 I am going to talk to you about asset allocation. So we've been through what I called primordial asset allocation, where you're thinking about things like an emergency fund and so on. Alan covered the basics of investing, Rick covered investment selection, Mike is going to talk, Mike talked about tax-advantaged investing. I'll talk about apportioning your assets across different investment types and the key considerations to bear in mind when you do. So there are really two key jobs that you need to bear in mind when you're setting an asset allocation. And I think they can be helpful because asset allocation, the way it's often discussed to me seems terribly black boxy, but it really requires you to do two key things to find yourself in the right asset allocation ballpark. The first would be to take a step back and think about why you are investing. So being clear on what your goals are. And the second is to kind of take a look inside and think about how you have behaved in previous market environments. If you've had investments, how you felt in sort of that March 2020 period that Alan alluded to earlier, where we saw our worlds turned upside down very quickly, the markets plummeted. It didn't feel like a great time to invest. In hindsight it was a great time, but many people were retreating to safe investments during that period. So thinking a little bit about what's called your risk tolerance is also a job here. So both of these things are important. I would argue the first thing, kind of clarifying your goals and your time horizon and your proximity to needing your money, I would argue that's kind of the top of the heap. But risk tolerance should also be part of the discussion too, in my opinion. So knowing your goals determines your risk capacity. And when you're thinking about your goals, you want to think about your proximity to that goal as sort of a key point to think through. When will you need these funds? So if you are 35 and it's retirement when you think you'll be 60 or 65 or maybe even longer, we have a very long time horizon for that goal. You have high risk capacity. You can absorb the changes in your portfolio's value because you don't need the funds imminently. So thinking about proximity to goal and also using what we know about asset class returns over various time horizons to inform how you would think about how to invest given your proximity to the goal. So when we look at stocks, stocks have historically had a higher return than safer investment types like cash, like bonds. And if you have at least a 10-year time horizon, stocks have actually been extraordinarily reliable. So in more than 90% of rolling 10-year periods, whenever the periods might be, you were most likely going to gain money over that 10-year time horizon. But once you start shrinking that time horizon, taking it to like five years or three years or certainly even shorter than that, well, you start to see the odds for stocks go down quite a bit. So the odds are well less than 90% if you have a five-year time horizon for stocks. You'd want to be in something that has a much better shot at making you whole over that fairly short time horizon. So that would be cash or bonds, for example. So I would say 10 years is a good guidepost when deciding whether you are going to be in stocks or not. If your time horizon is shorter than that, you need to be in safer assets that are most likely to be in positive territory over that shorter time horizon. So you're thinking about your proximity to needing your money to spend. You're also thinking about the duration of that goal. So if you're thinking about retirement and you're someone who's embarking on retirement in your 60s and you're in good health, well, that's sort of a long-duration goal. So you'd want to think about having probably 25 years or 30 years overall that you'll have where you'll be spending your money. On the other hand, college is a good example of a shorter-duration goal where if you're lucky, your child will make it through college in four years, maybe five on the five-year plan. And so that's a fairly rapid spend-down pace. That means that when that goal date arrives, you'd want to have the money in very safe investments, even though maybe stocks helped you grow that 529 plan or grow whatever portfolio you're using for college. Nicely, by the time you get to college, you pretty much just want to hold the assets steady. You don't want to risk losses in your investment at that time. So you're thinking about the proximity to goal. You're thinking about the duration of goal. And of course, there are other goals that we might have where it's kind of one and done. So the home-down payment, for example, where it's a one-time purchase and so you don't want to risk having the funds move around when you need the money. And then another thing to bear in mind when thinking about your risk capacity is thinking about your flexibility with respect to that goal. So here, again, I think college funding is a great example. If you have, say, a 17-year-old, you don't want to be, you don't want to have any wiggle room and say, ah, your investments are down. I think you might need to wait until you're 21. Your child probably would not love that as an answer. So there's an investment goal where there's not a lot of wiggle room in terms of timing. Same with retirement. You may have actually some wiggle room to delay retirement if the market's really bad and it's not a good time to tap your investments. You might say, well, I think I'll continue working a couple more years, but you may not want to have to work eight more years until your investments start looking better. So think about the flexibility of whatever goal you have in mind. A lake house purchase or something that's totally discretionary, well, there you have more