(applause) >> This one-- these two panelists need no introduction, but I'll-- so I'll be short and sweet. William Bernstein-- Bill Bernstein is a Bogle Center board member. He's a neurologist-turned-financial advisor and author, 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 a 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 "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 Bogleheads and still a tremendous friend of the Bogleheads 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 Bogleheads historically. So let's get into this discussion.

Join me in welcoming Jonathan and Bill Bernstein. (applause) >> Good morning, everybody. When Christine emailed me about this session today, she said, "Well, 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 certainly my intellectual superior." So I said, "We should be asking each other questions." I've known Bill since the late 1990s, when I was at 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, his actually made sense. (audience laughing) 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 column." And that has become the start of a great friendship.

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. 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 easily return the compliment, but with respect to the compliment coming in my direction, you obviously have not talked to my children. (audience laughing) 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 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 ado, my first question for 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? Do you think that maybe 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. (audience laughing) 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 the Total International with 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 the 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 balance sheet metrics between value and growth stocks narrowing as people bought up growth stocks, value stocks, and sold their growth stocks off. In fact, that spread has increased to historically high levels.

And as I 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 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. >> So Bill, two 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. As value stocks tend to be more heavily leveraged, they tend to have greater exposure to debt. They're more highly leveraged, in other words. And the other thing about a growth stock is that its 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 when safe assets, they fall. So we saw that happen over, really, the 10 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 $100,000 in a total stock market index fund. It's in a retirement account. There's no tax consequences to changing. And I want to add a value tilt to my portfolio. How much of that $100,000 would it be prudent to move towards value?

>> Oh, 20%, 25% at most, I would think. Rick Ferry, yesterday, 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, or VTSAX. 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 Avantis 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 7 or 8 basis points.

And that's probably how you should do it, 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? >> Uh... (laughing) Well, 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 both of them. All right, time for me to turn the tables. (audience laughing) 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 the industry, and you started out with a conventional career in journalism, and now, you are off on 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 of 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 won, and it's a credit to the bogleheads. 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, you know, 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 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, Medigap plans, thinking about long-term care, thinking about what we'll make for a fulfilling retirement.

Now, I've amassed 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 your, 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 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... >> You're going to pound on me a couple more times on this one. >> 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, 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 included concerns for her daughter, and somebody wanted to 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 Dollar's comment section is remarkably civil, and I am bound and determined to keep it that way.

>> Yeah, and this is my opportunity to thank Sue Kennedy, Lady Geek, and her crew on the Vanguard Diehards Forum for doing exactly that same thing, it's remarkably civil, and it makes the forum exactly-- oh, there you are, very good. Thank you, too. You know, it 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 investment. Isn't that an awful lot of money? >> Yeah, 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 when the market's 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 hearty 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? 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, judged 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 I plead guilty, all right?

I think that you have to take those sorts of things into consideration. Now that TIPS are yielding, you know, 2.5%, 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 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 first conversed about this, you know, 25 years ago. We've been talking about this, the two of us, you know, really since we 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, there are 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 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 whatever goes on in the world, that you are going to be all right. But the biggest change, I think, in my thinking over the past 10 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 and 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 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 going to be grumpy.

It's just the way they are. And then there are other people, 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, 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, 10% is going to be your life circumstances, and maybe 10% is volitional. The fact that you do actually do things like shorten your commute, 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 going to make a comment on that. I largely agree with that. It's your set point, whether you're just you're a 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 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 bogel head ethic, is most everybody in this room is perfectly happy 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. Happiness, one of the definitions of happiness 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 I think that if you really want a prescription for misery, it's to collect art, OK? 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. Even if you're a multi-billionaire, there's always somebody who's got more paintings than you do.

And that will make you unhappy. Just a quick digression. I'll take issue with your art example. Yes, if your sense of self-worth is going to hinge on the car you drive, and we all know that certain cars are more expensive than others, and so on and so on, yes.

I can see that totally. I can see that with homes, totally. But with art, everybody has different taste in art. And you may have this great collection of modern art. And I may think, my three-year-old grandson could have done that. So I'm not sure art is as good an example as commonly available goods like homes and cars.

But to come back to your point, which I generally agree with, is I think that money is less good at buying happiness than it is at staving off unhappiness. And in coming back to the three components of a happy life-- 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 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 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.

