The Rational Reminder Podcast (Benjamin Felix, Cameron Passmore, Mark McGrath, and Dan Bortolotti)

Identity helps shape our perception and thinking about the world around us. What is identity? How does it influence our perspective? These are some of the questions we answer in this episode of the Rational Reminder Podcast. In this episode, we talk with Jay Van Bavel, an Associate Professor of Psychology and Neuroscience at the University of New York, an affiliate at the Stern School of Business in Management and Organizations, and Director of the Social Identity and Morality Lab. He is also co-author of the book The Power of Us, which provides readers with cutting-edge research in psychology and neuroscience to explain how identity really works and how we can harness it for the better. His research focuses on how group identities, moral values, and political beliefs shape the mind, brain, and behaviour. He has published over 100 academic publications on the topic and has won various awards for his research achievements. In our conversation, we unpack the complexity of identity and its influence on our perspective and decision-making abilities. We cover aspects such as the differences between self-identity and group identity, how to be aware of your biases, the role that leaders play in influencing identity, and how identity plays out in social relationships. We also talk about how group identity interacts with democracy and the role of social media in shaping our identity, as well as learn some practical advice to help broaden your perspective.

Key Points From This Episode:

• We start the show by learning the basics of group identity. [0:03:29]
• How group identity differs from self-identity. [0:04:04]
• He explains how impactful group identity is to individual identity. [0:05:06]
• Whether there is good data on how many groups people typically identify with. [0:06:08]
• How aware people are of the groups they identify with. [0:07:27]
• Ways in which group identity affects decision-making. [0:08:12]
• The effect group identity has on setting and achieving goals. [0:09:35]
• General ways group identity affects social relationships. [0:15:21]
• A deeper explanation about groups, memberships, and physical presence. [0:17:28]
• Differences between introverts and extroverts. [0:19:18]
• How group identity affects our thinking and perspective. [0:20:43]
• Associate Professor Van Bavel explains how to foster social cohesion, using America as an example. [0:25:41]
• Find out if people have a default identity that determines their perspective. [0:28:41]
• What people can do to be aware of which identity is affecting their thinking. [0:30:10]
• Find out if group identity affects how people learn new information. [0:31:58]
• Whether people can change or broaden their identity to improve decision-making. [0:34:18]
• Practical advice to help broaden someone’s perspective. [0:37:25]
• The challenges of changing your group identity entirely. [0:39:34]
• Steps that one can take to view the world more objectively. [0:42:04]
• A rundown of how leaders influence the thinking and decision-making of individuals. [0:45:47]
• An outline of what qualities to look out for in groups. [0:48:49]
• The influence of social media on which groups people identify with. [0:52:21]
• We learn if following people on social media with opposing views helps break down group barriers. [0:55:57]
• An explanation of how group identities interact with democracy. [0:58:48]
• The differences between current political divisions and past political divisions. [1:03:59]
• How well studies on the topic can be replicated. [1:05:43]
• We end the show by learning how Associate Professor Van Bavel defines success. [1:09:18]

Today’s episode is the first that takes a new format we are piloting, where we compile clips from the most valuable conversations we have had in different episodes on a given topic. To kick it all off we will be devoting this episode to inflation-adjusted retirement spending and the nuances of the 4% rule. We start off with a clip from our conversation with Bill Bengen, creator of the 4% rule, where he explains the concept. From there, we pull up an excerpt from an interview with Wade Pfau, hearing him weigh in on how this rule only works in the context of the US and Canada. Next up, Fred Vetesse talks about the changes in stock and bond yields and how they further problematize the 4% rule. After that, Professor Moshe Molevsky makes the case for flexible spending, followed by Michale Kitces with his favourite variable spending rules. We grab a segment from our chat with Scott Rieckens where he argues that the 4% rule should be seen as more of a guideline for making financial decisions than a rule. Bill Bengen’s interview then features again as we hear his comments on the effects of small-cap value stocks and cyclically adjusted price-earnings on safe withdrawal rates. Tune in for this fascinating set of highlights, the main point of which is that the 4% rule should rather be used as a guideline for financial planning and that where actual spending is concerned, a flexible approach is more sensible.

Key Points From This Episode:

• Bill Bengen, creator of the 4% rule, explains how the concept relates to inflation-adjusted retirement spending. [0:03:50.8]
• Wade Pfau speaks about how the 4% rule doesn’t work in an international context. [0:09:15.0]
• Fred Vettesse lays out the contrast between today and the period Bill studied. [0:12:31.1]
• The importance of having flexibility in retirement spending with Moshe Milevsky. [0:14:51.8]
• Variable spending rules with Michael Kitces; ratcheting, guardrails, and more. [0:19:27.3]
• Scott Rieckens on the 4% rule as a tool for making financial decisions. [0:32:33.8]
• Bill Bengen comments on the problems that have been found with the 4% rule. [0:38:35.7]
• The effects of small-cap value stocks on the safe withdrawal rate with Bill Bengen. [0:42:52.8]
• The effects of cyclically adjusted price-earnings on safe withdrawal rates with Bill Bengen. [0:47:20.6]
• Final thoughts on the 4% rule with Ben and Cameron. [0:51:37.8]

It takes only a handful of smart choices to convert regular savings into a secure future. Today we welcome famed financial educator Paul Merriman onto the show to discuss how the right habits and investing approach can add millions to your retirement nest egg. After chatting about his personal and professional background, we dive into Paul’s investing philosophy

and how it’s been influenced by the work of Eugene Fama. A significant theme in this episode, we then talk about why Vanguard’s portfolio allocation ensures that clients have the smoothest possible emotional relationship with their investments. This leads to a discussion on the benefits of simple versus complex funds and how simple funds fit with the preferences of many do-it-yourself investors. Linked to this, Paul explains why it’s emotion and not strategy that gets in the way of successful investing before exploring the challenges of sticking to portfolios that are heavily weighted in small-cap value stocks. Reflecting on his career as an advisor, we ask Paul about his difficulties in working with clients as well as the role of financial advisors. Later, Paul unpacks some of the top habits and beliefs that lead to investing success; a key focus of his new book, We’re Talking Millions. We wrap up our conversation by touching on target date glide paths, how Paul’s foundation educates investors, and the relationship between money and a life well-lived. With such an illustrious career in financial education, tune in to benefit from Paul’s investing advice.

Key Points From This Episode:

• We introduce today’s episode with financial educator Paul Merriman. [0:00:17]
• Paul shares details about his personal and professional history. [0:03:16]
• How Eugene Fama’s work impacted the way that Paul built his firm. [0:06:55]
• What PWL Advisors went through to access Dimensional’s products. [0:08:21]
• Insights into the fateful chat that Paul had with Jack Bogle in 2017. [0:09:08]
• How Paul helps his clients balance fee frugality with expected returns. [0:13:29]
• Exploring the trade-offs between simple and complex funds. [0:16:49]
• Paul compares his former buy-and-hold strategy with his simpler new approach. [0:19:06]
• The costs of do-it-yourself investors having an overly-complicated portfolio. [0:22:46]
• The rationale underpinning the small-cap value strategy. [0:27:20]
• Why it’s so difficult to only invest in small-cap value stocks. [0:25:36]
• What Paul would say to clients who want to ditch their small-cap value stocks. [0:37:32]
• Paul reflects on challenges when communicating with investors. [0:40:39]
• We ask Paul about the value of financial advice and financial advisors. [0:46:32]
• Discover the habits that every investor should follow. [0:51:29]
• What Paul is trying to achieve with the Merriman Education Foundation. [0:58:21]
• Pros and cons to target date glide path funds. [01:02:00]
• We chat about Paul's radio show from the previous decade. [0:50:35]
• Hear Paul’s top lessons on the relationship between money and a life well-lived. [01:08:51]
• How Paul defines success. [01:16:29]

In Episode 2 of the Rational Reminder podcast we discussed the following:

• The underperformance of value stocks
• Are we in a Winner Take All market?
• Facebook’s crash
• Global value performance
• Canadian value premium at ~+5.5%
• Rebalancing into the pain
• Factor diversification
• Having a philosophy and sticking with it
• Index fund flows are slowing down in the US
• Canadian active funds are still dominating passive ETFs
• Markets are still efficient
• Deciding to be an index investor takes work
• Fewer highly skilled active managers make markets more efficient
• Canadians might need to buy real estate to retire
• Doctors were sold out by MD Management
• Should you listen to the yield curve?
• Michael Batnick’s chart crimes
• DFA’s weights vs. the S&P 500 weights

The stories we talked about:

• Don’t cry over underperforming US value stocks
• O’Shaughnessy Quarterly Investor Letter Q2 2018
• Index Funds Are Going to Be Just Fine
• The growth of index investing has not made markets less efficient
• People Aren’t Dumb. The World Is Hard.
• Many doctors feel “betrayed” by sale of MD Financial Management
• Earth to investment advisers: You’re blowing it with millennials
• Arguing With the Yield Curve
• Robot vs. human: When you should invest with robo advisors

The charts we talked about:

Image source: Michael Batnick

For more information or to contact Cameron and Ben, visit pwlcapital.com

On today’s episode, we cover a variety of topics, such as some tips for DIY investors, highlights from a conference Cameron recently attended, home country investment bias and whether it’s possible to have too much money in your RRSP. We begin first by talking about what DIY investors can do to ensure that they are investing to the best of their abilities. As people who work in investment daily, we often forget how tricky a terrain it can be to navigate if you are not armed with all of the knowledge, so we hope to pass some of it on to you. After that, we move onto the lessons Cameron learned from the Dimensional Advisors conference. We unpack ideas such as why he believes the world is ‘running towards factors,’ how Dimensional is leveraging academic research to inform their work along with some other highlights. Following on from that and picking up on what was spoken about at the conference, we delve into the pros and cons of home country investment bias. In some instances, this bias makes perfect sense, both from a returns and tax perspective and in other instances less so. We take you through some of these scenarios and what they mean for an investor looking to diversify.  And finally, in the planning portion of our show, we tackle RRSPs, whether it is possible to overinvest in them, how they compare to other investments and much more. To learn more, join us today!

Key Points From This Episode:

• Our team is growing and we are looking to add some extra positions at PWL. [0:01:32.0]
• There are many challenges that DIY investors face not having access to professional advice. [0:05:00.0]
• How to overcome asymmetries of financial knowledge between spouses and within families. [0:07:30.0]
• Some of the fee-only planners available in Canada that we recommend. [0:08:49.0]
• Robb Engen’s services and his discount for Rational Reminder listeners. [0:09:42.0]
• What factors are and why the world is ‘running towards’ using them. [0:12:38.0]
• Dimensional provides a framework for investing but does not guarantee answers. [0:14:09.0]
• Has the value-add factor become obsolete? [0:14:55.0]
• Highlights from Robert Novy-Marx's presentation at the conference. [0:16:18.0]
• Insights into and trends in the fixed income market. [0:20:31.0]
• What peer to peer bond trading is and why it has seen such huge growth? [0:21:17.0]
• All countries in the world, except for one, have a home country investment bias. [0:22:36.0]
• Factors to consider when deciding how much to allocate to home country investments. [0:23:58.0]
• Buying and trading costs and taxes are drivers to own more home-country stocks. [0:26:19.0]
• The difference between tax payable on international versus Canadian stocks. [0:27:50.0]
• An explanation of unrecoverable foreign withholding tax related to non-taxable accounts. [0:31:50.0]
• Some of the ways to get around the foreign withholding tax. [0:33:08.0]
• How the S&P 500 has been performing in Canada over the last ten years. [0:35:29.0]
• Why we are comfortable having a third of investments in Canada. [0:37:00.0]
• Is it possible to have too much in an RRSP? [0:39:40.0]
• Understanding the differences between an RRSP and a taxable account. [0:41:57.0]
• Which tax conditions make it better to use an RRSP. [0:44:00.0]
• The conditions under which your OAS will be clawed back. [0:48:07.0]
• The one exception where you may not want to contribute to your RRSP at all. [0:51:40]
• This week’s piece of ‘bad advice.’ [0:53:12]

The concept of financial math is another foundational element of investing and good economic decision-making, and today we are carrying on the recent string of shows dealing with these kinds of fundamental aspects. First, we have a look at the central idea of the time value of money, and how this plays into many areas of our finances, such as retirement planning, spending, investing, and so on. From there, the conversation goes on to cover exponential functions, the tradeoffs between saving and spending, and regrets. Today's 60-second episode recap is of the great conversation we had with David Blitzer back on Episode 54, and we also do a quick book review of the potentially life-changing How to Live on 24 Hours a Day. We finish off this punchy episode with some news from the community and some thoughts on the ways in which competition and repetition can improve a skill.

Key Points From This Episode:

•    Introducing the time value of money, as well as the concepts of compounding and discounting. (0:03:07)

•    Applying financial math in different ways to varied questions. (0:11:34)

•    Lessons from Cameron's first business selling worms. (0:18:15)

•    The challenges and biases associated with exponential functions. (0:20:27)

•    Spending and saving; illuminating the reality of the tradeoffs. (0:27:26)

•    The biggest problems of foundational regrets. (0:35:40)

•    Looking back on the episode with David Blitzer on indexing. (0:42:33)

•    Reviewing the 1908 book, How to Live on 24 Hours a Day. (0:44:25)

•    TV shows, podcast reviews, updates from the community and more. (0:49:05)

•    Incentives and leaderboards; unpacking the impacts of practice and competition. (0:56:43)

Participate in our 23 in 23 Reading Challenge:

23 in 23 Reading Challenge — https://rationalreminder.ca/23in23

23 in 23 Reading Challenge on Beanstalk — https://pwlcapital.beanstack.org/

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-239-the-math-of-financial-planning-discussion-thread/21899

Book From Today’s Episode:

How to Live on Twenty-Four Hours a Day — https://amzn.to/3JLyDaz

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

When it comes to the uncertain future of financial markets and technological innovation, a deep understanding of history and the roots of the systems at play in our contemporary climate is often overlooked. This is the argument made by Bill Janeway, our guest on the show today and the author of Doing Capitalism in the Innovation Economy. We have a fascinating conversation with Bill who has vast experience in both the academic and venture capital spheres, having spent years working in both sectors. Bill does an amazing job of sharing his expertise, talking about the role of the state in innovation, how venture capital actually operates, and what the innovation economy means for those who are not on the vanguard of technological progress. We discuss how investors can think about allocating their assets in relation to innovative companies, Bill's reflections and advice regarding financial bubbles, and how Bill applies his understanding to current questions about cryptocurrencies and decentralization. Bill's lifelong passion and commitment to learning about the history of economics and the financial markets makes him a deeply valuable resource and having him on the show was so illuminating, we hope you enjoy the conversation as much as we did. 

