 This is my third Bogleheads conference. I've been coming every few years for since I don't know 2008 or something and And this one's going to be spectacular. I'm pretty excited about it Bogleheads University has a fantastic faculty lined up as you can see I am the least of them and that's why I am the host Let's get into it a little bit first a few disclosures Okay, all these faculty members they work for or they own successful businesses They are published authors if you buy their books. They make money We're not going to tell you what any of these businesses are we're gonna work very hard not to have any conflicts of interest in our presentations today Alright Rick says I have to tell you about Boglecenter.net, which is an awesome place Many of you have been coming to the Bogleheads forum for a long time and may not have known about this fantastic resource But the Boglecenter.net should be your front page for all things Boglehead You can see there's all kinds of things there including a way to donate to Boglecenter.net And I'm gonna bribe you into making a donation when they do the book signing tomorrow I have a few copies of my book that I was able to stuff into my carry-on that I will give you if you make any sort of donation to Boglecenter.net But you have to donate more than 257 because apparently that's what it costs to process a donation So you got to donate more than that But Boglecenter.net is the hub, right? Bogleheads has a podcast. It has both virtual and live events like this one There's the forum that most of you probably already know about The Wiki is a fantastic resource when you're just trying to look something up The problem with looking stuff up on the forum is something that was there yesterday is already at the bottom of the page The Wiki is not like that and and it tends to be more peer-reviewed and more Up-to-date and also will give you that information that you're looking for in a more digestible format There's also a Bogleheads blog if you are on reddit. There's a Bogleheads subreddit There's YouTube channel and of course there are Twitter and Facebook social media outlets and all that is accessible from Boglecenter.net So be sure to check that out All right, here's what we're gonna do today. We're running this operation with military precision We started right at one o'clock We're gonna end right at four o'clock because they got to turn this room for the reception So all these chairs have to be hauled out. They got to bring in the reception stuff So we all got to leave at four o'clock that means we have to be done at four o'clock So all the speakers have been whipped into in the line So they're gonna follow this schedule more or less and then we're gonna make up the slack with the Q&A at the end But this is the plan. We're gonna talk about developing a workable plan That's my part then we get Christine Benz to teach us about investing early and often And then Alan Roth is gonna teach us about risk Christine's gonna come back and talk about diversification. Then we're gonna take a break. It's a ten minute break No kidding ten minutes after we start you got to be back in your seat. We're gonna be talking Then we're gonna Rick Ferry show comes on right? He's gonna talk about not timing the market and he's gonna talk about using index funds Then we're gonna go back to Alan who's gonna talk about keeping your costs low And then the treat you've been waiting for all day is gonna come on with Mike Piper Talking about minimizing taxes and that is such good stuff We're gonna give you a break right in the middle of it another ten minute break And then he's gonna come back and talk about investing with simplicity I'll finish up with a short bit about stay the course in case you didn't get the hint from the book You were handed when you registered and then we're gonna do Q&A with the five of us, okay? all right, let's get started with my part here and And talk about developing a workable plan and this in my opinion is one of the most important things In personal finance and investing but since no one's here to do an introduction of me those of you who don't know me I'll tell you a little bit about myself the picture is what I'd like to do The rest is why I get to stand up here and talk to you. I'm an emergency physician by education and training I have zero financial training at least formally as it goes, but I've been a Boglehead since 2004. I Had a net worth of zero in 2004 And I've been with the Bogleheads all the way from there until financial independence a few years ago At one point I'm now the 25th most prolific poster on the forum at one point I was the eighth most prolific poster on the forum and my wife turned to me and said you're spending way too much time online talking about investing to not be making any money doing it and So I took the Boglehead philosophy to my peers to my profession with the successful online business It wasn't successful initially, but it was eventually I've offered there four books on personal finance and investing and asset protection multiple book chapters Including one in the Boglehead's guide to retirement I've created the most widely read physician specific investing website in the world I have popular podcast and have also created a conference. Now. This is the fun part about the faculty They've all been keynote speakers at my conference I paid them thousands of dollars to come and speak to the people that come to my conference and they've come here Voluntarily for free to speak to you. They are really a star-studded faculty that we have Except me you're stuck with me. All right, so let's talk about a workable plan, okay? Single most important piece of advice that I can give to you is to have a plan If you fail the plan You plan to fail and I want you to write the plan down The reason why is that when you write a plan down it forces you to actually make the plan, right? We all think we have a plan in our head But what it is is some half-baked notion of what we're going to do and when you actually write it down and it Exposes the gaps in your thinking the gaps in your