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76report

June 25, 2026

Three (More) Things I Want My Sons to Know About Investing

Father's Day was last weekend. It's one of those holidays that prompts reflection. You think about what your own father passed along to you, and what you're trying to pass along to your kids.

Last year around this time, we shared Nine Things I Want My Sons to Know About Investing in the 76report. The note hit a chord. An unusually large number of subscribers told us they enjoyed reading it and that they shared it with their own children.

That meant a lot to us—and it was an interesting signal.

We all spend a lot of time trying to understand the latest opportunities everyone else seems to be chasing. To a large extent, we need to do that. The world is constantly evolving, and investors need to keep up.

At the same time, there is clearly a strong appetite for timeless frameworks and enduring principles that can be relied upon in every market environment.

People want more than stock tips. They want help developing and applying a consistent investment approach.

My father gave me an early and lasting appreciation for markets. The library trips to photocopy Value Line, the annual reports stacked on my desk, the dividend discount model explained over the kitchen table—all of it added up.

I've been trying to do something similar for my own sons, in my own way. But the world moves faster now. And it has changed enough over the past year that I felt some items needed to be added to the list.

The timing feels right for another reason. My two sons in college—along with what seems like every one of their friends—independently went out and bought SpaceX right after the IPO. I did not suggest it. They just did it.

Elon Musk deserves a Father’s Day shout out if only because he has fourteen kids of his own. He deserves extra credit for all the excitement he has brought to stocks and investing.

Elon has also reignited enthusiasm for technological and economic progress in general.

We are at a moment when anti-capitalist politicians—in New York and elsewhere—are gaining real traction. They are succeeding by amplifying the same anti-capitalist attitudes that have unfortunately become deeply embedded across the American education system.

Elon’s grand ambitions for humanity represent a stark alternative to the dark rhetoric and pessimism of these suddenly influential politicians, who are winning elections by putting a cool spin on failed nineteenth century socialist concepts.

That being said, as Trish and I have discussed, the SpaceX valuation is quite intimidating. It requires enormous growth from current levels for it to be at all plausible. That growth is possible but far from guaranteed.

So, on the plus side, SpaceX is sparking the interest and stimulating the imagination of a whole new generation of investors. On the other hand, one hopes it does not leave these new investors disillusioned if the business is unable to deliver on all the hype and the shares perform poorly.

Whether or not SpaceX successfully grows into its multi-trillion dollar valuation—and how much of Elon’s vision of the future actually materializes—will be fascinating to watch.

But even if we are not vacationing on Mars by 2031, it is clear that AI-driven technological advancement is going to change the world to an enormous, potentially even shocking, degree.  

This brings me to my updated list. Specifically, I wanted to put more emphasis on technology—and AI in particular.

AI is not just another investment theme. It is likely to be the most consequential technological shift of our lifetimes. And if my sons (or anyone else) are going to be serious about investing, they need to understand it deeply.

With that in mind, here are three more things…

(1) We are all tech investors now.

In 1971, Milton Friedman famously declared, "We are all Keynesians now.” He was acknowledging that even his fellow free-market economists had absorbed into their thinking certain basic beliefs about how modern economies actually work.

There was a time when all investment firms had their “tech guy.” It was usually someone with a background in the industry or some kind of computer science degree.

But the reality is, we all have to be tech investors now—and should think of ourselves that way.

As we often point out, the S&P 500 is now nearly 40% Information Technology by market cap. This figure actually understates tech’s real allocation within the index because it excludes several of the Mag Seven stocks that are classified in other sectors, even though they are clearly technology leaders.

With Micron (MU) recently booting out Berkshire Hathaway (BRK), all of the top ten holdings of the S&P 500 are now tech or tech-related businesses.

Technology has colonized virtually every sector of the stock market. The biggest energy companies are running AI-optimized drilling. The biggest banks are deploying machine learning across their entire credit operations. The biggest retailers live or die by their logistics algorithms.