Key Points From This Episode:

• Bill explains his concept of the 'three-player game' and how it brings together two important histories. [0:03:13]
• The role of venture capital in technological innovation in the last 50 years. [0:05:16]
• Findings on the returns experienced by entrepreneurs in light of VC structures. [0:10:22]
• Thinking about venture capital as a private investor; best approaches for asset allocation. [0:15:05]
• Investing in innovation and assessing secondary market public equity benefits. [0:20:02]
• Bill explores the relationship between innovation and financial bubbles. [0:31:43]
• Waste and innovation; what we should expect as we progress. [0:35:43]
• The people left behind by innovation; who has taken the role of trade unions? [0:41:09]
• Bill weighs in on the question of cryptocurrencies and their place in the conversation about innovation. [0:45:38]
• Investment in crypto from big firms; separating the 'adults' from the crooks. [0:51:36]
• Why a deep understanding of history is paramount to sustainable innovation. [0:53:10]
• Bill's personal definition of success; staying motivated for work! [0:55:15]

The contemporary world is saturated with ways in which we can experience rewards that were historically much more difficult to access. Although this idea of a world filled with dopamine fixes is not new, it can be continually surprising just how extreme this reality has become. Here on the show today to talk about this issue and her most recent book, Dopamine Nation, is Dr. Anna Lembke, and we have a fascinating and important conversation in which she unpacks the human body and mind in relation to the world around us at present. One of the main points from this chat is the weakness of humans, and how unaware we can be of the way our brains compel us to engage in behaviours and seek pleasure. We get into some strategies and solutions for healthier ways to exist, talking about mindfulness, awareness, and dopamine fasting, in the face of accelerating tech and overabundance. Dr. Lembke gives us a great introduction to dopamine and how it functions in our bodies, unpacks the four properties of addictive substances and activities, the different ways to frame and understand addiction, and shares some realistic ideas about moderation. So to hear all this and much more, tune in to this great episode of the Rational Reminder Podcast.

Key Points From This Episode:

• An introduction to dopamine and its functions in the human body. [0:03:03.2]
• The human brain and the current overabundance of addictive experiences and substances. [0:05:36.1]
• Contemporary increasing in different types of addiction. [0:08:13.8]
• Considering the inherently negative connotation of the word 'addiction'. [0:11:44.4]
• The reasons that make gambling so addictive to the human mind. [0:14:12.7]
• Applying what we know about addiction and gambling to speculation and the stock market. [0:18:03.2]
• Why working also falls into the category of addictive behaviours. [0:21:46.8]
• Looking at the addictive nature of spending money and shopping. [0:24:01.5]
• A shocking story about water addiction from Dr. Lembke's practice. [0:25:12.1]
• Thoughts on recognizing addiction and possible ways to stop the behaviours. [0:26:22.2]
• Using in moderation; Dr. Lembke comments on the realities of this idea. [0:29:32.7]
• Long-term decision making versus a dopamine-laden environment; the battle of our time. [0:31:00.4]
• Understanding hormesis, seeking pleasure through pain, and embracing volatility in a portfolio. [0:34:54.6]
• The impacts of increased leisure time and the question of what we need. [0:38:47.6]
• Lembke's advice around retirement and the dangers of dopamine deficit states. [0:42:43.3]
• How the era of the pandemic has affected these trends in addiction. [0:45:20.2]
• The relationship between radical honesty and dopamine; how lying is related to reward pathways. [0:48:39.6]
• Radical honesty and better parenting; Dr. Lembke's thoughts on transparency. [0:54:01.3]
• Weighing the value of shame and its power as a socially regulating force. [0:55:51.2]
• Lembke's definition of success and its connection to being a good parent and becoming a positive force in the world. [1:00:01.6]

Today on the podcast we are very excited to welcome Brad Steiman who is the Canadian Head of Financial Advisor Services for Dimensional! This is an episode we literally cannot wait to share with our listeners as it is jam packed with really useful information, history, and inside scoops on Dimensional and what has helped them get to where they are today. As huge fans and associates of DFA this is the type of conversation we have been hoping to have for quite some time and hope you are as excited as we are. In our discussion, we cover Brad’s early career and how he became involved and employed by Dimensional. From there, Brad gives us some great insight into the important early events that shaped his and the companies trajectories as well as laying out the vital characters in DFA’s story. We also get into some of the ideas and the ethos that underpins the work done at the company, particularly around research, findings and implementation. For all of this and host of other interesting subjects be sure to join us for this episode!

Key Points From This Episode:

• Brad’s initial attraction to working at Dimensional. [0:01:45.5]
• The college years and the following epiphanies. [0:02:37.9]
• Why Brad did not look at his early paychecks at Dimensional. [0:06:29.3]
• How David Booth preempted the evidence-based approach. [0:08:53.1]
• Dimensional’s continual approach to new research and data mining. [0:14:55.5]
• The criteria Dimensional apply when assessing findings. [0:17:26.9]
• Brad and Dimensional’s philosophy when it comes to stock momentum. [0:20:41.1]
• The implementation strategy at Dimensional. [0:25:51.1]
• ETFs versus mutual funds and Dimensional’s decision in this battle. [0:28:05.1]
• Dimensional’s unique approach to working with the advisor community. [0:30:51.5]
• Three of Brad’s favorite stories from his time at the company. [0:32:49.6]
• Brad’s science based approach to happiness! [0:37:34.1]
• And much more!

For more information or to contact Cameron and Ben, visit pwlcapital.com

For this episode of the Rational Reminder Podcast, we review our year by playing back and discussing a collection of the most impactful moments of the show from 2020. This has been a drastic year filled with many learnings for us all, and in today’s show, we cover topics of happiness, decision making, dealing with uncertainty, and the connection that financial planning and investing have to all of this. We collect some amazing gems of wisdom from guests like Annie Duke, Ken French, Michael Kitces, Patricia Lovett-Reid, and a whole lot more, whittling down an original list of over one hundred of this year’s finest moments to a collection of just 45. The show starts out exploring themes of the connection between wealth and happiness, keeping cool in stressful times, and the transformations that crises kickstart. From there, we talk about the importance of models and systems for informing investing and behaviour in general, and the idea that unexpected outcomes swamp expected ones in the short term. We also look at what market history has to say about staying in your seat rather than market timing when things look bleak. Next up, we cover themes of the value of a flexible approach to retirement spending, how families should think about financial planning, whether 60/40 portfolios are dead, and why stock market returns in the U.S. are higher under Democratic presidents. Moving onto the subject of decision making, we explore some of our guests’ thoughts on evaluating decisions, outcomes bias and the role of luck, and more. We also consider the topic of human capital, how it relates to investing, and what we should really be spending our time on. The subject of the convergence of brokerage firms and financial advisors then leads to a great exploration of the role of financial advisors. We wrap up with some extra special perspectives on how optimal financial planning should be geared around the person that you want to be rather than maximizing wealth for the sake of it. Tune in today for an amazing overview of the year and to hear all the ways we have changed and grown thanks to our incredible guests.

Key Points From This Episode:

• Looking back on the year: Pandemic adjustments and how this podcast has grown. [0:00:15]
• Shoutouts and Cameron’s method of putting past clips together for today’s show. [0:06:20]
• Brian Portnoy and Andrew Hallam on wealth and happiness. [0:09:15]
• Dealing with stress and volatility with Dr. Moira Somers and Dave Goetsch. [0:13:48]
• Craig Alexander on market volatility and Jim Stanford on crisis and revolution. [0:18:27]
• Dave Goetsch and Greg Zuckerman on the benefit of models and systems. [0:23:11]
• The role of unexpected returns in outcomes and how to deal with this. [0:27:04]
• Small and value stocks relative to the market with Dr. William Bernstein. [0:33:09]
• Ken French and Cliff Asness on whether ‘this time is different’. [0:35:29]
• Enduring tracking error with Cliff Asness and Andrew Hallam. [0:38:37]
• Cliff Asness on whether 60/40 is dead and Lubos Pastor on why stock market returns in the US are higher under Democratic presidents. [0:41:00]
• Changing your risk portfolio when the market is dropping with Ken French. [0:45:25]
• Market timing versus awareness of investing history with Mark Hebner and Dr. Bernstein. [0:48:20]
• Wade Pfau on how expected returns fit into financial planning and the ‘safety first’ approach. [0:52:15]
• Moshe Milevsky on retirement spending and Pattie Lovett Reid on addressing one’s financial situation. [0:56:13]
• Annie Duke, Ken French, and Victor Ricciardi on making and evaluating decisions. [1:00:05]
• Greg Zuckerman on the role of luck in decisions leading to positive outcomes. [1:08:15]
• Forecasting as a way of knowing the range of outcomes with Craig Alexander. [1:11:15]
• Moshe Milevsky and Dr. Bernstein on human capital, financial planning, investing and asset allocation. [1:13:34]
• Josh Brown on what to spend your time on and Fred Vettesse on when to start saving. [01:16:28]
• Michael Kitces on the convergence of brokerage firms and financial advisors. [01:19:20]
• Dennis Mosey Williams and Ken French on financial advice for gaining wealth and being content. [01:20:57]
• Allison Schrager on the role of financial advisors for mitigating systematic risk. [01:25:00]
• Mark Hebner on the role of financial advisors for explaining a range of outcomes. [01:26:38]
• Scott Rieckens and Dennis Mosey Williams on what finding happiness means. [01:30:03]

As author and financial expert Morgan Housel explains this episode, “people don't make financial decisions on a spreadsheet. They make financial decisions at the dinner table.” Today we chat to Morgan about his key insights into financial decision-making — many of which are captured in his book, The Psychology of Money. Our conversation opens with an exploration of how investing success has less to do with what you know and more to do with how you manage your behaviour. We then look into the dangers of emulating top investors and how luck can fuel success. Reflecting the theme that people invest according to their unique circumstances, Morgan shares why he prioritizes endurance as an investor by minimizing his debt and having high cash reserves. After hearing his take on debt and whether young people should use leverage, we dive into how financial expectations impact investing and the importance of deciding what ‘enough’ means to you. We discuss the virtues of saving like a pessimist and investing like an optimist before looking into the role that financial advisors play in guiding their clients. In the latter part of the end of the episode, Morgan touches on active versus passive investing, the purpose that bonds serve in your portfolio, his top lesson from 2020, and why he’s empathetic toward people who sell their portfolios during a downturn. Throughout our discussion, Morgan shares his clear understanding of how our psychology affects our relationship to money. Tune in and benefit from his incredible perspective.   

Key Points From This Episode:

• Introducing today’s guest, financial author Morgan Housel. [0:00:15]
• Morgan shares his view that succeeding in investing has little to do with how you behave. [0:02:31]
• Hear about the problems that can arise from trying to emulate top investors. [0:05:02]
• Exploring the impact of luck on your success. [0:07:37]
• The differences between being conservative and having a margin of safety. [0:08:35]
• Insights into Morgan’s personal investing strategy. [0:09:48]
• Morgan’s thoughts on leverage and how debt impacts behaviour and peace of mind. [0:10:31]
• Stepping off the hedonic treadmill and the importance of defining your financial expectations. [0:14:02]
• The link between money, independence, and having a high quality of life. [0:16:44]
• What it means to be wealthy and what motivates the drive to be rich. [0:19:18]
• Morgan’s advice to save like a pessimist and invest like an optimist. [0:21:34]
• Why no one makes perfectly rational investing decisions. [0:23:54]
• The role of financial advisors in guiding clients towards their investing decisions. [0:26:22]
• Why Morgan has embraced the simplest investing strategy available to him. [0:29:02]
• How you should be thinking about fixed income in your portfolios. [0:31:20]
• Why financial advisors can be priceless when understanding your finances and goals. [0:33:44]
• Life is surprising; hear why this is Morgan’s top takeaway from 2020. [0:36:29]
• Morgan’s thoughts on the FIRE Movement and retiring early in life. [0:38:53]
• Hear Morgan’s predictions on the next big financial innovation. [0:41:49]
• Why Morgan is empathetic towards people who sell their portfolios during a downturn. [0:43:50]
• The tendency for people to embrace more extremist views during times of financial crisis. [0:47:34]
• We ask Morgan how he defines success in his life. [0:50:25]

The terms passive investing and index investing are often intertwined, but they are not exactly the same thing. Today’s guest is Adriana Robertson, the Honourable Justice Frank Iacobucci Chair in Capital Markets Regulation and an associate professor of Law and Finance at the University of Toronto Faculty of Law and Rotman School of Management. Adriana is interested in index investing and, in this episode, we hear her views on whether or not index investing is passive. Hear facts from her paper on the S&P 500 Index fund specifically, and all of the reasons that it's not passive, as well as some of the issues that are potentially arising from the creation of so many indexes or so-called passive investments. A more recent paper by Adriana, published in The Journal of Finance, surveyed a representative sample of U.S. individual investors about how well leading academic theories describe their financial beliefs and decisions, and Adriana shares the differences in something like value growth from an academic perspective versus a real-world perspective. Find out how investors can go about evaluating the performance of their portfolios and what they should be looking for when deciding which index fund to invest in, as well as why index funds aren’t a meaningful category anyway, factors from Adriana’s surveys that might influence investor’s equity allocation, and the trend towards indexing and whether it will overtake active portfolios. Tune in today for all this and more!