plan until you realize that's a problem I don't know what that is and you go do more research or you get some help and You can fill those gaps in the plan So you need a written plan the other benefit of a written plan is that you can go back to it and Remind you yourself of why you're doing things the way you're doing them or how you decided you were going to do them And so it's really important to write it down and I've been harping on this now with my audience for the last 12 years And so I was really depressed to do a survey last year and find out that half of them still didn't have a written financial plan And so I want you to get a written financial plan Okay, if you need professional help to do that get the professional help a few thousand dollars to have someone help You make a financial plan. Maybe the best money you ever spent it is a fantastic Investment and way cheaper than paying them for investment management Okay, so what's in a financial plan? Well, there's a lot more to it than just an investing policy statement It's not just about investments, right? You should have a plan about how you're gonna get rid of your student loans or other debts How are you gonna reduce them? What you're gonna do for your insurance, you know, we're talking about disability insurance and life insurance and property insurance and that kind of stuff All right housing plan where you're gonna live how you're gonna pay for it spending plan aka a budget, right? Then of course you got to have an investing plan and then eventually you're gonna need some sort of an estate plan and Probably an asset protection plan as well. So all that goes into your written plan I'm gonna focus mostly today on just the investing portion But all of that should be part of your plan and this document is not something you write down once and and file away And never look at again. This is a living changing working document So let's zero in on it. There are five Pieces to an investing plan. Okay, the first one and the problem is one of these pieces is sexy and the other four are not Okay, the sexy one is number four choosing the investments, right? Everybody likes that. Everybody likes talking about the investments But the truth is that's a very difficult thing to do if you haven't done the three steps above it If you have done the three steps above it, it's really simple And so it's important that you do them in order set your goals Choose what accounts you're gonna invest in for each goal Determine an asset allocation for each of your goals Select the investments to fulfill that asset allocation and then determine whatever your rules You're gonna use for changes and maintenance to the plan. Those are the five pieces Okay, so let's talk about setting goals, right? You got to set your goals. Just set them It's okay if they change. This is what keeps us from setting them Because we're afraid they're going to change or I'm gonna want something different. You just set a goal So what if it changes in three months? You can adjust the plan for that, but the goals need to be smart goals specific measurable attainable relevant to you and Time-limited and here's some examples and these come from my original plan that we wrote in 2004 Our investments will provide an income of a hundred thousand dollars per year and two thousand six dollars We'll still grow in at the inflation rate providing us financial independence by June 28th, 20 30 That's a smart goal. Get rich. Not a smart goal. Be a millionaire. Not a smart goal. That's a smart goal Okay, so some goals may have to do with your net worth some with your income some with your savings rate Okay, here's another example. We'll be worth one million by June 28th 2017 Or this one we'll have the equivalent of four years of in-state tuition at BYU That's my alma mater in each 529 by the time each child turns 18, right? These are smart goals. That's what you want to set You might be wondering the relevance of June 28. That's my birthday All right, it's also important that one great benefit of these goals is it allows you to define enough So that you recognize it when you get there because there are far too many people in our society That don't know how much enough is All right, next you got to choose what accounts you're going to invest in okay, so you choose an investing account for each goal So retirements the obvious one. It's the big one. It's you know, as Jonathan Clements says It's basically the whole point of your financial life is saving up enough money to pay for retirement You tend to do that in accounts like 401ks and 403 B's 457 B's IRAs and Roth IRAs to find benefit plans if you work for the federal government the thrift savings plan And of course you can save as much as you want in a taxable account For education. We have 529s are probably used most commonly, but you can also save up for them with Cover Dell ESA's Uniform transfer to minors accounts and a taxable account health care expenses health savings account Any big purchases or your emergency fund tends to be in a taxable account But it's important to find what accounts you're going to invest in for these goals before you get started Recognizing that it will change as you change employers as account contribution limits change These ratios of how much you have in tax protected accounts like tax deferred and tax-free accounts as well as taxable Accounts is likely to change over the years. There was a time when I didn't have a taxable account at all Now it's my largest account and that often happens to people Tax diversification means having some money in tax-free accounts some money in tax deferred accounts and some money in taxable accounts That's a good thing But in general you don't want to seek after that if it means paying a whole lot extra in taxes to have it So try to get some tax diversification, but try to get it at a good price All right, I am a big fan of a top-down approach to investing to have an overall asset allocation or division of how you're going to invest your assets and Then selecting investments to fulfill that plan So it turns out that your