At least 10.

Okay.

Okay.

Well, the main reason I ask that, Sean, is that generally we're looking for at least a five to 10-year time horizon to be heavily allocating to stocks, and the longer that time horizon, the more comfortable we can be having a higher stock percentage relative to the bonds in the plan.

In fact, for somebody who's thinking they're g- they've got a 20 to 30-year time horizon, um, you know, generally we're gonna do relatively little, if any, bonds.

And so that's gonna help narrow the, the choices for you within the TSP.

So you've got a few different stock options, uh, in that plan.

Mark, your thoughts?

Why is restraint so important, especially when it comes to higher risk

strategies? Yeah, it's because our emotions tend to swing so strongly based on what the market's been doing recently.

You know, when markets are really good, it's so easy for investors to let their portfolios take on more and more risk because because those riskier investments have been gaining so much so it's really important to exercise restraint in order to keep your risk exposure appropriate so at smi that means we limit our allocations to high risk high return strategies like our sector rotation strategy And especially so when those kind of high risk, high return strategies have been posting particularly big returns.

This is really important, even if you have a good reason to believe that a high risk, high return strategy is going to be a really good performer over the long term.

And that's because of a powerful behavioral trait called loss aversion, which causes investors to feel the pain of losses roughly twice as much as they enjoy the pleasure of gains.

So even if it works out over time, you're going to feel those volatile downturns twice as much as you're going to feel the gains on the other side.

How does that help us manage the emotional side of

investing? Yeah, well, using a combination of strategies is another way to combat that loss aversion we were just talking about, the pain of losses outweighing the pleasure of gains.

How did that decision come about?

Yeah, you know, one of the most challenging aspects of being an investor today is honestly deciding how much weight we should place on the stock market's behavior over the last 15 years versus really everything that's happened before that in market history.

You know, the most recent 15 years has been all about U.S. large cap stocks.

Before that, that wasn't necessarily the case.

And the adoption of indexing, which has really driven a lot of that performance, you know, has been a big part of the story of investing the last decade.

couple of decades.

Now, as we looked in this article at the last 30 years as a whole, going back to 1996, the large company S&P 500 index has slightly outperformed the extended market, that's mid caps and small caps.

Tell us why you still see a role for international stocks in the portfolio.

Yeah, and let's apply that to the real world of investing.

Do you have an example? I do.

So probably the most famous example of this is the failure of long-term capital management, which was a really famous hedge fund back in 1998.

The reason it's so compelling a story is that the brain trust behind this particular fund was just loaded with investing legends, the biggest names in the field.

In fact, the famous book that followed after this episode was titled When Genius Failed.

And the short version of the story, Rob, is these were the smartest guys in the room and They built these amazing mathematical models that would have worked almost all the time.

But they got hit by the age-old combination of leverage and just the wrong circumstances that ended up wiping out the whole fund and, depending on who you believe, almost took down the whole financial system with them.

And then I want you to take that theoretical idea and apply it to the practical and talk about something called margin of safety.

So why don't we start there? What's fueling those concerns?

Yeah, well, the AI story has been increasingly driving markets for really about three years now.

We can see that real clearly in the performance of the tech-oriented NASDAQ index, which is up about 160% since the end of the 2022 bear market.

That's about a third better than the broader S&P 500 index, which is up closer to 120% over the last three and a half years.

But then more recently, Rob, we just finished an earnings season where many companies showed really rapid profit acceleration that they were attributing to AI.

And that was a bit of a wake-up call on a It showed that this AI story is real, that many companies across many industries are starting to show tangible benefits to their bottom line from AI.

And then by extension, companies were clearly communicating that they're going to demand a lot more AI computing power than we currently have.

Yeah, so are those concerns warranted? Are we really looking at a bubble, or is something different going on beneath the surface?

Why should investors consider looking beyond the US markets?

Yeah, there are a few reasons, Rob.

You know, the traditional reason to include international stocks in a portfolio has always been diversification.

So foreign markets used to move a lot more independently of the US market.

When old guys like me were starting out in the investing business 30 years ago, there was a strong diversification case that you wanted to own some foreign stocks so that when the US market zigged, your foreign stocks might zag.

Now, to be fair, as globalization has advanced over the last few decades, a lot of that diversification benefit has gone away.

So these days, US and foreign markets tend to move in the same general direction most of the time.

So how do currency valuations factor into international investing?