Key Points From This Episode:

• Whether or not it’s sensible to call the S&P 500 Index fund a passive investment. [0:03:20]
• How discretion affects the S&P 500 Index constituents and performance. [0:04:14]
• Adriana reflects on Tesla joining the S&P 500 Index and the speculation there. [0:04:49]
• Adriana’s view of benchmarking and comparing other investments to the S&P 500. [0:05:34]
• Why calling it rules-based investing rather than passive depends on the index. [0:07:35]
• How investors can go about evaluating the performance of their portfolios. [0:04:14]
• Why Adriana believes there are so many indexes and how they differ. [0:09:29]
• Value growth from an academic perspective versus a real-world perspective. [0:11:28]
• Why methodology differences between indices aren’t necessarily well-documented. [0:13:14]
• The marketing strategies involved in fund managers creating affiliated versus bespoke indices. [0:14:50]
• Common differences in index fund tracking and one-to-one mapping. [0:15:45]
• What investors should be looking for when evaluating which index fund to invest in. [0:16:53]
• Tilting towards factors versus using the market cap as the de facto benchmark. [0:18:19]
• Why Adriana’s advice is to compare an investment to the other options available. [0:20:11]
• Ex-ante versus ex-post and whether funds choosing a benchmark ex-post to inflate performance is a concern. [0:21:31]
• Concerns over asset growth in index funds and why it’s not a meaningful category. [0:23:47]
• Factors from the survey results of Adriana’s recent paper that might influence investor’s equity allocation. [0:26:16]
• The results that were surprising to her, like the need for cash for routine expenses. [0:28:21]
• Reasons there is still so much money invested in active funds – for example, a belief in higher returns and advisor recommendations. [0:29:57]
• Notably, how equity allocation is reliant upon professional financial advice. [0:32:12]
• Whether or not a year like 2020 will affect the asset allocation of investors. [0:35:17]
• The trend towards indexing and whether it will overtake active portfolios. [0:37:02]
• The implications of risk on the theoretical explanations for asset pricing anomalies. [0:39:00]
• The role of professional financial advisors in high net worth investor’s decisions. [0:37:02]
• How Adriana came to be so interested in and passionate about indexing. [0:44:49]
• Adriana’s defines success by figuring out what she wants to doing it do it well. [0:47:24]

John List is the recently appointed Chief Economist at Walmart, and is also a Professor of Economics at the University of Chicago, having worked as the Chief Economist at Uber and Lyft. He has published a huge array of important papers in the field of economics and is also the author of the recent book The Voltage Effect, which deals with the question of how to scale ideas successfully. We are very excited to bring you this episode, which is a particularly illuminating one, in which we draw on John's treasure trove of insight and experience, to answer a long list of questions related to personal finance decision-making. A large portion of our chat focuses on the central ideas of critical thinking and fieldwork, practices that our guest views as indispensable in making the world a better place. Along the way we get John's thoughts on retirement planning, public policy, charitable donations, and much more, so make sure to press play on this fantastic episode of the Rational Reminder Podcast.

Key Points From This Episode:

• John explains the importance of fieldwork in the study of economics. [0:03:51]
• Examples of field experiments that overturned a supposed economic truth. [0:05:15]
• Finding ways to test theories that previously proved difficult. [0:08:30]
• The question of generalizing findings from an experiment to a wider rule. [0:13:30]
• Replication in academic studies; John unpacks its central importance. [0:20:46]
• Why positive results tend to garner a publication bias. [0:23:38]
• John's perspective on checking in on investment portfolios. [0:24:40]
• What the data shows us about investment behaviours of men and women. [0:28:38]
• Accounting for the drive to give to charity. [0:35:20]
• Advice for how to make the most of your donations. [0:39:42]
• John unpacks his findings on scaling, its importance, and what he calls 'the voltage effect'. [0:44:41]
• The impact of technological advancement on our ability to scale certain solutions. [0:48:27]
• How field experiments can influence the process of scaling big ideas. [0:54:47]
• Hindrances to healthy scaling; confirmation biases, and herding. [0:56:17]
• Impacts of loss aversion and marginal thinking when scaling ideas. [1:05:28]
• Reasons for the difficulty of tackling globally important issues; multidimensionality and politics. [1:15:10]
• Weighing the utility of incentives when trying to encourage retirement savings. [1:19:16]
• Thoughts on bringing more reliable science into the policy-making process. [1:21:26]
• How parents can approach the promotion of critical thinking in their children. [1:25:45]
• John's approach to the questions he pursues; how he evaluates potential ideas and questions. [1:31:10]
• A little bit about John's new post as Chief Economist at Walmart and what the job entails. [1:33:53]
• How John defines success at this point in his life and his focus on inputs. [1:33:53]

Can we really understand the impact of passive ownership on the US market? Marco Sammon is an Assistant Professor in the Finance Unit at Harvard Business School. During this episode, he joins us to share deep insights into the complex and counter-intuitive nature of the index fund revolution. To kick off our conversation, we discuss some of the challenges associated with getting a true understanding of the scope of passive ownership across the US. Distinguishing between different approaches to investment, we begin to unpack Marco’s paper with Alex Chinco, titled ‘The Passive-Ownership Share Is Double What You Think It Is’. We touch on the relevance of Grossman Stiglitz in 2024, pricing and reconstitution, and the ins and outs of employee stock and compensation. Using the case studies of huge global firms, we consider how to best accommodate passive demand. Lastly, as an index investor who does not own index funds, Marco shares his opinion on whether index funds have had a net positive or negative impact on financial markets. Tune in today to get a more dynamic view of the complex world of index funding and investment.

Key Points From This Episode:

(0:00:45) Index funds, index and passive investments, and why Professor Marco Sammon is perfectly positioned to unpack these concepts. 

(0:03:36) The challenges of understanding just how big passive ownership is in the US market. 

(0:08:16) Distinguishing between partial investment, direct investment and passive funds. 

(0:10:14) Important concepts on the closing auction and which indexes Marco focuses on. 

(0:15:50) Defining the Grossman-Stiglitz framework and its validity in 2024. 

(0:20:36) Evolving ideas around pricing and reconstitution over time. 

(0:23:05) Why indexing is a fixed-point problem and how to measure market efficiency. 

(0:32:19) Nuances of security demands around indexing and how it differs from other investors.  

(0:38:02) Employee compensation and reverse causality as illustrated by Marco’s friend. 

(0:42:10) Why it is important to distinguish between equal-weighted and value-weighted. 

(0:44:13) How huge firms like Facebook and Tesla accommodate passive demand. 

(0:48:19) Conditions that affect the responsiveness of firms in accommodating passive demand.  

(0:51:13) The ‘Dead Reckoning’ metaphor to describe how we can know who is clearing the market.

(01:02:22) Marco’s thoughts on whether index funds have had a net positive or negative impact.

Links From Today’s Episode:

Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on X — https://x.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Marco Sammon — https://marcosammon.com/

Marco Sammon on X — https://x.com/mcsammon19 

Episode 302: Michael Green — https://rationalreminder.ca/podcast/302

Papers From Today’s Episode: 

‘The Passive-Ownership Share Is Double What You Think It Is’ — https://www.hbs.edu/ris/Publication%20Files/double-what-you-think-it-is%20may%2023_3c1ae213-5aec-407d-b656-13e3822f0b8b.pdf
‘On the Impossibility of Informationally Efficient Markets’ — http://www.dklevine.com/archive/refs41908.pdf 

‘Capital Asset Prices With and Without Negative Holding’ — https://ideas.repec.org/p/ris/nobelp/1990_003.html

Do Demand Curves for Stock Slope Down? — https://www.jstor.org/stable/2328486/ 

Welcome back to The Rational Reminder Podcast! Today we are riding solo with no guests and just going over some recent developments, in-house news, and gearing up for some more great shows in the pipeline. We have had so many amazing guests recently, talking on a number of specific topics, so we thought we would take this opportunity to clean the mailbox, as it were, and set the table for the next few weeks. During the episode we cover the new partnership between RBC and iShares and what this means going forward and we also look at the state of ETFs and how much they have grown in the last few years. We talk about the impetus to go to cash that many investors and advisors seem to be considering and also discuss global diversification and how this is the truest representation of a belief in capitalism. We talk data, advertising, tax and the supposed market monopolies that the biggest companies in the world have right now. For all this and more, be sure to join us!

Key Points From This Episode:

• We are hiring! [0:01:40.0]
• The new alliance between RBC and iShares. [0:02:23.3]
• The growth for ETF in comparison with mutual funds. [0:05:31.9]
• Does it make sense for long term investors to go to cash? [0:06:14.7]
• Globally diversified investments in international markets. [0:08:30.2]
• Are we living in a winner takes all market right now? [0:14:36.4]
• How data has overtaken oil as the most valuable resource. [0:20:54.2]
• CPPIB’s controversial advertising strategies. [0:23:50.6]
• A few quick tax updates. [0:26:30.6]
• And much more!

For more information or to contact Cameron and Ben, visit pwlcapital.com

It sounds reasonable to say that investing in the most popular companies would produce the best returns, but this is just not how asset pricing works. Today on the show, we unpack the ‘good company is a good investment’ fallacy. Before diving into the main topic, we kick off our discussion on the subject of index funds with Robert Wigglesworth’s Trillions. From there, we share some updates about custom indexing and home buying in Canada, along with the immense valuation of Tesla as well as Elon Musk’s net worth. This acts as a great segue into the focus of today’s show: a so-called good company has high historical returns, strong earnings growth, strong forecasted earnings growth, and high prices. But just because the good companies have done well historically, this does not mean they will continue to be a good investment. In fact, there is a premium that says that higher-priced stocks earn lower returns than lower-priced stocks and value stocks. We unpack several papers that explore the concept that it is the lesser-known companies that tend to have better returns. We also get into how growth extrapolation, the skewness effect, and the big market delusion plays into the good company is a good investment fallacy. Our discussion concludes with the idea that investors are better off paying attention to expected returns rather than falling victim to extrapolation errors. Tune in today!

Key Points From This Episode:

• Introductory comments: modifications to the show, listener feedback, and more. [0:00:30.2]
• Book review of the week: Trillions by Robert Wigglesworth. [0:08:28.3]
• News updates: custom indexing, Tesla valuation, homebuyer gifts, and more. [0:12:23.2]
• Introducing today’s topic: the ‘good company is a good investment’ fallacy. [0:19:30:9]
• Investing in good companies is irrational because of how asset pricing works. [0:20:44.7]
• The threat that crypto and decentralized applications pose to good companies. [0:21:50.5]
• Higher-priced stocks earn lower returns than lower-priced and value stocks. [0:24:40.3]
• Findings from papers exploring glamorous stocks and investor bias. [0:27:21.2]
• The problem of extrapolating growth too far into the future. [0:34:07.1]
• Behaviour patterns of lottery-like stocks with high expected skewness. [0:37:17.4]
• Declining prices and the big market delusion. [0:39:51.1]
• The high prices and low expected returns of the NIFTY 50 companies. [0:44:05.2]
• What the Fama French Five-Factor Model has to say about how assets are priced. [0:45:30.2]
• Talking Cents: Questions about the price we pay for riches. [0:46:50.2]

When witnessing the dramatic payouts of miracle trades, it's easy to be lured into thinking that your big score is just a few trades away. But as is evident in trading options for retail investors, it is neither quick, simple, nor easy to make guaranteed returns on your investments. In today's episode, Ben and Cam walk us through the many reasons why trading options is a losers’ game; especially for retail investors. Trading options is definitely today's hot topic and we unpack how the recent resurfacing of Roaring Kitty affirms how life-changing payouts are the exception rather than the rule. We dive deeper into trading options and their uses, the trading demographics of the current market, why trading options are an expensive choice for retail investors, and why people still choose to trade even when doing so at a loss. To end, Ben and Cam highlight the dangers of being a copycat and how social media adds fuel to the fire and we hear some heartwarming Rational Reminder Podcast reviews from a few of our dedicated listeners. 

Key Points From This Episode:

(0:00:48) Why today's topic is widely discussed in the current financial climate. 

(0:03:34) What we can learn from the resurfacing of Roaring Kitty. 

(0:05:35) A brief background on stock options and their various uses and the current state of retail trading. 

(0:08:13) Understanding the trading demographics at play in today's markets. 

(0:10:24) Discussing why trading options are expensive for retail investors. 

(0:12:35) Why people keep trading despite losing on average. 

(0:16:16) Exploring the dangers of copying successful traders and the role of social media. 

(0:17:17) The after show, headlined by inspirational Rational Reminder Podcast reviews from you, our dear listeners.

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder Email — info@rationalreminder.ca 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on X — https://x.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Books From Today’s Episode: 

Wealthier: The Investing Field Guide for Millennials — https://wealthierbook.com/

Papers From Today’s Episode: 

‘Retail Trading in Options and the Rise of the Big Three Wholesalers’ — https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.13285

Have you ever received hate mail or negative comments on your social media posts? We’re here to tell you you’re not alone. On today’s show we are talking at length about your interactions online with people commenting on YouTube videos as well as a Globe and Mail article which is quite incredible. It’s kind of a theme for this week. We dive into online trolls, those people whose sole purpose in life is to get you down. It’s super interesting to read and obviously very entertaining for some to see. People are forever out there giving advice and it’s up to you to decide who you’re listen to and what advice you’re taking. In wrapping up our talk, we also reveal our pick for the worst advice that we’ve heard in the previous week and why you need to stay far, far away. For all this and more, keep listening!

