort of insecurity even though you're reasonably well off Just keep a lot of money in the bank. Why not you can probably afford to do it It's a good thing that mel isn't here because as soon as I started to talk about politics He would he would start getting very nervous and giving me the fish eye But this feeds directly in you know in through what we're looking at politically in the country today The polarization we're seeing which is that if you have five thousand dollars in the bank You're going to be very secure. Well, the problem is that half the people in this country Can't fund a four hundred dollar car repair. All right And that does not lead to and then their their existence financially is very precarious and That sense of insecurity feeds directly through into the politics we're seeing in the country today So bill I think this is for both of us, but uh, I'm gonna wait wait wait I want I want to ask trust the question back to you though, which is I thought it was a very interesting Point about you know the sense of personal security And the thing that I've observed is that people who were raised in abject poverty Don't feel financially secure no matter how much money they have if they had a hard scrabble childhood They never feel financially secure and I know you had some experience with that personally as well You have an interesting family history, which you've written about informing your own view of money So for those who don't know it when my great great grandfather died in livable england in 1889 According to newspaper accounts He was one of the richest men in england It was a family fortune built. I hate to say it on cigarettes. There's a brand called cope cigarettes, which is now owned by nip on tobacco I think and that family fortune was inherited by a single daughter And she if you've seen brides head revisited as My mother has said to me said I don't need to watch brides head revisited darling. I lived brides head revisited So There was this great family fortune it passed down to uh, my uh My grandparents generation at that point there were five siblings And four of them blew the money in short order on wine women and song My grandfather inherited the money and he blew it in a more boring fashion. He blew it on gentleman farming The farms kept getting smaller and smaller. He would trade down to Places that Well, you know with less acreage and so that he could free up some capital to sustain his lifestyle Eventually the farm's got too small at which point he retired Uh That is what happened to the great family fortune and that is the story that I grew up hearing And it's a consequence I have always been extremely frugal and is True of my two brothers. It's true of my sisters. We were all greatly influenced by this great family story And that's why we're all extremely careful about money Bill This is really the same question in and other guys actually If you never worry about money Why shouldn't you allocate a hundred percent of your portfolio to stocks? Repeat the question. I think I want to make sure I understand it if you don't worry about money I guess I guess you in other words you have a very high risk tolerance, right? Okay Why not allocate a hundred percent of your portfolio to stocks? Ah, okay, so it's a hypothetical question Uh, I didn't catch that at first because I worry about money every every day of the every single day of the week Because that's my family background as well my my father and mother both lived through the great depression as Not even young adults middle-aged adults So that was what I was but if you are hypothetically a person who is perfectly, uh Risk tolerant it can stand a hundred percent stocks Sure, you should be a hundred percent stocks as long as your burn rate is less than two percent All right, uh, or three percent even There's no reason why you can't be a hundred percent stocks. I'll tell you who else can be a hundred percent stocks Is the person who has Enough social security and pension income to pay a hundred percent of your living expenses because guess what your portfolio ain't your money Okay, it belongs to your heirs and your charities and god bless to uncle sam to whom you owe a great deal. All right There's another kind of person who should be a hundred percent stocks And that's the person uh as merton and bodhi and samuelson pointed out Who has an enormous amount of human capital relative to their investment capital? Namely someone who was just at the beginning of their savings career that person should be a hundred percent in stocks and in fact a la pole merriment that is the person for whom small value stocks Are most appropriate because even if small value stocks return a percent less A full percent less than the large market does you will still do better dollar averaging into Small value stocks because the volatility assuming You have the emotional wherewithal and the discipline to do that which is no small thing So I think I've answered that one All right, so we have a nice large stack of questions and we are not going to get through them um But I've got one here that I'm going to ask bill because I think I'm hoping I'll get an interesting answer from him So somebody here asks what you think of bucket list, but I'm not going to ask bill that question instead This is my question for you bill. What is on your bucket list? Oh my god uh A national book award I mean to be to be to be perfectly honest I have And my wife's going to wince when I say this but I I have fulfilled just about every single material need that I've ever had Uh, I you know, we we spent uh, we would take eight week ten week vacations in the summer with our children abroad Uh, because you know, we could afford to to do it Uh, I mean do I want a bigger car? Do I want the tesla? You know the $80,000 or the $100,000 test tesla. Hell, no, that's not a car. That's an IQ test, you know So so my my my bucket list and what else is on my bucket list? I want to see my grandkids graduate college I want to see my great-grandkids It's not material All right, final question for you Is there one book blog video You would recommend to our financially ignorant millennial child Uh Oh, that's well first of all you have to understand that I I devoutly believe that it's cheesy to recommend my own books to anybody I just Drives me you know self self-promoting authors drive me up a wall Uh, but almost anything by jack bogel or rick ferry or larry swed row or mike piper And my favorite jack bogel book, of course, is the little book of common sense investing So I would Do the plug for you bill has uh the booklet from how many years ago if you can Yep, about about about 12 years ago. Yeah What is the exorbitant price on amazon these days? Oh, well It's zero if you want to download the acrobat from any number of websites It's 99 cents if you if you really want it on your kindle But it's it's totally unnecessary you can actually Download the pdf and then you can email it to your kindle and then you have it on your kindle. So don't spend the 99 cents And on that very suitable bogelhead moment We'll wrap it up. Thank you A lot of applause to do so great great contributors to uh personal finance. Thank you very much