flexibility about your goal date and so forth. So I mentioned human capital earlier on. We talked about the importance of really thinking about human capital, especially for young accumulators, thinking about trying to find ways to grow your earnings power over your lifetime. There's kind of an intersection with asset allocation. So this slide comes from some of my colleagues in Morningstar Investment Management, but the basic idea is when you're young and just starting out, most of us don't have much in the way of financial capital, right? We have small portfolios most of the time. We may even have negative portfolios if we have a lot of student loan debt. But we're long on another tremendous asset, which is that we're long on human capital, especially if we're well educated. We have a really powerful source of income that will take us through our working years. By contrast, when we are older, one would hope that our financial capital would have grown over that period. But as we're getting close to retirement, our human capital may not be as rich as it was when we were younger. In fact, it's not as rich. We can't expect as many years of earnings during those remaining years as we could have when we were younger. So even though our salary may be at its highest point in our lifetimes, the number of years that we expect to continue working would not be. So there's an interplay here, where if you are very long on human capital, like the new worker who's just graduated with a degree and something worthwhile, that new worker doesn't have much in financial capital, doesn't have any imminent need for retirement funds, those funds should be invested really aggressively. On the other hand, as we get close to retirement, as we get close to needing to tap our funds, we want to make those investments more conservative. We want to have them kind of on standby, or at least a portion of that portfolio. So if we happen to retire in a bad market for stocks, well, we're not having to sell stocks into a trough. So thinking back to 2008, for example, during the global financial crisis, stocks dropped about 50% during that period. You wouldn't want to be the all equity investor. So thinking about your own life stage, thinking about the status of your own human capital, your own proximity to retirement can be really helpful in terms of determining how to position your portfolio. So that's risk capacity, all that stuff, thinking about your proximity to spending, thinking about your duration of spending, thinking about your flexibility with respect to the goals. Those are all risk capacity questions. The second part of the equation is risk tolerance. And many of you have probably done these questionnaires and surveys online. If you work with a financial advisor, many of them use what are called risk tolerance questionnaires. The bottom line is that people tend not to be great judges of their own risk tolerance. They might think themselves really risk tolerant. And then when push comes to shove, and it's March 2020 again, that investor might have fear in his or her heart. So that's a key thing to know. And one reason why I think risk tolerance questionnaires have been downplayed a little bit in the financial advice space, probably rightly so, that people aren't great judges. But still I think it's a component. And the reason why risk tolerance is such an important concept is that people do bad things when they have a portfolio that's not aligned with their risk tolerance. So they might be inclined to sell themselves out in that really risky bad market environment where they're inclined to move into cash and safer investments at the worst possible time. And we see this again and again. I believe Rick alluded to it, and Alan alluded to it in his presentation. We have a study that we run at Morningstar called Mind the Gap. And we see that investors systematically undermine their own results due to these poor timing decisions. And a lot of them come up in these fear and greed cycles. So when the market is really frothy, like it was in 2021, early 2022, we see that investors oftentimes glom on to the things that have performed really well in the recent past. And they retreat to safer stuff in bad market environments. So risk tolerance is something that should sit side by side with risk capacity. I would say put risk capacity in the front seat, put risk tolerance in the back seat, but both are important concepts that work together. So this is just an example of how at Morningstar we've got different glide paths, different asset allocations for people at different life stages. And we have a conservative, moderate, and aggressive version. The reason is that they're all sort of trending in the same direction, but the more conservative versions are a little bit more heavy on the fixed income and cash investments. So I just want to run through a few case studies here to illustrate how these two things work together. So we're assuming 68-year-old Mary has been investing for a while, and she was a person who felt terrible during the global financial crisis, where she saw she was watching CNN, she was watching a lot of news, and her investment portfolio seemed to be going from bad to worse. She was checking it day by day, and she did what I said a lot of investors do at those market inflection points, where she just said, I can't stand it. I am getting close to retirement by then she would have been in her early 50s, and she retreated to safe investments and never got back in. And I will say that this is not an uncommon profile. I still sometimes encounter people who are older adults who did this very thing, where they retreated to safe investments and never got themselves back into stocks and unfortunately have missed the whole subsequent market rally. So this is not an unusual