Key Points From This Episode:

• Why an index fund should be better than an active fund. [0:04:00.0]
• How the index committee works. [0:06:30.0]
• Differences in the types of indexes. [0:07:29.0]
• Tax loss selling - buying something tracking a different index. [0:09:50.0]
• People promoting their own beliefs and opinions by commenting on articles and posts. [0:11:00.0]
• People following tribal leaders and why there’s too much information out there. [0:12:32.0]
• Decision theory and why you can’t base a decision on past outcomes. [0:13:00.0]
• Putting controversial content out there and “poking the bear” with dividend investing. [0:13:50.0]
• Being more wary of who you listen to and take advice from. [0:15:40.0]
• Who you should listen to - evidence based facts. [0:16:39.0]
• The concept of dividend growth investors. [0:19:30.0]
• Wanting the most reliable outcome possible. [0:21:25.0]
• Dividends as a guaranteed source of returns. [0:24:35.0]
• Using dividends as your spending rule. [0:26:25.0]
• The FIRE movement and why not all advice is good advice. [0:28:00.0]
• How irresponsible it is to use the 4% spending rule for your retirement goals. [0:29:35.0]
• Worst advice - when mutual funds make more sense than active funds. [0:34:45.0]
• And much more!

What shapes investor beliefs and behaviours? Steve Utkus, a leading expert in investor behaviour and former Global Head of Investor and Retirement Research at Vanguard, brings decades of groundbreaking insights to this episode. Drawing on exclusive access to Vanguard’s anonymized client data and investor surveys, Steve uncovers the intricate links between what people believe and how they invest. In the first half, he reveals surprising findings from his research into investor beliefs and portfolio decisions. The second half dives into the impact of financial advisors, both human and robotic, on improving investor outcomes. Steve’s reflections, enriched by years of collaboration with academic leaders and personal conversations with Vanguard founder Jack Bogle, offer a rare window into the world of data-driven financial research. Join us today for this fascinating conversation as we unpack fresh perspectives on investor behaviour and the evolving role of financial advice!

Key Points From This Episode:

(0:00:20) The importance of understanding investor belief, Steve’s unique approach to studying it, and the benefits of using survey data.

(0:08:37) Understanding the effects of individual beliefs on portfolio equity shares.

(0:13:40) How equity sensitivity varies with things like trading frequency and how observed sensitivity compares with predictions of an asset pricing model.

(0:17:27) The variation of beliefs across different groups and the strong effect of being a pessimist, optimist, or having a middle-of-the-road perspective.

(0:21:29) Investor cash flow expectations, how it affects stock return expectations, and how it aligns with models of equilibrium.

(0:24:35) The impact of stock market disaster expectations on future stock returns and the effect of COVID-19 on investor expectations.

(0:33:37) ESG investing motives, portfolio impact, and the role of financial returns.

(0:38:35) Unpacking the impact of robo-advisors on previously DIY investors and who benefits.

(0:45:21) Pros and cons of human financial advisors: the needs they satisfy over robo-advisors.

(0:53:12) How unadvised investors' needs differ from those who get financial advice.

(0:54:04) What determines how much value investors place on financial advice and how they think about the trade-offs between fees and the value of advice.

(01:00:00) Reasons traditionally-advised people give for not switching to robo-advising.

(01:03:15) Having a relationship with a good advisor: how it impacts investor behaviour through poor market performance periods, and the importance of frequent quality communication.

(01:13:07) The key attributes of a high-retention advisor and what they should be focusing on.

(01:19:02) Success, retirement, timing, and knowing when to leave, according to Steve.

Links From Today’s Episode:

Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://pwlcapital.com/our-team/

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://pwlcapital.com/our-team/

Cameron on X — https://x.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP

Steve Utkus on LinkedIn — https://www.linkedin.com/in/steveutkus/

Episode 278: Juhani Linnainmaa — https://rationalreminder.ca/podcast/278

Books From Today’s Episode:

Bogle on Mutual Funds — https://www.amazon.com/Bogle-Mutual-Funds-Perspectives-Intelligent/dp/111908833X

Papers From Today’s Episode: 

‘Political Cycles and Stock Returns’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2920401
Scott Cederburg Paper —
‘The Diversification and Welfare Effects of Robo-advising’ — https://www.sciencedirect.com/science/article/abs/pii/S0304405X24000928

‘Who Benefits from Robo-advising? Evidence from Machine Learning’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3552671

‘Human Financial Advice in the Age of Automation’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4301514

‘The Misguided Beliefs of Financial Advisors’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3101426

For our very first episode of 2020, we kick things off with some quick updates before sharing Cameron’s ten best financial planning strategies for the new year. After laying out some statistics about the great asset class returns that 2019 saw, we get into the wonderful listener questions we have been receiving over the break. Our first topic is about buying versus leasing cars, and Ben shares his thoughts on some of the reasons he recently converted to leasing. Our second question is about using credit to invest in a TFSA and acts as a great segue into our main topic for today’s show: implementing leverage in an investment portfolio. We discover some fascinating outputs given by a Monte Carlo simulation that compares the reliability of expected returns between diversified and concentrated investment portfolios. Surprisingly, the concentrated portfolio, while unpredictable, actually produces higher returns, even in its worst iterations. We start to think of concentrated portfolios as just another form of leveraging after comparing IUSV to VLUE ETFs, and then move on to the idea of time diversification as it relates to implementing leveraging in Lifecycle investing. As always, we end off with our bad advice of the week, with the 60/40 stocks and bonds model taking centre stage, so hop on and join us for the ride!

Key Points From This Episode:

• Different corporate cultures and the value of instilling one in your workplace. [0:05:55.0]
• A top ten list of strategies for financial planning in 2020. [0:08:48.0]
• Asset class returns from 2019 which were very high across the board. [0:15:34.0]
• Market unpredictability and why to buy a second-hand car but lease a new one. [0:19:18.0]
• When to use your unsecured line of credit to invest in a tax-free savings account. [0:22:49.0]
• Three things that structure a belief: values, biases, and models. [0:24:51.0]
• Ben’s model and expected returns of diversified vs concentrated portfolios. [0:27:49.0]
• When concentrated portfolios work well: if high performing stocks are chosen. [0:34:01.0]
• Ways to achieve higher factor exposure with IUSV vs VLUE ETFs. [0:35:47.0]
• How unexplained portions of returns are the costs of leveraging via concentration. [0:40:40.0]
• Why investing using leverage creates ‘time diversification’ and higher yields. [0:42:47.0]
• Ways for young people to leverage their savings: concentration, derivatives, etc. [0:42:47.0]
• Time decay on leveraged ETFs and other reasons for leveraging not being a joke. [0:50:52.0]
• Why ditching a 60/40 portfolio denies market efficiency by increasing risk. [0:55:36.0]
• And much more!

How can the Rational Reminder Podcast get even better? By bringing back one of its most beloved voices, Dan Bortolotti, also known as "The Spud." In this exciting episode, hosts Ben Felix, Cameron Passmore, and Mark McGrath announce that Dan, the mind behind the Canadian Couch Potato Podcast, will now be a regular guest, contributing segments like "Bad Investment Advice" or "Ask the Spud.” Before Dan joins the conversation, we have an insightful discussion with Håkon Kavli, CIO of Reitan Kapital. Håkon shares how his team manages the wealth of one of Norway’s most prominent families, comparable to Canada’s Weston family. We discuss Reitan Kapital’s evidence-based investing approach, their robust methods for overcoming portfolio optimization challenges, and much more. Håkon also sheds light on their upcoming investing conference in Norway, featuring speakers like our very own, Cameron Passmore, and Marcos López de Prado. Following this, Dan kicks off his return by dissecting an article that advocates going all-in on the QQQ ETF in an RRSP, exposing the dangers of such a concentrated and risky strategy. He contrasts this approach with the wisdom of diversifying across global markets, using examples like Vanguard’s VEQT ETF, which offers exposure to over 13,000 stocks worldwide. Additionally, if you’re a financial advisor interested in joining a planning-focused, fiduciary firm like PWL Capital, we encourage you to reach out. Our team is growing, and we’re looking for like-minded individuals to join our mission. Tune in for a rich mix of expert advice, thoughtful discussions, and exciting announcements!

Key Points From This Episode:

(0:00:28) Announcements: a new regular guest, PWL’s call for like-minded advisors, and more.

(0:04:15) Introducing Håkon Kavli, the Reitan family, and the origins of Reitan Kapital.

(0:08:06) Reitan Kapital’s investment philosophy and asset allocation strategy.

(0:10:29) The biggest differences between a Reitan Kapital portfolio and a market portfolio.

(0:13:19) Capital market assumptions; how they influence Reitan Kapital's investment process.

(0:20:38) Portfolio optimization challenges and Reitan’s robust methods for addressing these.

(0:35:06) The role of private equity in a diversified portfolio and how it differs from public equity.

(0:38:40) Fee structure significance in private equity investments and their impact on returns.

(0:40:38) Risks associated with private equity and how they compare to public markets.

(0:43:36) Reitan Kapital’s view on how private equity fits into a diversified portfolio.

(0:49:08) Challenges of investing in private equity for retail investors. 

(0:50:26) Why so many institutions and firms have substantial allocations to private markets.

(0:53:58) An overview of the research Håkon is most excited about.

(0:56:20) Details for the upcoming conference in Norway, featuring Cameron Passmore.

(0:59:16) Dan’s Bad Investment Advice segment; going all-in on the QQQ ETF in an RRSP.

(01:13:12) Our aftershow segment: listener feedback, our next meetup in Ottawa, a shoutout to Jason Pereira, and more.

Links From Today’s Episode:

Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on X — https://x.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP

Dan Bortolotti — https://www.canadianmoneysaver.ca/authors/dan-bortolotti

Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/

Canadian Couch Potato Blog — https://canadiancouchpotato.com/

Canadian Couch Potato Podcast — https://canadiancouchpotato.com/podcast/

Episode 308: Dan Bortolotti — https://rationalreminder.ca/podcast/308
Håkon Kavli on LinkedIn — https://www.linkedin.com/in/haakonkavli/
Reitan — https://reitan.no/no

Reitan Kapital — http://www.reitankapital.no/

Weston — https://www.weston.ca/en/Home.aspx
Marcos Lopez de Prado — https://www.orie.cornell.edu/faculty-directory/marcos-lopez-de-prado
Antti Ilmanen — https://www.aqr.com/About-Us/OurFirm/Antti-Ilmanen
Episode 224: Prof. Scott Cederburg — https://rationalreminder.ca/podcast/224
Sharpe ratio — https://www.investopedia.com/terms/s/sharperatio.asp

Episode 210: Prof. Ludovic Phalippou — https://rationalreminder.ca/podcast/210
Reitan Kapital Conference —
‘An interesting RRSP idea – all in on QQQ?’ — https://www.tawcan.com/all-in-on-qqq/

VEQT Vanguard All-Equity ETF Portfolio — https://www.vanguard.ca/en/investor/products/products-group/etfs/VEQT
Mark Mid Graph on X —
Jason Pereira — https://jasonpereira.ca/

Papers From Today’s Episode: 

‘Estimating Private Equity Returns from Limited Partner Cash Flows’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2356553
‘Mutual Fund Flows and Performance in Rational Markets’ — https://www.nber.org/papers/w9275
‘What are Stock Investors' Actual Historical Returns? Evidence from Dollar-Weighted Returns’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=544142

How the financial system works and how we interact with it has grown in complex ways and is a fascinating but nuanced topic. To guide us through the history of the economy is Professor William Goetzmann, who is an expert in finance, economics and art history, and whose research has been featured in top publications. As a highly respected scholar, he's authored numerous books on topics such as real estate and behavioural finance. It is fair to say Professor Goetzmann's work has left a significant impact on both academia and the world. In our conversation, we dive into financial market history and explore more than just broad market returns. We unpack the fascinating phenomenon of economic bubbles and booms, and how they have evolved and shaped the financial system. He also shares crucial insights from the past and advice for investors looking to leverage the market. And to wrap things up, Professor Goetzmann shares his views on money after digging deep into its historical roots. Tune in to unlock the secrets of the past and gain valuable insights for the future as we journey through the fascinating world of economic history. Tune in now!

Key Points From This Episode:

•    Why is it important to collect and examine long-term historical returns data, and how useful the findings can be for today’s market. (0:03:21)

•    The furthest back in time that Professor William Goetzmann has looked at equity returns and how much of an issue survivorship bias is in long-term historical data. (0:05:44)

•    Reasons for the United States market trends concerning equity risk premiums and his approach to forecasting long-term returns of both stocks and bonds. (0:11:02)

•    Whether current discount rates are better for estimating future returns than long-term historical returns. (0:17:08)

•    How the markets of today compare to the markets of the 1900s, and whether investor behaviour has changed. (0:18:42)

•    Learn how global finance changed after the First World War and how likely a global financial meltdown is. (0:23:35)

•    What to consider when investing internationally and whether Canadian investors should be biased towards their home country. (0:28:23)

•    Hear Professor Goetzmann’s definition of an asset price bubble and his approach to studying economic bubbles and booms. (0:32:44)

•    Overview of the economic bubble and boom trends and crucial advice he has for investors regarding a market run-up. (0:36:18)

•    An explanation for negative bubble behaviour and how well market crashes align with investor expectations. (0:41:46)

•    The role of media in influencing investor behaviour, and whether long-term investors should ignore news from the financial media. (0:47:35)

•    What Professor Goetzmann has learned from studying bubble dynamics, and his advice for investing in transformative technologies. (0:52:50)

•    Professor Goetzmann’s book Money Changes Everything, his definition of money, and if money pre-dates trusted authorities. (0:57:47)

•    The role of money in finance and a brief outline of how finance played a role in the development of modern civilization. (1:02:13)

•    Professor Goetzmann’s definition of success. (1:06:08)

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-248-prof-william-goetzmann-learning-from-financial-market-history-discussion-thread/23010

Book From Today’s Episode:

Money Changes Everything: How Finance Made Civilization Possible — https://amzn.to/3KqOYzX

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
 Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Prof. William Goetzmann on Twitter — https://twitter.com/wgoetzmann

Prof. William Goetzmann — https://som.yale.edu/faculty-research/faculty-directory/william-n-goetzmann

'History and the Equity Risk Premium' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=702341

'The present value relation over six centuries: The case of the Bazacle company' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X18302836?via%3Dihub

'A Century of Global Stock Markets' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=225683

'Will History Rhyme?' — https://jpm.pm-research.com/content/30/5/34

'New evidence on the first financial bubble' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X12002541

'Bubble Investing: Learning from History' — https://www.nber.org/papers/w21693#:~:text=History%20is%20important%20to%20the,sample%20size%20for%20inference%20small.