This is a shift that even experienced investors struggle to fully internalize.

For decades, "tech stocks" meant a specific slice of the market—volatile, growth-oriented, often unprofitable. Something you balanced against the boring, reliable stuff. That mental model is now outdated.

The S&P 500 is on a path to becoming a technology index, similar to the NASDAQ Composite. This trend is unlikely to reverse because technology is only becoming more powerful, more pervasive, and more valuable.

Even “low-tech” industries, to the extent they still exist, are increasingly being shaped by tech-driven demand. Commodities like copper and natural gas, for example, are gaining relevance because they are inputs within tech supply chains.

Investors who lack technical degrees should not be intimidated by this. Some of the most well-known and successful investors in tech have non-technical educational and professional backgrounds.

One does not need to comprehend how every piece of technology works at the most detailed level. But investors do need to grapple with how it all fits together.

The investors who will thrive in our tech-dominant future are not necessarily the ones with the deepest expertise in computing. They are the ones who are most curious and most capable of connecting all the dots.

(2) Use AI—to learn more about AI.

One of the most challenging aspects of being a fundamental investor is developing an initial understanding of the industry in which a company operates.

Before you can even think about making an assessment about what a business might be worth, or what its future prospects are, you need to understand what it does, the products or services it provides, and, very crucially, how it actually makes money.

When I started my career in the late 1990s, the internet was just developing as a source of information. AI now supercharges a person’s ability to scrape the internet for information and process it in a digestible way, almost instantaneously.

AI is extremely complicated and rapidly evolving—but, rather conveniently, it also provides the tools needed to develop our understanding of it.

So actually use the tools—aggressively.

Invest in a paid subscription to at least one of the AI models (ChatGPT, Grok, Gemini, etc.) and have ongoing conversations with it. Ask it to help you analyze a company's earnings report. Have it summarize a 10-K or other documents you get your hands on. Ask it to poke holes in your investment ideas.

Understanding AI as a user gives you an enormous edge as an investor.

Investors used to rely heavily on industry insiders to gain perspective on businesses and try to understand their inner workings. That approach remains valuable, yet many experts now provide those insights for free on podcasts and in other forums.

Use AI tools to locate this valuable information, engage with it in a time-efficient manner, and help you get up to speed and solve investment problems yourself.

The more you interact with AI in this way, the more adept at using it you will become and the more insight you will have into its potential.

Do not, however, rely on AI blindly.

AI, at least for the moment, excels when it is directed toward solving specific problems with abundant data, as opposed to very general questions like, “What stocks are good?”

Use AI to collect and process the information that will allow you to piece together strong answers to those more general investment questions. Then use AI to challenge and refine those answers.

(3) Even for AI stocks, valuation still matters.

The AI infrastructure buildout is real. The capital being deployed is staggering. And the companies at the center of it—the chip designers, the cloud platforms, the model developers—have already created an enormous amount of wealth for investors who got there early.

But with any transformational technology, there are landmines alongside the opportunities. Valuations can detach from reality. Capital can be misallocated.

The winning business models are not always obvious at the start. The companies that seem to be winning in year one are not always the ones that win in year ten.

The internet was genuinely transformative. It also produced the dot-com crash. Both things were true simultaneously.

So yes—get involved. Be curious. Own the theme. But apply the same discipline here that you would apply anywhere else.

Know why you own what you own. Be able to articulate the investment case in plain language. Understand the risks. Frame the various scenarios.

The more you understand the underlying business, the more capable you will be of differentiating a temporary setback from an existential problem. And the less likely you will be to sell down the road merely because market sentiment turned negative.

AI has not changed what should be the overall goals of investing. You are investing to build a permanently growing balance sheet for yourself and your future family.

The tools and the landscape may be evolving faster than ever, but the link between price and real business value endures.  

Nine Things I Want My Sons to Know about Investing

(Originally published in the 76report on July 12, 2025.)

