 So, Alan, I bought us a little extra time here. Alan Roth is going to come up. I want to introduce Alan. He is a former board member for the John C. Bogle Center for Financial Literacy. He is an author. His book is called How a Second Greater Beats Wall Street. And it's a great Bogleheads book. I think Alan is going to be giving away a few of those books for people who will make a donation to the Bogle Center. Alan is a columnist in several places, AARPETF.com and financial planning. He is just such a generous and thoughtful person. And he has made huge contributions to Bogleheads over the years and we're excited to have him here as part of this track talking about the basics of investing. So, Alan, come on up. Thank you. Christine, that was incredibly nice. I'm thrilled to be here. I'm going to start with, well, it was planning on starting with the two most important lessons in investing. But I've got to start with something very embarrassing. I need to borrow $1,000. I haven't managed my money very well. So, I need to borrow $1,000. I'm going to return every penny a year from today, lots of witnesses. Who will lend me that $1,000? Christine, Mike, you're the nicest people in the world. You're not going to lend me the $1,000? Why would no, somebody's nice back there. You would lend me the $1,000? Well, obviously there's some really nice people in here. But who logically and rationally would lend me $1,000 and why would you not? No interest. You want to make money off of my misfortune, not being able to manage my own finances? That's pretty reasonable. You want to make more or less than inflation? More. Absolutely. Which gets me to the two most important lessons. Oh, by the way, if you lent me money versus lending the US government money via treasury, would you want to charge more or less me versus the US government? More. I'm riskier. I'm a financial planner. That means I'm not very good with my money. So the two most important lessons in investing are you want to be compensated for taking on risk. The second is a dollar today is worth more than a dollar in the future. Has anyone noticed that things are costing more than they did a couple of years ago? That's called inflation. So you want to make more than inflation. The million dollar coin flip. Is betting a million dollars even money investing? Is there an expectation of profit? No. What about betting a million dollars on a coin flip? Whereas if you call heads and it's right, you get a million $20,000. It is investing. I wouldn't take that bet. I would recommend that you not take that bet. There's a fellow by the name of Daniel Kahneman, who won a Nobel Prize for Prospect Theory that shows we're going to get twice as much pain from losing money as pleasure from making money. But third is, would you do a million $1 bets? What have I done? I think I heard a yes. I saw a yes back there. I would, because what I've diversified is over the number of coin flips. I should make $10,000 in a very, very low probability I would actually lose money. And even if I did, it would be very little. That's an example of diversification. So there are three types of risk. There's default risk. Let me just say lending money to Honest Owl has huge default risk. There is interest rate risk. If you lent the US government $100 for 10 years at 5%, then you're going to get $5 a year back. If interest rates went up to 7%, then that means you're getting a below market rate. Interest rates have gone up. The value of your bond has gone down. And holding it to maturity doesn't help. And then you have liquidity risk. It would be a lot easier to sell somebody your treasury than it would be to sell the $1,000 loan to Honest Owl. So three questions. Why do people invest? Because they want to grow their money, obviously. How do people invest? We buy stocks, US, international, large companies, small companies, energy, tech. We buy bonds. We buy investment grade, or one of the few terms the industry has gotten right. Junk bonds, high yield bonds. We buy gold. We buy Bitcoin. We buy all sorts of things to invest. And where do we get investment advice? From our friends, from our neighbors, from TV, mad money. My personal favorite are newsletters. If I knew how to beat the market, do you think I would try to create a newsletter and try to sell it one by one for $299 a year? Jim Kramer, mad money. I'll let you in on a secret. The head of his foundation once shared their investment results with me. He earned half of the return of the US stock market. So financial versus real assets. First of all, if you don't save, investing doesn't matter. So you've got to reduce current consumption today to have a better financial independence in the future, or even a better thing to do is get the best deals on what you do consume. And I will say that Clark Howard is to savings as Jack Bogle was to investing. So I'm just absolutely thrilled. I've gotten to know him over the years, absolutely wonderful guy for planned consumption later. Real assets are used to produce goods and services. I could buy a new car so I could make money. I could invest in a new car to become an Uber driver. That's an investment in a real asset. Or financial assets, which are claims to real assets. If I buy a stock, I have a claim on that company. So major classes of financial assets. There's debt. There's bonds. There's CDs. There're money markets. There's common stock. When we think of a stock, we generally think of a common stock. There are some stocks that have preferences known as preferred stock. And in spite of the name preferred, I recommend against them. And then there are derivative securities, futures, energy futures, options, puts, calls. Anybody know how much has been made in the history of the futures and options market before costs? Zero. Was that you, Mike? Yeah, well, Mike knows everything. Yeah, absolutely. That is not investing. That is gambling. That's like betting on the Broncos. Oh, it's painful. So stocks and bonds are the two principal areas where people invest. If I buy a stock, I am one of the owners of that company. I have upside if it does well, Nvidia. I have downside if it doesn't do very well. Like General Motors, it was at one time when I was