asset allocation is the most important determinant of your investment return the mix of assets the mix of investments that you invest in is going to cover something like 80% Of your investing return is going to come from that asset allocation. So it's really important It's probably not the most important thing that actually determines you reaching your goal That probably has more to do with your savings rate quite up quite honestly But it matters for your investment return and the further you get into your investment career The more your investment return affects you reaching your goals You want to make sure you're taking on enough risk to beat inflation long-term and to meet your goals Alan's going to be talking in a little while about a little more in-depth about risk But you don't want to take on more risk than you can handle I like to think of it like the price is right You've seen the game show right you got a bid and try to guess the price of whatever they have up there on stage And you want to get as close as you can without going over and that's kind of like risk tolerance with investing You want to take on about as much risk as you can handle? But not too much that you panic and end up selling low in a nasty bear market. I Generally recommend people include at least three asset classes in their asset allocation I think you can get a lot of benefits by going up to as many as seven asset asset classes Maybe there's some benefits as you push that up to eight nine ten beyond ten. You're just playing with your money Okay, that is just complexity without additional benefit So if you look at your portfolio, and you got 16 different asset classes Simplification is probably in order and Mike Piper is going to be talking about that today Avoid analysis paralysis. This happens to a lot of people. They realize there are a million different ways You can set up an asset allocation and they Can't move they can't get started because they can't decide Well, the truth is there is no perfect asset allocation. Nobody knows in advance what the best one is So just pick something reasonable and stick with it for the long run And that's the most important thing is that you stick with what you've chosen rather than what exactly you've chosen Okay is each of those asset classes you included in your mix of investments is going to have its day in the sun It's okay to make adjustments to your plan But what usually happens when we're making an adjustment is you do what I did in 2007 when I added REITs to my portfolio Subsequently watch them drop 78% in value over the course of the next year Now they've done fine in the long run because I've kept them in my portfolio ever since and my long-term return Something like 11 or 12 percent or something on that asset class but that first year it wasn't very good and Truthfully, I was probably performance chasing and that's what happens a lot when you're adding new asset classes to your portfolio So be aware of that you should also spend some time on asset location asset location is what assets go in which account I'm not going to get into the details of that But the idea is that you can add a little bit of extra return there by managing the taxes well All right, the fourth step is to choose your investments You just want to choose investments to fulfill your asset allocation based on the availability in those accounts It can be really easy like 25% of my portfolio is in US stocks It all goes in one fund VTI or VTS a x the Vanguard total stock market index fund It's my favorite mutual fund and that's literally 25% of my portfolio super simple, right? Other things might be more complicated though like I have an asset class for inflation index bonds some of that money is in Tips ETF some of it is an individual tips about a treasury direct some of it is an I bonds a little more complexity there and if you get into some more exotic asset classes such as direct real estate investing or private equity or crypto assets it can get really complicated Okay So in general as Rick will tell you later today favor broadly Diversified low-cost index funds you can just pick one fund per asset class that works You know five asset classes in your portfolio. You got five funds super simple You can even consider a simple fund of funds if you're only investing in retirement accounts And you have a good fund of funds available in every account We'll have one of our speakers that will teach you about simplicity who does just that Um, lastly set up some rules. Okay, things change For example, uh, when are you going to rebalance? How are you going to rebalance, right? So you need a rebalancing policy in there How are your investments going to be selected? What are the what's the criteria for adding a subtracting asset classes from the portfolio? How will your asset allocation change over time a lot of people like to get less aggressive as they approach retirement? Okay, how's that going to change you should put that in your written investing plan What are you going to do in a bear market? How's the how are things going to change in a bear market if at all put that in your asset allocation plan? And of course one thing that we like to have is we have a waiting period to keep us from doing anything stupid on a whim We have to wait three months before you can make any changes So that keeps us from hopefully doing as much performance chations we did in 2007 So here's some examples of rules. No asset class will represent more than 30% or less than 5% of our portfolio We'll rebalance our asset allocation as frequently as necessary using the 525 rule using new investment money as much as possible If selling an taxable account or selling an investment with significant trading costs is required rebalances may be performed No more than once a year. These are examples of what I mean by rules And then of course there's our three month waiting period rule So to recap you set your goals you choose accounts for each goal you determine an asset allocation for each goal You select investments and then you determine the rules for changes and maintenance