If you walked into the bedroom of a typical American middle school kid in the 1980s, you would probably not find a stack of company annual reports on the bookshelf. The same applies to the home office of a typical middle aged man in 2025, decades after the invention of the PDF file.

My upbringing was perhaps a little different from most.

Instead of Sports Illustrated, I collected glossy annual reports that my father would drop off in my room after we got them in the mail. And I’ve actually got a stack of them on my desk right now.

To be fair to my high school self, the annual report pile would later primarily function as a way of discreetly storing swimsuit issues in between. I wasn’t totally abnormal!

My investing “origin story”

Investing may not be the most common family pastime, but there are certain benefits if it is.

Children learn from their parents many things that they cannot learn in school—habits, attitudes, moral boundaries, life skills. So much of who we become as adults is connected to the patterns and behaviors we witnessed as children.

This very much extends to personal finance, especially since our K-12 education system barely touches the subject at all, which is unfortunate.

What most of us know and believe about spending, saving and investing, at least initially, is shaped by our parental role models.

I was lucky enough to have a father who was a highly engaged investor. He not only invested personally, but, as an economics professor, he even taught classes on investments.

My dad liked dividends. He still does. The Income Builder Model Portfolio is his personal favorite. He was also an investor in the dividend-focused mutual funds I previously managed.

He actually taught me the dividend discount model when I was in middle school.

It’s one of the original valuation methods for stocks—basically an algebraic formula that involves dividing the expected dividend by the assumed cost of equity minus the long-term growth rate.

Cracking the code

Companies still send annual reports to shareholders. (You can’t let them trick you into opting out of paper delivery.) Back then, well before the Internet, investors really relied on them for information.

One annual report that sticks out in my memory was the one from Beatrice Corporation.

The company no longer exists, but it was a giant food conglomerate that owned brands like Tropicana and Dannon. I probably was impressed by the fact that they made the orange juice and yogurt I always saw in the fridge.

I remember investigating Beatrice with my dad. I don’t recall the exact figures, but the stock definitely offered a nice chunky dividend.

Our investment research activities included trips to the local public library. We would go to the reference area upstairs in the “grown up” section and flip through the Value Line Investment Survey.

Back in the 1980s, this was a thick book with very useful one or two page company write-ups with key pieces of information… not too dissimilar from the Company Snapshots we now include in all of our Model Portfolio reports.

My father and I would look up stocks that we owned, like Beatrice, take some notes, and maybe even photocopy a few pages.

I enjoyed the trips. It was like doing detective work, or better yet, cracking some kind of secret code.

Beatrice provided what may have been my first lesson as a value investor.

It was eventually acquired in 1986 by Kohlberg Kravis Roberts & Co. (KKR) for over $6 billion. It was one of the largest leveraged buyouts at the time.

Shares rallied about 50% from where they were before the deal was rumored. We were quite pleased.

KKR ultimately sold off all the divisions within the company and made even more money. The businesses within Beatrice were worth way more than the stock market was giving the company credit for.

Beatrice was a cash cow, which the high dividend reflected. If you appreciated how valuable the underlying businesses were, you could have been a Beatrice shareholder as well and made a lot of money.

The appeal of investing

Investing has always been a major part of my life. I eventually became a professional investor, managing money for others, but have always invested my own money.

Probably the thing I like most about investing is the way it integrates basically everything in life… math, science, technology, psychology, politics, history. You’re constantly solving puzzles that challenge every part of your mind and understanding of the world.

The other nifty thing, of course, is being able to make a lot of money without really doing anything other than reading, thinking and perhaps performing some calculations.

The ability to turn a dollar into two with just a few keystrokes and a little time is pretty magical.

As a kid who liked to do his own thing, I understood that it’s definitely a better way of obtaining money than completing tasks that some other person tells you to do.

I was fortunate enough to have an influence in my life who familiarized me with investing and its potential pay-offs.

For many people, however, investing seems very complicated and intimidating. They keep their distance and as a result often miss out.