small, viewed as safe as the US government. I'm glad that wasn't true. So goes GM, goes America. I'm glad that wasn't true. And a bond is you're lending money to a company. And that company is going to pay you interest and the principal back. You've got no upside, no claim on how well the company does, but you have more protection than a common stock on the way down. Choices are asset allocation. Yes, in general, stocks are a lot riskier than bonds. You've got security selection. If I'm going to own some stocks, which ones should I buy? Is Exxon going to do better than Chevron? Is Amazon going to do better than Walmart? Those are the choices. So valuation. Why does Exxon Mobile, my first employer out of business school, by the way, why does it have value? Because it is going to pay us dividends and we hope that it will pay us more and more. And then we are also buying their cash flow. This is more rather than investing 101. This is more investing PhD, but a stock buyback is a far more efficient way, tax efficient way, for a company to return money to shareholders, even though it has a terrible name in the press, in the media. Now what I have here is a genuine, real, completely fake gold coin. Why does it have value? Because we say it does. It's rare and it's pretty. Belly button lint is pretty rare, but it's not so pretty. Bitcoin, why does Bitcoin have value? A lot of value. There are actually some utilitarian uses for it, whether or not it's over or under value. I certainly wouldn't bet much on it, but that's why it has value. So what is riskier, a portfolio of 100% in one stock or a portfolio comprised of thousands of different companies? The latter. And by the way, does that mean a diversified index fund owning thousands of companies has no risk? No, it has risk. But it has a lot less risk than buying any one company. So I'm old. When I was in grad school, shortly afterwards, the largest 10 companies, the most valuable 10 companies back then versus the most valuable 10 companies 40 years later. And by the way, things changed. That list of 2020 is no longer valid, and Vidya is in there. By the way, what do you notice about most of the companies, the most valuable companies today? Did they exist 40 years ago? They did not. So there's this big debate, active versus passive. Active is finding undervalued securities, timing the market, which by the way, I'm going to admit I'm a market timer. Passive management, which Jack Bogle brought us, no attempt to find undervalued securities and no attempt to time the market. And then holding an efficient portfolio. What is the efficient portfolio? Which stocks should you buy? All of them. So there's this whole active passive debate and efficient market hypothesis. Is the market efficient or not? And I argue, doesn't matter a bit. What matters is arithmetic. If the US stock market earns 10%, the average investor is going to get 10% minus what they pay in fees. If the market loses 10%, the average investor is going to lose 10% minus what they pay in fees. So owning everything at the lowest cost. And by the way, this year, you may have heard of the term the Magnificent 7 tech companies like Alphabet, Apple. They are 0.2% of the US companies and maybe 0.1% of all companies, including international. And they have driven the entire return. Now, when it comes to market timing, when I was in business school, I was taught we couldn't time the market. But it turns out we're really, really good at timing the markets really, really poorly. And Morningstar's Mind the Gap does an amazing job of showing that shortfall year after year after year. If you look at fund flows into stock funds, rather, that we hit the dot com bubble and people panic and sell, then it goes back up and we buy. Then the financial crisis hits and we panic and sell. Then it goes back up and we buy. Then COVID hits. This has never happened before a pandemic. We panic and sell. That was the shortest bear in the history of the US stock market. But we are really, really good at timing markets really, really poorly. So what I do for myself and my clients is to set an overall asset allocation target and guess what that means? When stocks go up, you have to sell. When stocks go down, you have to buy. Really, really simple and really, really hard to do. And let me tell you, when I bought stocks in March of 2020, when stocks fell 35% in 33 days, that was anything but easy. It took 10 minutes, but it was really hard. So in conclusion, investing is really, really simple. Taxes aren't, and Mike Piper is really an expert on helping there. It's simple but not so easy, especially when money starts meaning more to us. And the older we get, by the way, the more money means to us because the less the human capital we have and the more the investment capital we have. Never take on uncompensated risk, own every stock in proportion to the market. Now, nearly 15 years ago, I wrote this book, How a Second Greater Beat Wall Street, and cap-weighted investing, meaning that you buy more of the large, most valuable companies like Apple and Amazon, and less of the smaller companies, was out of vogue. Everyone was factor investing, smart beta. It didn't work going forward. So in every stock in proportion to value, and something like the Vanguard Total Stock Market Index Fund, we've got a great speaker who runs that fund at a 0.03% expense ratio does the trick. And then when it comes to fixed income, take your risks with stocks. Your fixed income, you want to be very, very safe. So in conclusion, investing is really simple. In eight words, anything that you do ask, are you minimizing expenses and emotions? And are you maximizing diversification and discipline? Simple yes, easy no. And when you're eight years old and money doesn't mean anything to you, duh. The older we get, and like I said, I'd be lying through my teeth if I said it was easy to rebalance and buy more stocks in March of 2020 when our lives had changed and suddenly we weren't going to the office, we weren't socializing, who knew what was gonna happen. It's really, really hard. So anyways, that is investing. You know, I didn't know that we were gonna, oh, Christine, you're gonna do introductions, wonderful. Thank you.