OK. So if I can turn one more question around to you, which is that you've also written about how experiences have a better payoff, a higher payoff in terms of well-being than do consumer purchases, direct material consumer purchases. And I wonder, are there any other things that money buys that makes you happy, aside from being able 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 tend to value possessions more than older people. 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 don't own a car, but I know that if I had a car, it would have the potential to facilitate experiences. We could get in the car and drive into the country for the weekend.

We could more easily 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 them 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 beyond the experience versus possession question, what else should we do to boost our happiness? Yeah, exactly.

I mean, I think we're 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 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 really hate cutting the lawn, whatever it is, if you can buy your way out of that problem so you can use that time to do things that you enjoy, I think that is a very valuable use of money.

Yeah, I mean, again, we've sort of skirted around the edges of something that's called self-determination theory. Jonathan has 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. And the second thing is competence, which I think gets to a lot of the boglehead ethic.

Jim Dolley talked last night about do you really have to keep cheaping out at the supermarket if you've got a seven- or an eight-figure portfolio? And I think you do, because I think that that gets to my sense of competence, OK? If I go to a supermarket and I pay $5 for a brick of cottage cheese, I have morally failed as a human being, all right?

It's just as if I were in the clinic with a patient and I did a bad job or in the woodshop and did a bad job there. You want to exert competence. But the third thing and the most important thing, it doesn't get talked about enough, is autonomy. And that may be the most important thing that money buys.

It's the FU money, OK? 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 going to build a 30-year complicated tips ladder, what would you suggest that we do? I would-- 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 you're maturing, and you've told your kids and your spouse about it, 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, OK? You want the average maturity of that ladder or of the funds that you're buying to be half that, OK? So you basically want an average maturity of 15 years, whether it's tips or whether it's nominal bonds, to defease a 30-year lifetime.

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-- 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 Hist, PIMCO, OK?

And they charge 20 basis points. Hopefully, that will change. But why am I excited about tips? Because you can guarantee yourself, at maturity, a 2.5% real return, all right? That is more than historically the real return of bonds. Any time that I can get a 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% is not far from the lower bound. Yes, the US and a lot of other developed nations have had returns of 5% to 7%. 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, what I like telling people a couple of years ago is I would have given my right arm to be guaranteed a 0% real return on my portfolio at that point, all right?

And now I can get 2.5%. I'm pretty happy about that. So Bill, if someone's a retiree in their 60s, their 70s, they've got a mix of stocks and bonds, would you-- and 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, OK? 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 1% or 2%, and I'll bet there are a whole lot of people out here that I'm looking at that have 1% or 2% burn rates, it doesn't matter what you're invested in.

You're probably going to be fine. You could even have 100% stocks if you can stomach the losses. Because your global portfolio is now going to be yielding a 2.5% average dividend yield, 2.5%, 3%, depending upon how much foreign you have. And that 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 4%, 5%, 6%, 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, personally, I don't need TIPS in my portfolio. I'm fine without TIPS. But I really like sleeping at night. Your turn. OK, one last question, which is that-- and this is sort of my bottom of the barrel question here before we turn to the-- before at least I run out, which is that consumption smoothing is something that gets talked about a lot by financial economists.

In other words, in the most extreme version of it, you want to be borrowing money when you're young so you can have the bigger house and the nicer car. And then you'll pay back that debt when you're older. So that's an extreme form of consumption smoothing. Another form of consumption smoothing is borrowing money for educational expenses, which if done prudently is a good idea.

Where do you fit on that spectrum? So obviously, some level of consumption smoothing is a smart idea. 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 Marriotts in my 20s, if this wasn't happening in the Four Seasons, I would be really disappointed. You want that gradually rising standard of living.

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 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. If you grew up with the silver spoon in your mouth, it's basically all downhill from there.

I couldn't have put it better. My favorite line from the Succession TV series was from Tom Wamsgams, if I can get his name right, the Matthew McFadden character, who 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.

When I go to a three-star Italian restaurant, I hug myself. So I think what we'll do at this point-- Yep, I've got the first question for you. If there are any more, and Mel has a fistful more. But we'll start with this one, and I'll take those from you.

So Bill. OK, 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 percentages in stocks? It really depends upon what your burn rate and, of course, your risk tolerance are, and, of course, your age as well.

How many years of living expenses do you have to fund? And if you've got the 1% or 2% burn rate, you've won the game, and you're probably fine. 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 4% or 5%, 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 what Wade talked a lot about yesterday.