Extending the legacy

I have three sons myself now, two of whom are legal adults. They are attending or on their way to college and have set up their own independent brokerage accounts.

The youngest is not much older than I was when I would go on the fact-finding missions to the library.

I’m not pushing my sons to become professional investors themselves, nor am I discouraging it. I want them to find their own path and pursue their assorted talents as they see fit.

But whatever direction they go career-wise, I do want them to know as much as they possibly can about investing.

At this stage of my life, I appreciate how investment decisions I made (or didn’t make) decades ago have had major consequences for my family today.

So for the benefit of my sons, I decided to distill what I think are the key things they need to understand and prioritize as they begin their adult lives and investing journeys.

I also wanted to share these thoughts with our 76research subscribers.

Many of you, of course, have kids of your own. One subscriber in particular has mentioned to me that he uses our content to help his own son develop as an investor. Trish and I are thrilled to be helpful in that way.

NINE THINGS I WANT MY SONS TO KNOW

What follows below is not necessarily conventional financial advice. It reflects my own personal psychology around investing, convictions about how our economic system works, and attitude towards risk.

But after several decades as both a professional and private investor, this is where I land… and what I want my boys to know.

Take from it what you please!

(1) Never forget the basic arithmetic of wealth accumulation.

Let’s start with the easy stuff. This may sound painfully obvious, but too many people overlook it.

If you want to accumulate wealth, it breaks down to three main variables.

First, you have to figure out a way to earn money. So get a good job or maybe even start a business.

But remember, no matter how much money you make, you will literally have nothing at all to show for it, unless you actually save a portion of it.

In fact, someone who earns a lot and but fails to save could end up in even worse condition than someone who earns far less. Big spenders who suffer a decline in their income might struggle to maintain all their pricey possessions, which can turn into liabilities fast.

After you earn and save, you then need to generate high returns.

If you invest $10,000 at a 4% return (approximately equivalent to current savings account yields), it becomes around $22,000 in 20 years.

If you can get a 10% return (the approximate return of the S&P 500 over the past 10 or 20 years), it becomes around $67,000 in 20 years.

Your savings compounded at 10% over 20 years will be more than three times higher than it would be at 4%.

So compounding at this higher rate has the same long-term effect of either earning three times as much money at a given savings rate, or saving three times as much off the same level of income.

To sum it all up, if you want to accumulate wealth, you need to earn as much as you can, then save a lot of it, then try to get good returns. This applies to everyone and will always be true.

(2) You should be fearful of missing out.

Fear of missing out, also known as FOMO, is often depicted as a psychological weakness, especially in the context of people who may be spurred to action after seeing a stock or other investment rise a lot.

Chasing whatever may be hot at the moment is not necessarily a good idea. You don’t want to fall for every investment fad you encounter.

But you should have a healthy respect for the risk of missed opportunity. And don’t be too skeptical. An investment that appreciates rapidly can also signal genuine long-term potential.

Elon Musk is the richest person in the world because he imagines what’s possible. Every great investor I ever met has a certain optimism that allows them to think through and visualize upside scenarios.

Negative Nellies avoid mistakes but miss major opportunities because their minds don’t allow them to contemplate the possibility of great outcomes.

The stock market is constantly fluctuating, with all kinds of bubbles and crises along the way. Many people are paralyzed with fear of the next crash.

To be fair, there have historically been periods of poor returns that lasted years.

The long-term trajectory of the stock market is up, however, because businesses in a free market system are able to grow their earnings and because the money supply is constantly growing, especially in periods of market weakness.

Our economic system fundamentally relies on the stock market performing well. If earnings do not grow organically, the Fed makes sure they grow nominally.

If you are young and in the wealth accumulation phase, you may not even mind if you temporarily lose money in stocks.

You are continuing to earn money and save money. If stocks are out of favor and valuations are low, this just gives you more time to build positions at lower levels.

Short-term declines of 10%, 20% or 30% or more are not fun, but they get washed away over the broad sweep of time.

