Okay, as I promised, let's start off with a brief discussion of just what is meant by the concept of a return on investment, or rate of return on investment. The easiest way to think about this is to imagine that you invested $100 in an investment vehicle on January 1st of a given year. If your investment is worth $110 by December 31st of that year, you've earned a rate of return of 10%. So if that investment is worth only $105, the return is 5% and so on. Now, in considering your rate of return, the next big concept I want to introduce is the difference between the nominal and real rate of return on investment. The nominal return is that what you see is what you get return. In our earlier example, if you wound up with $110 on December 31st, your nominal return was 10%. But, what if over the course of the year, the rate of inflation was 10%. In this case, your real rate of return, which is the nominal rate minus the rate of inflation, would be a big fat zero. In other words all you would have done that year is tread water with your investment because your $110 is worth the same as the $100 you invested a year ago. And sure you now could cash that investment in for $110 but your purchasing power would not have increased because with inflation everything costs a little bit more. The broader point here is to pay attention to how inflation may affect your investment returns. And that kind of attention may help you choose investment vehicles that are better at protecting you from things like inflation or recession. This fact is an excellent segue to the concept of diversification. The central idea behind diversification is that different investment vehicles have different levels of risk, and sometimes, by combining the right investment vehicles, you can reduce your overall risk. The classic example to teach diversification is that of the umbrella company and the suntan lotion company. In any given year, if it rains a lot more than the sun shines, the umbrella company is going to make relatively more profit than the suntan lotion company. Of course, the opposite is true when a drought rolls in and the sun shines high in the sky all day long. Now, as an investor with, say, a million bucks, hey, I'm a generous guy. You could choose to invest in the stock of either one of the two companies. And if it's a rainy year and you picked the umbrella company, you would win big. But on the downside, if you picked the suntan lotion company, you would get burned. Sorry about that pun. So to diversify, one thing you could do is simply divide your investment funds equally between the two companies. That way, in the parlance of Wall Street, you have hedged your risk. For, if one company suffers in any given weather year, chances are the other company will do well. Of course the key point here as you move forward in your life is to be aware not just of the various risks of investment, but also be mindful of how you can allocate your investment funds to diversify your risk. [MUSIC]