phenomenon. It's something that we see again and again. So her risk capacity is what I would say medium. So at age 68, she is embarking on retirement, but assuming she's in good health, well, she probably wants to plan for 25 or 30 years of retirement. So she can't afford to be hunkered down in very safe investments, even though we've seen yields on those investments tick up quite a bit over the past couple of years. Reaction still is what it is, and it takes a bite out of the purchasing power of those very safe investments. So it's not prudent for her to be just in safe investments. She needs to take some risk with the hope of actually growing her portfolio a little bit and hopefully outpacing inflation over her time horizon. So I would rate her risk capacity, her ability to take risk as kind of medium, because she has that long time horizon. Even if she incurs some losses from the stocks in her portfolio, she has time to recover. She wouldn't want to be spending from that fall in equity portfolio, but assuming she has some sort of a balanced portfolio, that gives her time for her portfolio to recover. So I would say that her risk capacity is kind of medium. Her risk tolerance, well, we know it's low. She is really uncomfortable in equity markets wounds. So she would want to have kind of a balanced exposure. She'd certainly want to have some safer assets that she could call upon in an equity market downdraft, but she needs stocks for their long run appreciation potential and for their ability to outpace inflation. So we'll take a look at another extreme. We'll assume that we've got Abby and Zack here. And I will also say that some of these people are ripped from my own life. Their names have been changed, but they resemble some people in my life. So Abby and Zack live in a big urban center, which they love, but they now have a baby. And they live in a one bedroom apartment in this very costly urban center. And they have their site set on buying a place to live, probably some sort of a townhouse or something like that. And when you talk to them, these two, they're both 32, they rate their risk tolerance as very high because they've been doing this for a while, they feel. And they have gotten comfortable with equity market volatility. Their retirement accounts are parked in long term investments. They don't bother with them when the market's down. So they rate their risk tolerance as really high. But their risk capacity is low. So they're expecting a second baby. They're in this too small place, so they need to get into a larger home. They know that they want to buy and they have the down payment funds set aside. Well their risk capacity with that portion of the portfolio, not their retirement portfolio, but that portion of their portfolio, their risk capacity is really low. They are not in a position to absorb losses with that down payment fund, right? They don't want to have to change their goal. They don't want to be stuck in this too small place with two children. So their risk capacity is really low. So there can be these disconnects where you've got what you feel is high risk tolerance, where actually your risk capacity is low. I would argue that this is the case for a lot of pre-retirees and retirees who I talked to who have had a great experience with stocks over their holding periods. They've been comfortable holding stocks through periodic down drafts and they rate their risk tolerance as high. But the fact is their risk capacity has changed a little bit over their lifetimes. And as they get close to retirement, they want to start putting in place safer assets that they could draw upon while they let their equity portfolio recover and repair itself. So Zach and Abby, I would say, are a great example of high risk tolerance, they think, and low risk capacity. Now we'll take a look at Jack and Ellen, who are already retired. This couple is, Jack was a retired college professor, and he has a good pension, as college professors often do, that they're in the luxurious position of having everything that they need coming from the combination of Jack's pension and Ellen's social security. So they're not really needing to touch their portfolio on an ongoing basis except maybe they want to do so for special trips or sort of extras. So this portfolio is not getting touched on a regular basis. It's not getting subtracted from on a regular basis. So their risk tolerance, their risk capacity, despite their ages, is actually kind of on the high side, right? They can afford to build and hold a fairly aggressively positioned portfolio with lots of stocks because there's not an imminent need of them turning around tomorrow and saying, I need $100,000 for this thing because our other income sources aren't doing the job. So this is a good example of high risk capacity, high ability to absorb portfolio withdrawals or absorb spending shocks, I should say, and also fairly high risk tolerance because this couple has invested through a lot of market cycles and they know that they're not going to upend their plan at the worst possible time. So it's important to kind of customize this. I do think that off-the-shelf sources of asset allocation guidance can be a help in terms of getting yourself in the right ballpark. So you can look at, say, a target date fund or even use a target date fund if you're someone who's in your 20s and 30s or even your 40s to kind of guide your portfolio's asset allocation. But if you have shorter-term goals or intermediate-term goals or as you're getting close to retirement, I think it's terribly helpful to customize your portfolio's asset allocation based on these two inputs, risk capacity and risk tolerance. So I am going to leave it at that. We have time for a five-minute break and then we'll be right back here at 3 o'clock. Thank you.