The S&P 500 Index was under 100 on June 30, 1975 and over 6,000 on June 30, 2025. Over 50 years, it became 65 times larger.

S&P 500 Index - Last 50 Years

(3) This isn’t a game. This is real life.

Investing is hopefully seen as interesting and fun, which means focusing on it will feel more like play than work. So you will spend more time on it.

But investing should not be confused with a form of entertainment.

The point of investing is to protect and grow your hard-earned savings so you and your family have more security, opportunity and comfort in the future.

There are a lot of companies out there doing “cool” things. There are many intriguing personalities.

But you’re not here to watch a movie. You’re here to build a permanent balance sheet for yourself as you navigate the real world as an adult.

Stay focused on your purpose and take a workmanlike approach to the task at hand.

(4) Mentally bucket your savings.

Money has different purposes. The most important purpose is survival.

So it makes sense to keep a certain amount of money, depending on your circumstances, in very stable, liquid investments such as bank accounts and government and investment grade bonds.

Sometimes you are just saving up for a specific expenditure in the near future. It also typically makes sense to keep money that you have plans to spend in some kind of bank account or bond investment.

Once you have enough cash allocated for these purposes, you can think about long-term allocations. These should consist of funds that you do not expect to have to touch anytime soon. Therefore, you can tolerate some downside risk and volatility.

Stocks should be the primary focus of your long-term allocations, with consideration given to other asset classes, like gold. Bitcoin and crypto also now need to be part of the discussion.

The main point is that you want to allocate money that is earmarked for long-term savings to asset classes with high return potential.

Stability of principal is less urgent. Manage risk through diversification and emphasis on quality.

(5) Passive investing is a modern wonder.

When I was working in the mutual fund business, I once got chided by a sales guy after I told a group of clients that I personally invest in index funds in addition to the fund that I managed and individual securities.

The active management industry hates to admit it, but passive investing is a tremendous innovation.

A financial instrument like an S&P 500 index fund or Exchange Traded Fund (ETF) offers investors low-cost and secure access to some of the greatest companies on the planet.

These instruments are also highly predictable, since they follow basic rules, usually linked to market cap. You don’t have to worry about a portfolio manager screwing up or retiring.

This means you can own them and grow with them in a very tax-efficient manner for essentially your whole life.

By definition, money allocated to index strategies will not “outperform.” You are settling for average market returns—but average market returns are historically compelling and hard to beat.

Using passive investments does not prohibit you from also being an active investor. It’s not an either/or situation.

Passive stock market exposure should be the foundation of your investment portfolio—just set it and forget it. It would be totally reasonable to have most of your money in various passive investments—even all of it.

(6) When you pick stocks, be highly selective and strategic.

Appreciating the logic and value of passive investment strategies does not mean you cannot also engage in active investing, whether in funds or specific securities.

But when you do venture into the realm of stock picking, be very picky. Ask yourself, is this investment really more worthwhile than the market as a whole?

Warren Buffett always used the metaphor of waiting for the “fat pitch” in baseball (when the pitcher screws up and throws you an easy one that you can clobber).

You should always sniff around for opportunity, but also let the opportunities come to you.

When you buy an individual stock, make sure you have a strong rationale that you can articulate, such as a compelling risk/reward, an open-ended growth opportunity or an exceedingly discounted valuation.

There are currently over fifty thousand different publicly traded stocks in the world. You may only directly buy a few dozen in any meaningful size over the course of your investing career. Be choosy.

Target businesses that have unique characteristics that have the potential to deliver outstanding results over time.

If the investment performs well, don’t feel the need to sell (and pay cap gains taxes) just for the sake of locking in gains. Ask yourself if the business is healthy and the valuation still makes sense.

Let your best ideas ride.

(7) Dip your toes.

If you are exploring a new investment, don’t hesitate to buy a relatively small quantity as you complete your research. Psychologically, there is a difference between owning something and merely kicking the tires.  