'Negative bubbles: What happens after a crash' — https://onlinelibrary.wiley.com/doi/abs/10.1111/eufm.12164

'Crash Beliefs From Investor Surveys — https://www.nber.org/papers/w22143

'Crash Narratives' — https://www.nber.org/papers/w30195

In Episode 13 of the Rational Reminder podcast we discussed the following:

• Getting into the DFA advanced conference
• Cancelling whole life insurance
• When permanent insurance makes sense
• Unaffordable housing in Canada
• Housing bubbles?
• Bridging the gap with a HELOC
• Undervalued financial advice
• Money does not buy happiness
• Defining a lifestyle
• Walking to work
• Active funds are still underperforming
• Missing out on the best stocks

The Stories we talked about:

HOUSING TRENDS AND AFFORDABILITY

UBS Global Real Estate Bubble Index

It’s officially normal to have a big, fat balance on your line of credit

Stock Pickers Struggle to Beat Index Funds Once Again

For more information or to contact Cameron and Ben, visit pwlcapital.com

Choosing an asset allocation is a crucial investment decision, as it determines expected returns and risk exposure. During this episode, we uncover what this means, exploring topics such as why risk may not always be the best assessment method. We unpack the three factors that John Grable’s risk profiling framework considers: behavioural loss tolerance, the ability to take risk (which assesses the financial capacity to withstand losses without affecting lifestyle), and the need to take risk. Many investors sabotage their returns by selling after losses and buying after gains, and we discuss the reasons behind this. We also explore why stocks tend to become less risky over long horizons, while bonds can be vulnerable to inflation and interest rate changes, before explaining why investors should focus on compensated risks. In the aftershow, we address listener comments on absolute returns, XEQT, why we have made certain sponsorship decisions, and more. To gain a deeper understanding of risk and avoid common pitfalls that can undermine your returns, tune in today!

Key Points From This Episode:

(0:05:10) The critical importance of choosing an asset allocation and understanding risk. 

(0:08:35) How behavioural loss tolerance impacts asset allocation.   

(0:18:42) Psychological theory on risk tolerance and willingness to engage in financial behavior. 

(0:30:48) Assessing your need to take risks. 

(0:39:24) Why market volatility is not where the true risks lie.

(0:47:42) Private credit, other portfolio alternatives, and GICs. 

(0:53:03) The aftershow: demystifying the AMA controversy.

(1:00:20) Absolute returns, XEQT, and sponsorship on the Rational Reminder.
(1:12:05) An update on Ben’s health and what he has learned from this experience. 

Links From Today’s Episode:

Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://pwlcapital.com/our-team/

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://pwlcapital.com/our-team/

Cameron on X — https://x.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP

Dan Bortolotti — https://pwlcapital.com/our-team/

Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/

Canadian Couch Potato Blog — https://canadiancouchpotato.com/

Canadian Couch Potato Podcast — https://canadiancouchpotato.com/podcast/

Papers From Today’s Episode: 

'The Grable and Lytton risk-tolerance scale: a 15-year retrospective’ — https://static.arnaudsylvain.fr/2017/03/The-Grable-and-Lytton-risk-tolerance-scale-15-year-retrospective.pdf

The last ten years have seen so much said and done in the cryptocurrency space, and yet the future of bitcoin is still somewhat unclear. For Michael Sonnenshein however, bitcoin and the crypto market still offer the freedom and possibilities that have long been espoused as their greatest values. He joins us today to talk about his role at Grayscale Investments, how Grayscale fits into the larger Digital Currency Group family and how he envisions the wide-open future possibilities for bitcoin. We discuss some basics for the bitcoin conversation and Michael does a sterling job of setting out the lay of the land at present. From there, we turn to the role of Grayscale in dealing with bitcoin which can also be bought directly. Michael then takes the opportunity to compare bitcoin and gold; showing how they overlap and then bitcoin improves on the benefits that gold investments have historically provided. The last part of the conversation is spent addressing the safety of bitcoin and how time is showing its resistance to shocks and is earning bitcoin its place among other highly trusted assets. For all this and more fascinating insights into a big part of the future, join us on the Rational Reminder today!

Key Points From This Episode:

• Michael's description of Digital Currency Group. [0:03:28.4]
• A basic explanation of bitcoin and what defines a digital currency. [0:08:09.2]
• What will happen when the maximum amount of bitcoin has been mined? [0:11:29.0]
• Affecting the value of bitcoin through the altering of its decimal places. [0:14:04.2]
• The usefulness of Grayscale when it is possible to buy bitcoin directly. [0:15:21.4]
• How bitcoin differs from and improves on gold investments. [0:19:11.7]
• How digital currency fits in portfolio management and who it really suits. [0:21:30.0]
• Thinking about the expected returns question in regards to digital currencies. [0:23:30.3]
• The high amount of institutional investments through Grayscale and deciding on allocation. [0:29:00.5]
• Bitcoin's response to shocks and its rising reputation as a place of safety. [0:33:36.7]
• Why Michael is worried by impatience in regards to digital currencies. [0:34:42.5]
• How bitcoin can impact under-resourced populations through it non-reliance on infrastructure. [0:36:49.3]
• How Michael defines success for Grayscale and himself moving forward. [0:39:07.0]
• And much more!

There are many different considerations behind housing when you are in the position to choose between renting or buying. During this episode, hosted by Ben Felix and Dan Bortolotti, we address user questions and comments on homeownership, rentals, and the factors that may lead to choosing one over the other. We discuss what makes homeownership more attractive as your financial situation evolves, consider whether or not landlords are making money on their properties in 2024, and explore the explanations behind whether or not renters are less wealthy than owners. This conversation also touches on one of the most common misconceptions about housing, why it is untrue, and how to make this key decision of renting or buying based on both lifestyle and financial considerations and the difference in mindset between renters and buyers. Join us today to hear all this and more.

Key Points From This Episode:

(0:02:06) Homeownership versus renting with renovations and rental evictions in mind.

(0:08:40) Understanding the risks and rewards associated with securitive tenure. 

(0:10:09) Factors that may influence changing needs that may influence whether you rent or buy.

(0:15:58) Three factors that one user would include in an argument of renting versus buying.

(0:18:25) Addressing the idea that it is equally expensive for a family or landlord to own a home.

(0:21:00) How the cost of homeownership evolves with time and other factors. 

(0:24:50) Why owning a home is not above and beyond better than renting or owning with a mortgage. 

(0:27:50) Understanding factors beyond financial considerations when it comes to renting versus owning.

(0:34:10) The difference in mindset between homeowners and renters and the benefits of both.

(0:38:10) Why it is so beneficial to be open-minded and add to conversations rather than rejecting other people’s ideas.

(0:40:25) Ben tells the story from the start of his career and Dan shares his experience of feedback on the Canadian Couch Potato blog.

Links From Today’s Episode:

Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://pwlcapital.com/our-team/?team-search=benjamin+felix  

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/

Canadian Couch Potato — https://canadiancouchpotato.com/blog/

Today we are joined by the Professor of Finance at the University of Utah, Matt Ringgenberg to discuss everything related to anomaly returns. Matt’s research – mainly centred on the actions of short sellers – has been published in all the major journals including the Journal of Finance, the Journal of Financial Economics, and the Review of Financial Studies. We begin with the definition of an asset pricing anomaly before learning about the anomalies that Matt’s research is primarily focused on. Then, we unpack anomaly returns and how they relate to anomaly signal information, what causes anomalies, the risk versus mispricing debate, and the barriers to accessing financial data that allow anomalies to persist. We also weigh Matt’s research against its anomaly-denying counterparts, assess anomaly behaviour before and after publicly available signal information, explore models that help to predict future anomalies, and learn more about the economic mechanism underlying asset pricing anomalies. To end, we dive into Matt’s paper, ‘The Loan Fee Anomaly’ and explore the relationship between cross-sectional predictors and market returns, and Matt explains why long-term happiness is the only true marker of success. 

Key Points From This Episode:

(0:05:07) Matt Ringgenberg defines an asset pricing anomaly and describes the anomalies his research is focused on. 

(0:06:27) When anomaly returns appear relative to the release of anomaly signal information.

(0:07:57) How the annual forming of portfolios in June affects anomaly returns. 

(0:08:50) The cause of anomalies, and the risk versus mispricing debate on anomaly returns.  

(0:10:35) Unpacking the barriers to accessing financial data that allow anomalies to persist.  

(0:13:41) How Matt’s rebalancing approach could affect anomaly-denying research.

(0:14:37) Applying his work to valuation-based anomalies and to investors capturing anomaly returns in live-traded portfolios.  

(0:16:04) How anomalies behave before anomaly signal information is publicly available.

(0:17:48) Exploring the models that can be used to predict future anomaly signals. 

(0:19:05) How anomaly premiums traded on predicted signals compare to trades on actual information release dates.

(0:19:37) Understanding the economic mechanism underlying asset pricing anomalies.

(0:24:38) Dissecting one of Matt’s short-selling papers, ‘The Loan Fee Anomaly’.

(0:32:51) The relationship between cross-sectional predictors and market returns.

(0:39:11) What Matt hopes to pass on to his students in his Introduction to Investments course.

(0:40:48) How Matthew Ringgenberg defines success.

Links From Today’s Episode:

Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://pwlcapital.com/our-team/

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://pwlcapital.com/our-team/

Cameron on X — https://x.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP

Matthew Ringgenberg on Google Scholar — https://scholar.google.com/citations?user=NArgYXUAAAAJ 

Matthew Ringgenberg on LinkedIn — https://www.linkedin.com/in/matthewringgenberg/ 

Matthew Ringgenberg on X — https://x.com/Ringgenberg_M 

University of Utah — https://www.utah.edu/ 

Davidson Heath on LinkedIn — https://www.linkedin.com/in/davidson-heath-5a28999a/  

Management Science — https://pubsonline.informs.org/journal/mnsc 

Journal of Financial and Quantitative Analysis — https://jfqa.org/ 

Morningstar Direct — https://www.morningstar.com/business/brands/data-analytics/products/direct 

YCharts — https://ycharts.com/ 

Andre Chen — https://andrewchen.substack.com/ 

David Booth | Dimensional Fund Advisors — https://www.dimensional.com/hk-en/bios/david-booth 

Papers From Today’s Episode: 

‘A Conversation with Benjamin Graham’ — https://www.jstor.org/stable/4477960

‘The Loan Fee Anomaly: A Short Seller's Best Ideas’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3707166 

‘Do Cross-Sectional Predictors Contain Systematic Information?’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3459229

Fundamentals of the Blockchain with Daniel Mescheder

Episode 1: Show Notes

Welcome to the first episode of our limited series focusing on cryptocurrencies and everything you need to know about them. Our first guest is Daniel Mescheder, who joins us to appropriately break down some of the basic concepts and engineering of the blockchain, using his expertise as a software engineer as the lens for this discussion. We felt this chat was the best way to launch the series and prepare listeners for the following episodes on the subject, and you can expect to hear Daniel share very helpful insight and explanations of fundamental terms and concepts such as distributed systems, consensus, hashing, digital signatures, and more. We also have time for our guest to weigh in on the subjects of smart contracts and NFTs, both of which are regular points of intrigue for the uninitiated. Importantly, we do hear from Daniel about the limitations of the technology at present, and which types of technological problems that he believes the blockchain is well-suited to address. So for all this and more, and to start this journey with us into such an important and hot topic, make sure to listen in.

Key Points From This Episode:

• The reasons for Daniel's interest and involvement with the blockchain and cryptocurrencies. [0:03:33]
• Daniel compares the hype around AI in the 1980s and the current atmosphere for crypto. [0:04:50]
• Getting to grips with Daniel's specific perspective on the blockchain and explaining distributed systems. [0:06:34]
• How the concept of consensus fits into the subject of distributed systems. [0:11:17]
• Looking at Byzantine consensus problems and how these occur on the blockchain. [0:13:51]
• Daniel gives an overview of the elements that make the blockchain functional; hashing and digital signatures. [0:19:17]
• How Satoshi Nakamoto introduced an economic incentive to comply with the protocol. [0:24:09]
• Differentiating between the public and permissioned blockchains, and databases. [0:27:33]
• How Bitcoin achieves consensus and some of the downsides of proof of work. [0:33:31]
• An assessment of the decentralized status of the Bitcoin and Ethereum blockchains. [0:41:16]
• The amount of control that is held by miners in relation to transactions. [0:45:27]
• Understanding interactions between the blockchain and other external systems. [0:49:16]
• Immutability and the blockchain; what the rules allow and the questions that still need to be answered. [0:52:47]
• Basic engineering downsides to the blockchain. [0:54:40]
• Vulnerabilities on the blockchain and how these have been exploited by hackers. [0:58:23]
• NFTs, DAOs, and smart contracts; weighing how neatly these fit into the current blockchain ecosystem. [0:59:27]
• The abundance of rhetoric surrounding discussion about the future and validity of the blockchain. [1:06:09]
• Which problems would be well-suited to a solution found within the blockchain? [1:08:10]

As human beings, our brains are wired to solve problems. This can make long-term investment strategies, like passive investing, surprisingly challenging, especially if you’re not accustomed to the ups and downs of the market – it can feel pretty unintuitive to stay the course when your instinct is to take more active steps to solve the problem! So, how can investors remain firm in their strategy and not get spooked by market changes? Joining us today to unpack this question is financial journalist, Nicolas Bérubé, whose new book From Zero to Millionaire: A Simple and Stress-Free Way to Invest in the Stock Market serves as a guide to investors on how to grow their wealth and achieve good portfolio diversification at a low cost. We talk with him about the contents of his book, his observations on financial media and its effect on investors, how to stay committed when making long-term investments, and more. We also spend the top half of the show discussing a popular idea we’ve seen posted by influencers online, namely that investing in stocks will give you a return of 10% or more per year on average, and the flaws in their arguments. Tune in for a deep dive into investor psychology, financial media, and much more!