So it really depends. And, of course, if you're 70 or 75 years old, that's less of a problem because you don't have as many years to fund. In other words, what you have to do is do the sequence of returns test. Ask yourself, 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 5 or 10 years, you want to start bailing out of stocks. All right, so we're into the weird part of the session, the point at which I ask a question to myself. 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 a question to Jonathan. Do you have any thoughts on that, Bill? Go ahead. So I think that even if you have amassed a decent amount of money-- I know that people do still feel financially insecure-- 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, OK, I want to make sure I'm absolutely certain that I know where money's going to come from for the next 5 years or 7 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, the less reason you're going to have to fret over your investment performance. I mean, my largest single stockholding or fundholding 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 und drang 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 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 was so-called liquidity, basically the amount of money they have sitting in the bank. And if you have $5,000 or more sitting in the bank, your sense of financial well-being is something like 50% higher than people who only have $250.

And the more you have in the bank, the better it gets. So if you have a sense of financial 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 start getting very nervous and giving me the fish eye.

But this feeds directly in through what we're looking at politically in the country today, the polarization we're seeing, which is that if you have $5,000 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 $400 car repair.

And that does not lead to-- and their existence, financially, is very precarious. And that sense of insecurity feeds directly through in the politics we're seeing in the country today. So Bill, I think this is for both of us, but I'm going to-- Well, wait, wait, wait. I want to ask Truss the question back to you, though, which is I thought it was a very interesting point about 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 hardscrabble 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 in forming your own view of money.

So for those who don't know it, when my great-great-grandfather died in Liverpool, 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 Nippon Tobacco, I think.

And that family fortune was inherited by a single daughter. And she-- if you've seen Brideshead Revisited, as my mother has said to me, said, I don't need to watch Brideshead Revisited, darling. I lived Brideshead Revisited. So there was this great family fortune. It passed down to 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 gentlemen farming. The farms kept getting smaller and smaller. He would trade down to places with less acreage so that he could free up some capital to sustain his lifestyle.

Eventually, the farms got too small, at which point he retired. That is what happened to the great family fortune. And that is the story that I grew up hearing. And as a consequence, I have always been extremely frugal. And as 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 another guise, actually. If you never worry about money, why shouldn't you allocate 100% of your portfolio to stocks? Repeat the question. I want to make sure I understand it. If you don't worry about money, I guess you would-- in other words, you have a very high risk tolerance.

Right, OK. Why not allocate 100% of your portfolio to stocks? Ah, OK, so it's a hypothetical question. I didn't catch that at first, because I worry about money every single day of the week, because that's my family background as well. 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 risk-tolerant and can stand 100% stocks, sure, you should be 100% stocks as long as your burn rate is less than 2%, all right, or 3% even. There's no reason why you can't be 100% stocks.

I'll tell you who else can be 100% stocks, is the person who has enough Social Security and pension income to pay 100% of your living expenses. Because guess what? Your portfolio ain't your money, OK? 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 100% in stocks, and that's the person, as Merton and Bodie and Samuelson pointed out, who has an enormous amount of human capital relative to their investment capital, namely someone who is just at the beginning of their savings career. That person should be 100% in stocks.

And in fact, a la Paul Merriman, 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 of 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. But I've got one here that I'm going to ask Bill, because I'm hoping I'll get an interesting answer from him. So somebody here asked, what do you think of bucket lists?

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. A National Book Award? I mean, to be perfectly honest, I have-- and my wife's going to wince when I say this-- but I have fulfilled just about every single material need that I've ever had.

We spent-- we would take eight-week, 10-week vacations in the summer with our children abroad, because we could afford to do it. I mean, do I want a bigger car? Do I want the Tesla, the $80,000 or the $100,000 test Tesla? Hell no, that's not a car. That's an IQ test, you know?

So 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? Oh, that's-- well, first of all, you have to understand that I devoutly believe that it's cheesy to recommend my own books to anybody.

It just drives me-- self-promoting authors drive me up a wall. But almost anything by Jack Bogle or Rick Ferry or Larry Swedrow or Mike Piper. And my favorite Jack Bogle book, of course, is The Little Book of Common Sense Investing. So I would do the plug for you. Bill has the booklet from how many years ago, if you can?

Yeah, about 12 years ago, yeah. What is the exorbitant price on Amazon these days? Well, it's zero if you'd want to download the Acrobat from any number of websites. It's $0.99 if you really want it on your Kindle. But 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 $0.99. Thank you, Bill. And on that very suitable Boglehead moment, we'll wrap it up. Thank you. A round of applause for these two great contributors to personal finance. Thank you very much. you