Once you own the stock, you will feel more compelled to understand it. You will watch it more closely. Your senses will be sharpened. You can always sell it later if you determine your initial impressions were off.

(8) Understand taxes really well.

I get it. Taxes are boring. But there are many things in life that are boring… filling out insurance forms, paying the bills, watching movies your significant other has selected.

Taxes may seem tedious, but there are not many other subjects where being proficient can potentially have such a huge financial impact.

Develop a robust understanding of how investments are taxed, especially capital gains. There are many strategies to minimize your investment tax burden, and none of them are terribly complicated.

You just need to spend some time and really learn about it. You may find this particular 76report note useful as a starting point: Taking Control of Your Capital Gains.

From a performance perspective, what ultimately matters is after-tax returns. Even a 1% per year performance impact can compound into a lot of money.

(9) Lash yourself to the mast.

Market crises are inevitable. Bad things happen from time to time that disrupt the economy. Investors can also be quite skittish and have a tendency to anticipate catastrophes that never materialize.

If you are going to be a long-term investor in stocks, you cannot give up as soon as the going gets tough. If you do that, you are practically guaranteeing that you won’t ever succeed as an investor.

Sure, if you are able to cut your exposure as the market turns down, and then successfully re-establish it at lower levels, you have saved yourself some money. But this is much easier said than done.

Market downturns may create interesting opportunities to reposition your portfolio, and realize losses for tax purposes, but one should be very hesitant about reducing overall market exposure right when everyone else is selling as well.

The key risk of selling into a downturn, when everyone is running for the exit door, is missing the upturn once the perceived problem fails to materialize or is solved.

We just saw this in April with the tariff tantrum. If you sold the S&P 500 at the bottom, you would have missed the 25+% recovery over the subsequent three months.

When it comes to crises and market downturns, you may get lucky abandoning ship once or twice, but it probably makes more sense to ride it out, regardless of the circumstances.

Be long and strong in a panic. Market sell-offs are actually some of the best moments to be a stock picker, because some good names really go on sale.

Take an opportunistic attitude, reposition as needed, and if you have the financial firepower, be a countercyclical buyer when others are selling.

The very best investments are often made under the worst market conditions.

My single biggest regret

I am sometimes asked about my biggest regrets as an investor. I have certainly had a few investments over the years, both as a fund manager and a private investor, that did not work out terribly well.

This goes with the territory. Stocks are risky, and the future is unpredictable.

Every investor experiences the occasional disappointment. Diversification and position sizing are how you manage the risk of loss.

My biggest regrets are not the handful of bad investments I made but the good investments I declined to make. Or investments I did make but did not put quite enough money behind.

The one that haunts me most goes back to the 2002 time frame. I had just graduated from business school the year prior.

Markets were in bad shape. We had the tech bubble burst, then 9/11.

I vividly recall the day when I was at my desk, staring as usual at my Bloomberg screen. I pulled up the Amazon (AMZN) chart and was shocked to see the stock trading for a few dollars per share (this even pre-dates its 20-for-1 share split in 2022).

Investors back then were nervous about the convertible debt the company had incurred to build some warehouses. They thought the company might go bankrupt.

I said to myself, why not put a few thousand dollars into it?

The worst that could happen is the business goes under. But on the other hand, it’s an extraordinarily innovative company with a potentially bright future ahead.

I don’t quite recall why I didn’t follow through with my instinct. Maybe I got distracted when my colleague handed me the piece of paper where we write down what we want for lunch.

Between June 30, 2002 and June 30, 2025, shares of AMZN have appreciated about 27,000%. A $4,000 investment in AMZN could have become over $1 million in this time frame.

My employer bought the team lunch everyday, but as the saying goes, there is no free lunch. This one may have cost me seven figures.

The moral of the story is that the stock market goes up and down in the short term but offers tremendous opportunities in the long term, especially if you are young and have time on your side.

American capitalism is a great economic system for consumers and workers, but it’s really great for owners. The biggest risk you face is failing to take advantage of it.

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