Key Points From This Episode:

(0:01:42) A breakdown of the flaws in the trending online theory being posted by influencers claiming that investing in stocks will give you a return of 10% or more per year on average.

(0:09:17) Taking a longer-term view of the US stock market (and other global markets), how it’s changed in the past 100 years, and what this means for investors today.

(0:16:12) Relevant findings from various papers on US and global stock market returns, US stock market valuations, performance, the impact of survivorship bias, and more.

(0:27:01) Why it can be so difficult to capture market return as an investor, and a breakdown of how best to approach historical data.

(0:33:33) Talking with Nicolas Bérubé about what he learned from his failed options trade before he started studying markets and the research that helped him become a market optimist.

(0:38:24) An overview of Indo-American investor, Mohnish Pabrai, and what Nicolas learned from meeting him.

(0:41:05) Unpacking the difference between investing in the stock market and playing in the stock market and the importance of having an infinite vision when investing.

(0:44:52) How Nicolas would explain the benefits of index funds and index investing to a novice and why behaviour is the number one obstacle to investor outcomes.

(0:48:29) The effect of financial media on investors from Nicolas’s perspective as a journalist.

(0:51:52) Advice on whether to delegate your investment actions to a financial professional or do it yourself ie. automatic transfers using a robo advisor.

(0:56:14) What people should be looking for if they do seek out financial advice and Nicolas’s opinion on what investors struggle with most.

(0:59:58) Aftershow section: future topics for the show, why we’re excited to see more of Mark McGrath, updates on our 24 in 24 reading challenge, upcoming meetups, and more.

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://twitter.com/RationalRemind

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 

Benjamin on X — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on X — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://twitter.com/MarkMcGrathCFP

24 in 24 Reading Challenge — https://rationalreminder.ca/24in24

Nicolas Bérubé on LinkedIn — https://www.linkedin.com/in/nicolas-b%C3%A9rub%C3%A9-27b9b111b/

From Zero to Millionaire — https://fromzerotomillionaire.com/

The Motley Fool — https://www.fool.com/

Rob Carrick — https://www.theglobeandmail.com/authors/rob-carrick/

Andrew Hallam — https://andrewhallam.com/

Somebody Feed Phil — https://www.imdb.com/title/tt7752034/

Everybody Loves Raymond — https://www.imdb.com/title/tt0115167/

Shake Shack — https://shakeshack.com/#/

Figure 01 AI Robot Video on LinkedIn — https://www.linkedin.com/feed/update/urn:li:activity:7173681028664901634/

Books From Today’s Episode:

From Zero to Millionaire: A Simple and Stress-Free Way to Invest in the Stock Market — https://fromzerotomillionaire.com/

The Algebra of Wealth: A Simple Formula for Financial Security — https://www.amazon.com/Algebra-Wealth-Formula-Financial-Security/dp/0593714024

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing — https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393358380

Everyone Believes It; Most Will Be Wrong: Motley Thoughts on Investing and the Economy — https://www.amazon.com/Everyone-Believes-Most-Will-Wrong-ebook/dp/B00655BGBG

The One-Page Financial Plan: A Simple Way to Be Smart About Your Money — https://www.amazon.com/One-Page-Financial-Plan-Simple-Smart/dp/1591847559

Setting the Table: The Transforming Power of Hospitality in Business — https://www.amazon.com/Setting-Table-Transforming-Hospitality-Business/dp/0060742763

Papers From Today’s Episode: 

‘The Equity Premium’ — https://onlinelibrary.wiley.com/doi/full/10.1111/1540-6261.00437

Scott Cederburg research: ‘Long-Horizon Losses in Stocks, Bonds, and Bills: Evidence from a Broad Sample of Developed Markets’ — https://www.paris-december.eu/sites/default/files//papers/2023/4393_scederburg_2023_complete.pdf

Jules H. Van Binsbergen Paper: Is The United States A Lucky Survivor: A Hierarchical Bayesian Approach — https://rodneywhitecenter.wharton.upenn.edu/wp-content/uploads/2020/12/30-20.Wachter.VanBinsbergen.pdf

Are you curious about the hidden factors driving your investment decisions? Today’s guest is Andrew Chen, a Principal Economist at the Federal Reserve Board who focuses on monetary policy and financial stability. Published in leading journals, his research informs key policy decisions and helps shape the Federal Reserve’s strategy for managing economic challenges effectively. In this episode, Andrew delves into the intricacies of meta-research and asset pricing, focusing on cross-sectional asset pricing predictors, replication, and out-of-sample performance in factor investing. We discuss the significance of open-source data and transparency, highlighting Andrew's creation of the Open Source Asset Pricing project, an indispensable and comprehensive dataset for asset pricing predictors. We also address the challenges of replicating financial studies, publication bias, data mining, and false discovery rates, with Andrew offering practical insights on how these factors impact financial research and investment decisions. For actionable insights that could refine your investment strategies and enhance your understanding of financial research, don’t miss this fascinating conversation!

Key Points From This Episode:

(0:03:43) What an asset pricing factor is and how it differs from a predictor.

(0:04:25) Three plausible explanations for why cross-sectional predictors exist.

(0:05:45) Insight into Andrew’s Open Source Asset Pricing project and why it’s so important.

(0:09:49) Where the results of his research diverge from other papers on the subject.

(0:11:42) How the returns on anomalies in his data sample change post-publication.

(0:12:33) Implications of this research for the “replication crisis” in cross-sectional asset pricing.

(0:14:14) Challenges of false discovery rates, publication bias, and out-of-sample returns.

(0:18:37) The effect of transaction costs on expected returns from factor investing.

(0:22:02) Problems with estimating factor expected returns using historical data.

(0:26:08) A big-picture view of the factors with the strongest investable expected returns.

(0:29:12) The relative value of peer-reviewed factors with strong theoretical underpinnings.

(0:35:13) Whether or not machine learning can be useful for asset pricing research.

(0:37:39) Practical advice for using financial research to inform your investment decisions.

(0:40:08) Andrew’s take on the current state of cross-sectional asset pricing.

(0:42:58) The simple way that Andrew defines success for himself.

Links From Today’s Episode:

Rational Reminder on Apple Podcasts — https://podcasts.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind

Rational Reminder on YouTube — https://www.youtube.com/@rationalreminder/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on X — https://x.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP

Andrew Chen — https://sites.google.com/site/chenandrewy/

Federal Reserve Board — https://www.federalreserve.gov/

Andrew Chen on LinkedIn — https://www.linkedin.com/in/andrew-chen-63394169/

Andrew Chen on X — https://x.com/achenfinance

Open Source Asset Pricing Project — https://www.openassetpricing.com/

Center for Research in Security Prices — https://www.crsp.org/

Books From Today’s Episode: 

The Adaptive Markets Hypothesis: An Evolutionary Approach to Understanding Financial System Dynamics — https://www.amazon.com/dp/0199681147

Papers From Today’s Episode: 

Andrew Chen, Tom Zimmermann, ’Open Source Cross-Sectional Asset Pricing’— https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3604626

Kewei Hou, Chen Xue, Lu Zhang, ’Replicating Anomalies’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3275496

R. David McLean, Jeffrey Pontiff, ’Does Academic Research Destroy Stock Return Predictability?’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2156623

Ilia D. Dichev, ’Is the Risk of Bankruptcy a Systematic Risk?’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=99868

Campbell R. Harvey, Yan Liu, Caroline Zhu, ‘…and the Cross-Section of Expected Returns’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2249314

Andrew Chen, Mihail Velikov, ‘Zeroing in on the Expected Returns of Anomalies’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3073681

Andrew Chen, Alejandro Lopez-Lira, Tom Zimmermann, ‘Does Peer-Reviewed Research Help Predict Stock Returns?’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4308069

Technology has made our lives easier but it has also fragmented our leisure time, creating a near-universal feeling that we have too much to do and not enough time to do it. Today we speak with Harvard Business School Assistant Professor Ashley Whillans about how our views of money and experience of time poverty impact our sense of well-being. We open our conversation by exploring the idea of time poverty, with Ashley unpacking the many factors that contribute towards feeling time-poor. Diving into the specifics, we talk about how different income groups experience time poverty and how these feelings are influenced by job satisfaction. After looking into differences in how we value time and money, Ashley shares research into how lower-income women benefit as much from being given extra time as they do from being given money. We then discuss the predictors of whether someone will prioritize time or money before chatting about the best practices and tips that will save you time and boost your well-being. Later, we hear Ashley’s insights into why wealth doesn’t lead to happiness and the need to engage in meaningful activities that increase the value of your time. With such radical changes in our work environments, we reflect on how work-from-home often deepens our feelings of time poverty. We wrap our discussion with Ashley by touching on retiring early versus working for longer, why you don’t need wealth to feel consistent happiness, and how you can incorporate time poverty into your financial planning. As Ashley’s research shows, money can be as integral as time in living a happier, more fulfilling life. Tune in to hear more about the connection between time poverty and your well-being.

Key Points From This Episode:

• Introducing today’s guest, Assistant Professor Ashley Whillans. [0:00:02]
• Ashley unpacks the concept of time poverty. [0:02:24]
• Exploring the relationship between time poverty and well-being. [0:03:17]
• Whether financially wealthy people feel less time-poor. [0:06:58]
• How job satisfaction impacts dissatisfaction and feelings of being time-poor. [0:10:00]
• The data underpinning why people are so bad at valuing their time. [0:10:59]
• Why, for lower-income earners, it can be valuable to trade money for time. [0:13:37]
• What predisposes people to feel more time-poor than others. [0:16:12]
• The causal link between preferences for money, time, and well-being. [0:21:51]
• Hear how Ashley designs her studies to get truthful answers. [0:23:22]
• How you can think of time while boosting your well-being. [0:26:20]
• Ashley shares her best practices for maximizing your time. [0:28:22]
• How our mindsets can influence our sense of time poverty. [0:31:08]
• Time-focussed versus money-focused and why money doesn’t lead to happiness. [0:33:14]
• Tips in making small changes that increase the value of your time. [0:37:08]
• How work-from-home has affected our time-poverty. [0:38:28]
• We hear Ashley’s views on the value of working longer to have a more secure retirement. [0:40:49]
• Why you don’t need to be wealthy to experience consistent happiness. [0:44:17]
• Incorporating time poverty into your financial planning. [0:46:06]
• How Ashley first became interested in time poverty and happiness. [0:47:46]
• Ashley shares how she defines success in her life. [0:49:47]

The recent film, Playing with FIRE details the particulars of the FIRE Movement in a way that is accessible, informative, and impactful. Both Cameron and Ben were hugely impressed with the film and the argument it makes for the framework of FIRE. Today we are joined by the producer and star of the film, Scott Rieckens, to discuss the movie and his own journey to reach financial independence. In much the same way that the film does, Scott makes a compelling and inspiring argument for the central philosophy of the movement, emphasizing what many of us will agree are the most important part of our lives and the way we can think about these to maximize our health and happiness. We discuss values and decision making, and how the FIRE perspective accounts for psychological and emotional changes to what is meaningful in your life. Scott explains the reframing that occurs with the system and the important aspects of it, especially those that matter in an introductory setting. We talk about communication and upkeep, the 4% rule, and the individual nature of your own financial strategy. Ultimately the ideas of FIRE are just ways to think about what is really important to you and your family and they provide a way to focus and enhance these. For this truly inspiring and potentially life-changing discussion, be sure to listen in with on the Rational Reminder!

Key Points From This Episode:

• Scott's own understanding of FIRE and what it comes to mean in his life. [0:04:25.4]
• The initial connection that Scott had with the FIRE movement before making the film. [0:05:23.2]
• Shared values and finding common financial ground in a life-partnership. [0:08:50.8]
• Mental changes that Scott and his wife, Taylor, made in response to the ideas of FIRE. [0:11:57.5]
• Reframing your decisions and the necessary information to do this. [0:18:01.9]
• Social changes and the impacts of the philosophical alterations Scott made. [0:22:48.1]
• How Scott has communicated these ideas to his daughter as she has grown older. [0:29:51.4]
• Scott's complete gratefulness for his new relationship with money. [0:33:23.8]
• First steps to take in the process toward financial independence. [0:37:27.4]
• Getting a grip on the '4% Rule and how it can guide your decisions. [0:41:39.6]
• Increasing income versus decreasing spending and adjusting accordingly. [0:46:41.2]
• Applying these ideas to something beyond our selfish needs. [0:51:05.4]
• The multitude of things we can all do with more time in retirement! [0:56:05.4]
• Comparing the changing definition of success for Scott. [0:58:11.4]
• The information that is now available for a framework for happiness. [1:01:55.4]

We start the show with a brief highlight of recent episodes, upcoming guests, and feedback we have received about the show. We then review the book Running Remote, which provides evidence for the benefits of working remotely and asynchronous management. We also outline the three essential principles of an asynchronous mindset. We discuss the positives and benefits of remote work, why hybrid work is a flawed approach, and how to recreate face-to-face meetings in a remote world. We also give listeners a breakdown of an interesting journal article about inferring stock duration and equity trades, including key takeaways from the papers. We then welcome our special guest, Harley Finkelstein, to talk about the role that reading plays in his life. Harley is a lawyer, entrepreneur, and the President of Shopify and uses what he reads to push him further in his professional life. In our conversation, we learn the role reading has played in Shopify’s culture, what his favourite books are, and inner details about his reading habit. Tune in for another jam-packed episode!

Key Points From This Episode:

• We start the show with a recap of previous episodes and upcoming guests. [0:00:00]
• A brief highlight of some of the reviews we have received about the show. [0:03:41]
• An update on the Rational Reminder 22 and 22 reading challenge. [0:06:35]
• This week’s review of the book, Running Remote. [0:09:24]
• The three fundamental principles of the asynchronous mindset. [0:16:58]
• Hear what the seven deadly sins are regarding remote team transitions. [0:24:35]
• Cameron shares a compelling paragraph from the book, Running Remote. [0:28:04]
• Learn a mind-blowing statistic Cameron read in a Bloomberg article. [0:32:31]
• Ben breaks down a journal article about inferring stock duration. [0:33:47]
• Another interesting paper regarding the retail price of equity trades. [0:44:10]
• Introduction to our guest Harley Finkelstein to talk about our 22 and 22 challenge. [0:47:20]
• Harley shares details about his reading habit. [0:47:50]
• How he incorporates what he has learned from reading into his professional life. [0:49:57]
• Ways in which Harley finds interesting books to read. [0:51:58]
• The role reading has played in Shopify’s culture and work ethic. [0:53:57]
• What books have had the biggest impact on him. [0:58:12]
• Find out whether his daughters have embraced his love for books. [1:02:29]
• Advice that Harley has for people who want to read more. [1:04:32]

This week we welcome back return guest Preet Banerjee, a renowned speaker, personal finance expert, consultant, and author of Stop Overthinking Your Money. Listeners may remember Preet from his previous appearance on the show back in 2019 when he was first embarking on his doctoral journey. Several years and one pandemic later, Preet has finally made it through the monumental task of completing his dissertation! We spend today’s conversation with Preet getting into the fascinating details of his research which interrogates the value of financial advice within households and explores the pressing question of whether it’s worth getting it. Preet provides a comprehensive overview of the current state of financial planning and shares his most intriguing findings before unpacking the policy and regulatory recommendations that emerge from his research. The latter part of the show includes our Mark to Market segment with Mark McGrath, where this week, he delivers key insights on retirement savings plans (RSPs) and why he believes RSPs are actually tax-free. You’ll also hear our reflection on our past conversation with Colonel Chris Hadfield, paired with a book review of Kevin Kelly’s Excellent Advice for Living: Wisdom I Wish I'd Known Earlier. Join us for an expansive episode on the value of financial advice along with timely insights on what truly matters in life!

Key Points From This Episode:

• (0:03:34) Background on today’s guest, Preet Banerjee, and the focus of his research: the value of financial advice to households and whether it’s worth getting it. 

• (0:06:29) Key problems with past research attempting to demonstrate the value of financial advice (including the portfolio-centric advice model). 

• (0:10:47) A review of the existing literature on the value of financial advice; the gap in the literature that his research is addressing. 

•  (0:16:27) How Preet measured holistic wealth scores and comprehensive financial confidence in his research and the dataset he based his research on.

• (0:21:26) What Preet took into account to determine who were DIY investors within his sample and which advice channels they use. 

• (0:28:27) The study of financial planning, shortcomings within the field, and some of the positive developments in recent years. 

• (0:30:00) Informative takeaways regarding advice channels, investable assets, and having a financial plan. 

• (0:36:30) How Preet approached his data, the progressive regression model he developed, and what it demonstrates about key topics in his research. 

• (0:47:36) How wealth allows you to access better financial advice versus the options available to you if you’re in the mass market. 

• (0:49:48) Learn about the policy and regulatory recommendations that emerge from Preet’s research. 

• (0:56:04) Preet’s advice to listeners and DIY investors and what’s next for his research. 

• (01:05:17) Our Mark to Market segment with Mark McGrath and his insights of everything you need to know about retirement savings plans (RSPs).

• (01:18:02) A recap and review of Episode 266 where we talk with Colonel Chris Hadfield and why it’s worth the listen. 

• (01:20:39) Hear our review of the book, Excellent Advice for Living: Wisdom I Wish I'd Known Earlier by Kevin Kelly. 

• (01:25:34) Our after-show section; Find out what we have coming up and how to attend our upcoming meet and greet. 

Join our live event “Finding and Funding a Good Life”: https://us06web.zoom.us/webinar/register/8516942588679/WN_gv6EVyCCRpaXCrnWAZUrLA

Links From Today’s Episode:

Preet Banerjee — https://www.preetbanerjee.com/

Preet Banerjee on LinkedIn — https://www.linkedin.com/in/preetbanerjee/

Preet Banerjee on X — https://twitter.com/preetbanerjee

Preet Banerjee on YouTube — https://www.youtube.com/c/preetbanerjee

Preet Banerjee at The Globe and Mail — https://www.theglobeandmail.com/authors/preet-banerjee/
Episode 53: Preet Banerjee — https://rationalreminder.ca/podcast/53

Episode 226: Colonel Chris Hadfield — https://rationalreminder.ca/podcast/226
Excellent Advice for Living: Wisdom I Wish I'd Known Earlier — https://www.amazon.com/Excellent-Advice-Living-Wisdom-Earlier/dp/0593654528
Episode 232: Dr. Annamaria Lusardi — https://rationalreminder.ca/podcast/232
Episode 188: Prof. Ayelet Fishbach — https://rationalreminder.ca/podcast/188
Episode 224: Prof. Scott Cederburg — https://rationalreminder.ca/podcast/224

Rational Reminder Continuing Education — learn.rationalreminder.ca

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder on Spotify — https://open.spotify.com/show/6RHWTH9iW7hdnA7eAg7ukO

Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://twitter.com/RationalRemind

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 

Benjamin on X — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on X — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

On today’s episode, Benjamin Felix and Cameron Passmore discuss a paper that Benjamin recently wrote called Factor Investing with ETF’s, which unpacks what factors are and why they are a useful tool in explaining performance. Before discussing Benjamin’s paper, they take some interesting detours, discussing annuities and the newly launched ALDA, why annuities are underutilized and what makes them different from portfolios. Along with this, they also cover some questions that can be asked to measure past performance of funds as well as luck versus skill. They share their insights into the Fama-French three factor model, how it evolved into a five-factor model and why they believe this to be a reliable way to read trends. For all this and a whole lot more, join us today!

Factor Investing with ETFs

Key Points From This Episode:

• Seller’s Capital: a hedge fund with an interesting investment philosophy. [0:02:46.0]
• The four questions to ask if you see why past results were good. [0:07:00.0]
• What it would take for results to be statistically significant. [0:07:54.0]
• Growing evidence of poor skill level of hedge fund manager. [0:09:53.0]
• Good returns are not related good decision making. [0:11:27.2]
• Annuities are underutilized and why it makes sense to use them more. [0:17:00.3]
• Annuities versus portfolios. [0:18:58.3]
• Some figures from the Dimension paper which was written. [0:23:26.3]
• What factors are. [0:26:41.3]
• What can be learned from the Fama-French model. [0:30:41.3]
• What the five factor model can help with. [0:33:48.0]
• Some critiques of using the factors. [0:38:50.0]
• Benjamin provides examples of using factors for evidence. [0:40:10.0]
• And much more!

Welcome back to another exciting and informative episode of the Rational Reminder Podcast, a show all about finances and how to get the most of your money responsibly. To make the right decisions regarding your investments, besides the knowledge and understanding of financial systems, you also need to understand the psychology behind your decisions. To help us unpack this complicated and interesting subject is Professor Vanessa Bohns, a Social Psychologist and Professor of Organizational Behaviour at Cornell University. Professor Bohns has a Ph.D. in Psychology from Columbia and is the author of You Have More Influence Than You Think: How We Underestimate Our Power of Persuasion, and Why It Matters. The topic of the book is exactly what today’s show is about, as we delve into the intricacies of human behaviour and decision-making. In today’s episode, we learn about the influence that people have on one another, how people perceive one another, the human behaviours that scammers take advantage of, why people worry about saying the wrong thing, what the default behaviour of people is, why people struggle to say no to a request, and so much more! Don’t miss out on this fascinating episode with special guest and expert, Professor Vanessa Bohns!

Key Points From This Episode:

• How much impact and influence people have on one another. [0:03:09]
• What people tend to notice about other people. [0:04:50]
• Why people don’t realize what other people are paying attention to. [0:08:58]
• How being in the presence of other people affects experiences. [0:10:31]
• Whether communicating with someone about a shared experience amplifies it. [0:12:41]
• Reasons why some people are underconfident in their social lives. [0:13:20]
• Problems that stem from underconfidence. [0:15:52]
• The consequences of underestimating how much people like us. [0:18:02]
• Why people worry about saying the wrong thing. [0:20:53]
• Whether it is default to believe or disbelieve when assessing information. [0:22:55]
• The impact of people interacting with people anonymously. [0:26:01]
• How the default to believe people impacts receiving advice from experts. [0:27:22]
• The authority on a subject can switch between domains of expertise. [0:31:19]
• Ways in which scammers take advantage of behavioural biases. [0:32:22]
• Problems caused by people being dishonest or spreading false information. [0:34:47]
• Approaches to ensure that you are not spreading misinformation unintentionally. [0:36:04]
• Why asking for what you want is so effective. [0:38:21]
• Whether asking for what you want becomes easier over time. [0:40:33]
• The effect that money has when asking for something. [0:42:24]
• Differences in response to small or large requests. [0:43:48]
• How responses differ between direct and indirect requests. [0:45:23]
• What effect asking in person as opposed to over email or text have on responses. [0:47:20]
• Reasons behind the hesitancy for people to ask for what they want. [0:49:04]
• Why people find it difficult to reject a request from someone. [0:50:36]
• Whether saying no in person is the same as saying no over email. [0:52:12]
• Feeling guilty and whether you should feel bad asking for things. [0:53:52]
• How people generally respond to unethical requests. [0:56:21]
• Find out if people with authority realize how much influence they have. [0:59:01]
• Approaches to help people be more aware of their influence. [1:00:58]
• A rundown of the impacts of not being aware of other people has. [1:05:12]
• We end the show with Professor Bohns sharing her definition of success. [1:07:41]

During this episode, we welcome back Eduardo Repetto, Chief Investment Officer of Avantis Investors. In his leadership capacity, he directs research design and the implementation of strategies and oversees the investment team and marketing initiatives. Our conversation kicks off with Edoardo’s explanation of how Avantis systemizes active management before we dive into strategies for launching in Europe and beyond. He weighs in on the most significant capacity issues that people face today, offering solutions to tweak your approach. We touch on what makes Avantis strategies preferable for advisors and Eduardo shares his insights on the future of small-cap value strategies for emerging markets. We discuss short-term reversals, towing the line between growth and value and factors that should inform asset allocation before diving deeper into small-cap value in the US and Canada. Tune in today to hear more. 

Key Points From This Episode:

(0:05:51) What sets Avantis Investors apart from other investment firms. 

(0:09:26) Five strategies for launching in Europe starting with free and equity UCITS.

(0:14:00) Accessing UCITS and adapting strategies in accordance with currencies, geographical regulations and restrictions. 

(0:22:49) The most significant capacity issue: an inability to invest cashflows. 

(0:27:59) Feedback from the advisor community on why they are choosing Avantis strategies. 

(0:32:43) Eduardo’s view on the future potential for the emerging markets small cap value strategy. 

(0:35:58) Improvements and adaptations to portfolio implementation at Avantis since 2019.

(0:39:01) The controversial nature of short-term reversals and advice for investors thinking about growth and value.

(0:44:40) What should inform asset-allocation decision-making.

(0:45:46) The potential of expanding into a Canadian base. 

(0:50:16) Mark’s thoughts on small-cap value in the US and Canada. 

Quotes:

“We have to adapt to the regulatory framework. But the strategies are the same. We manage the strategies in the same way, with the same people, with the same philosophy.” —  Eduardo Repetto (0:17:44)

“Just expand the offering. Anywhere we go, we do the same because that's the right thing to do. That's the right thing to help people that trust you on day one.” —  Eduardo Repetto (0:21:52)

“So, if you think about our valuation, we are using today's profits as a proxy for future profits. Can you improve that proxy? Can you have something better to say, about not level, but changes in level?” —  Eduardo Repetto (0:41:16)

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on X — https://x.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Eduardo Repetto on Linkedin — https://www.linkedin.com/in/eduardo-repetto-653231155/

Avantis Investors — https://www.avantisinvestors.com/

Episode 313 — https://rationalreminder.ca/podcast/313

Econompic  —  https://econompicdata.blogspot.com/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP

After a year and a half hiatus from discussing Bitcoin, we felt compelled to explore the implications of the US Securities and Exchange Commission's approval of 10 spot Bitcoin ETFs for trading. In this episode, we dive into the recent news surrounding Bitcoin and its entry into the mainstream investment landscape through spot Bitcoin ETFs. To help us unpack this topic is Eric Balchunas, a seasoned ETF analyst at Bloomberg Intelligence and host of the Trillions Podcast. Eric brings a wealth of knowledge on ETFs and offers valuable insights into the intersection between traditional financial markets and the cryptocurrency space. Join us as we discuss the implications of Bitcoin ETFs trading on regulated exchanges and the impact on its overall anti-establishment identity, the intricacies of approved cash creation and redemption limitations, what Bitcoin ETFs are backed by, the transparency and potential vulnerabilities of Bitwise, and the complexities of navigating anti-money laundering aspects within Bitcoin transactions. You’ll learn how financial advisors are likely to leverage spot Bitcoin ETFs, who stands to benefit the most from Bitcoin ETFs, the broader implications for the investment landscape, why Bitcoin is like Tabasco sauce, and more! Tune in for a captivating exploration of Bitcoin's journey into the mainstream investment arena, with Eric Balchunas.

Key Points From This Episode:

• (0:04:29) Reasons that Canada officially embraced Bitcoin sooner than the USA. 
• (0:05:55) Why spot Bitcoin ETFs took longer to be approved by the SEC than futures ETFs. 
• (0:07:54) Which ETF regulations have changed to allow a spot Bitcoin ETF. 
• (0:09:42) Approved cash creation and redemption limitations.
• (0:12:46) What spot Bitcoin EFTs are backed by. 
• (0:17:15) Bitwise: how it demonstrates transparency and the potential for sabotage. 
• (0:19:38) How authorized participants will deal with anti-money laundering aspects of Bitcoin transactions. 
• (0:21:31) How spot Bitcoin ETFs have been trading relative to their net asset value. 
• (0:22:42) The amount of value flowing into Bitcoin ETFs. 
• (0:27:23) Differentiating Newborn Nine ETFs from one another. 
• (0:31:57) Benefits of Bitcoin being made available through an ETF. 
• (0:34:21) The impact spot Bitcoin ETFs have had on Bitcoin's identity. 
• (0:38:04) Who has benefited the most from the adoption of spot Bitcoin ETFs.
• (0:40:36) Comparing spot ETFs starting trade to what was predicted by crypto enthusiasts. 
• (0:44:36) Vanguard's decision to not allow the spot Bitcoin ETFs on their platform. 
• (0:48:19)How financial advisors will leverage spot Bitcoin ETFs. 
  
  

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://twitter.com/RationalRemind

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 

Benjamin on X — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on X — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Eric Balchunas on LinkedIn — https://www.linkedin.com/in/ericbalchunas/

Eric Balchunas on X — https://twitter.com/EricBalchunas

Bloomberg — https://www.bloomberg.com/

Trillions — https://www.bloomberg.com/podcasts/series/trillions

U.S. Securities and Exchange Commission — https://www.sec.gov/

Bitwise — https://bitwiseinvestments.com/

Bitwise Bitcoin ETF — https://www.sec.gov/Archives/edgar/data/1763415/000199937124000346/bitcoin-424b3_011024.htm

Coinbase — https://www.coinbase.com

BlackRock — https://www.blackrock.com

Grayscale Bitcoin Trust ETF (GBTC) — https://etfs.grayscale.com/gbtc

Vanguard — https://investor.vanguard.com/

Bitcoin — https://bitcoin.org

Books From Today’s Episode:

The Bogle Effect — https://www.amazon.com/Bogle-Effect-Vanguard-Investors-Trillions/dp/1637740719

Key Points From This Episode:

• Today's book review, looking at Setting the Table by Danny Meyers. [0:08:47]
• Christopher Bloomstran's thought-provoking critique of Ark Invest. [0:18:06]
• A follow-up on our ongoing discussion about bonds and look at their recovery time. [0:20:04]
• Comparing real returns across the different decades. [0:27:30]
• Research into a more complete view of the historical returns of stocks versus bonds. [0:39:31]
• How correlations come into the conversation about stocks and bonds. [0:42:54]
• Aydin describes his reading habits; audiobooks on a commute, hacks, and more.
• The different purposes of books and how Aydin uses business content to generate ideas. [0:49:40]
• Books as leverage and some thoughts from Aydin on his favourite genres. [0:52:27]
• Where Aydin sources his books and what it takes for him to decide to recommend books to others. [0:56:12]
• The role that podcasts play in Aydin's reading habits. [0:58:30]
• Aydin's advice for how to read more and his approach to encouraging his children. [0:59:12]
• Considering different ways to increase information retention. [1:02:11]
• A round of Talking Cents cards with Aydin! [1:03:34]

Pim van Vliet is on a mission to put the low volatility factor on the map. In his role as Head of Conservative Equities and Chief Quantitative Strategist at Robeco, he focuses on leveraging the effect of low-risk investing. Pim has also published a book, High Returns From Low Risk: A Remarkable Stock Market Paradox, where he unpacks some of the key aspects that guide his work and underpin his success. During this conversation, Pim shares his insights on volatility, the changing market, and combining low-risk with other traditional factors. He equips listeners with key considerations for evaluating strategies or products when allocating low-risk and offers his perspective on out-of-sample-testing, distinguishing between global-factor and cross-sectional premiums, and more. Listeners will get Pim’s perspective on the pros and cons of the Sharpe ratio, and we examine risk-adjusted returns on long and short legs before hearing his Fama-French Five Factor Model analysis. We touch on inflation and gold, and finally, Pim shares his inspiring perspective on success in his financial and personal life. Tune in today to hear more! 

Key Points From This Episode:

• Introducing Pim Van Vliet and his mission to put low volatility on the map as a factor. (0:00:41)
• Defining the low-risk effect with reference to volatility and its impact on other asset classes. (0:04:47)
• Low-risk portfolio performance in relation to the changing market. (0:12:02)
• Combining low-risk with other traditional factors. (0:21:43)
• Considerations for evaluating strategies or products when allocating low-risk. (0:24:35)
• Out-of-sample testing. (0:31:28)
• Distinguishing between global factor premiums and cross-sectional premiums. (0:35:18)
• Weighing the pros and cons of the Sharpe ratio as an evaluation tool. (0:40:19)
• Examining the risk-adjusted returns of long and short legs. (0:41:20)
• Issues with the Fama-French Five Factor Model. (0:44:37)
• Why factor premiums vary through inflation regimes. (0:50:41)
• How an allocation to gold holds up as a downside hedge. (0:52:53)
• Pim’s definition of success in his life. (0:56:31)

Links: 

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-264-pim-van-vliet-the-volatility-effect-revisited-discussion-thread/24622

Book From Today’s Episode:

High Returns From Low Risk: A Remarkable Stock Market Paradox — https://amzn.to/3rMkJxQ

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
 Rational Reminder Website — https://rationalreminder.ca/ 

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Pim van Vliet on Twitter — https://twitter.com/paradoxinvestor

Pim van Vliet — http://www.paradoxinvesting.com

'The Volatility Effect' — https://www.robeco.com/files/docm/docu-the-volatility-effect-2007.pdf

'The Volatility Effect Revisited' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3442749

'Ten Things You Should Know About Low-Volatility Investing' — https://www.robeco.com/en-int/insights/2017/07/ten-things-you-should-know-about-minimum-volatility-investing

'The Conservative Formula: Quantitative Investing Made Easy' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3145152

'Media attention and the volatility effect' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3403466

'When Equity Factors Drop Their Shorts' — https://www.robeco.com/en-int/insights/2021/02/when-equity-factors-drop-their-shorts

'The Cross-Section of Stock Returns before CRSP' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3969743

'Global factor premiums' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3325720

'Investing in Deflation, Inflation, and Stagflation Regimes' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4153468

'Five Concerns with the Five-Factor Model' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2862317

'The golden rule of investing' — https://www.robeco.com/en-int/insights/2023/04/the-golden-rule-of-investing

For decades, owning a home has been seen as a hallmark of the ‘American dream’ and a major life milestone. While we take it for granted that home ownership is good, we make the argument in today’s episode that, from the perspective of subjective well-being, owning a home isn’t necessarily the key to happiness. This conversation covers the non-financial aspects of homeownership and why owning a home isn’t necessarily superior to renting one. This is supported by data from a number of different studies that describe the relationship between experienced happiness and life evaluation, and how the decision to buy or rent relates to effective forecasting, for example. Benjamin unpacks concepts like focalism, hedonic adaptation, and buyer's remorse, as well as social comparison and happiness when it comes to material purchases like homes. He concludes with the following words of wisdom: buying a house will not make you happy, but that doesn’t mean it’s a bad decision. During the course of today’s episode, we also touch on Shane Parrish’s The Great Mental Models Volume 3: Systems and Mathematics, how individuals engage in panic selling according to the recent MIT study, ‘When Do Investors Freak Out?’, and some of the listener discussion points that arose from our in-depth conversation with John Cochrane in Episode 169. Tune in today for all this, plus so much more!

Key Points From This Episode:

• Find out why you should listen to Tim Ferriss’ interview with Micheal Dell. [0:07:06]
• Today’s recommended book: The Great Mental Models Volume 3 by Shane Parrish. [0:08:05]
• Unpacking how individuals engage in panic selling according to the MIT study, ‘When Do Investors Freak Out?’ [0:11:10]
• We weigh in on three top Canadian banks halting sales of third-party mutual funds in preparation for Know Your Product (KYP) rule reform. [0:13:53]
• Ben highlights some listener discussion points following the John Cochrane episode. [0:16:34]
• Learn how predictable returns result from unpredictable cashflows in the long run. [0:18:23]
• What this means for long-term investors: focus on cashflow payoffs, not returns. [0:18:59]
• Why stocks are less risky for long-term investors if returns are predictable, which introduces horizon effects and impacts portfolio theory. [0:20:49]
• Key takeaways: outside income streams as additional asset classes, value versus growth, pure wealth investors versus labor market investors. [0:21:42]
• Introducing Ben’s topic for this week: does owning a home make you happy? [0:28:15]
• Some perceptions about the correlation between homeownership and happiness. [0:29:53]
• Why the non-financial aspects of renting might make it superior to home ownership. [0:31:50]
• Expanding on the 2011 paper, ‘The American Dream or the American Delusion?’ [0:32:10]
• Conclusions from the 2019 paper, ‘Homeownership and Happiness’, that Swiss homeowners are no happier or even less happy than renters. [0:33:57]
• The relationship between ownership and slightly elevated reflective life satisfaction; the difference between experienced happiness and life evaluation. [0:34:15]
• Ben reflects on how the decision to buy or rent relates to affective forecasting. [0:35:02]
• Focalism: how experience is shaped by how we spend our time rather than more stable circumstances like paying for housing. [0:37:50]
• How to deal with poor affective forecasting, hedonic adaptation, and buyer's remorse by making smaller, more frequent experiential purchases. [0:41:26]
• What Elizabeth Dunn and Michael Norton have to say about homeownership in Happy Money. [0:43:14]
• Social comparison and happiness when it comes to material purchases like homes. [0:43:57]
• How housing impacts life satisfaction: quality, economic effects, prestige, freedom. [0:46:09]
• Ben on how working from home can exacerbate possible issues for homeowners. [0:51:28]
• Concluding this topic: why homeowners are not automatically happier than renters. [0:52:05]
• Personally, Ben shares why he would rather own more of his time than his home. [0:53:27]
• Suggested reading, including Positive Psychology and The Happiness Hypothesis. [0:54:35]
• Talking Sense: whether success is based on money, cost versus value, and more! [0:57:38]

The work of Bill Schultheis has had a profound effect on us here at the Rational Reminder Podcast, and eventually having him join us on the show is truly an honour! Bill is the author of the Coffeehouse Investor series and is currently the Principal and Senior Advisor at Soundmark, in Kirkland, Washington. Throughout his career Bill has dedicated himself to helping his clients make the choices that best serve them and their particular needs, and his approach has continued to grow and improve over the decades he has been in the game. We have a wonderful conversation with Bill, charting his course from his early days on Wall Street, to writing his first book and starting Soundmark, to where is today. Bill gives us some great insider insight into the important concepts from his books and also talks about current issues in the financial world, like the impact of cryptocurrencies. Towards the end of our conversation, we get even more philosophical with our guest sharing some thoughts on what constitutes a 'rich life', and the importance of listening to your heart when it comes to your big decisions. So for this and much more from an inspiring and sensible voice, be sure to join us today!

Key Points From This Episode:

• Bill's upbringing on a farm in Washington with a large family. [0:04:16.2]
• The route that Bill took to publishing his first book as a way to share the wisdom of indexing. [0:06:40.7]
• The beginnings of Soundmark and the first clients that Bill started helping. [0:10:13.4]
• Bill's most recent book and the three ground rules it lays out for readers. [0:12:36.3]
• Unpacking the 'coffeehouse investor' model portfolio. [0:18:20.7]
• How Bill approaches and explains diversification to his clients. [0:21:54.7]
• Thoughts on presenting data and challenging strongly held views from clients. [0:23:14.1]
• The impact of cryptocurrencies and commission-free trading on indexing. [0:25:53.6]
• Comparing the commonly held investing approaches of now and the 1990s. [0:29:01.0]
• The approaches to wealth building that Bill recommends to younger people. [0:30:52.7]
• How a persistent attitude served Bill when looking for a publisher for his book. [0:33:07.4]
• The basic strengths and weaknesses of index funds. [0:34:56.3]
• Bill's idea of a 'rich life' and what this means to him. [0:39:55.2]
• How to 'dial in your power settings' with your financial planning and common mistakes to avoid. [0:41:19.2]
• Listening to your heart and finding the financial and professional life that feels right. [0:44:52.7]
• How dissatisfaction can lead to unhealthy spending habits! [0:48:37.5]
• Bill's thoughts on the FIRE concept; pros and cons of adopting the philosophy. [0:50:31.4]
• The impact that The Millionaire Next Door has had on Bill's life and work. [0:51:48.2]
• How Bill defines success and the value he places on kindness. [0:52:51.7]

We spend the bulk of today’s episode considering whether Wealthsimple’s use of long bonds and low volatility stocks is really protecting their clients’ downside, and summing up recent arguments by Cliff Asness and AQR leveled against critiques on value investing. Before that, we kick things off with thoughts on why Elon Musk aims to have no possessions, before looking at the links between empathy and the theory of relativity as well as some productivity secrets in recent books by Charles Duhigg and Shane Parrish. Next up, we briefly address a bunch of listener questions on factor tilting, and ETFs concerning COVID-19, the Smith Maneuver, and more! A final listener question about Wealthsimple’s claim mentioned above leads our hosts to wonder whether volatility and drawdown are good measures of risk. Ben made a few models to help answer this question which tested consumption models as another possible measure and brings up an interesting point about the significance of considering long bonds from an expected return or a risk parity perspective. From there, we move to the investment topic of the week – the historic state of value investing. This is a contentious topic with recent papers by Cliff Asness and AQR both weighing in and you’ll hear Ben and Cameron distill the main points from both. We hear about medium-term odds being on the side of value, and some great arguments showing common critiques leveled at value investing to be premature. Finally, Cameron takes us through the psychometric profiling side of measuring risk tolerance before telling listeners why they shouldn't make investment decisions based on reckless critiques. Tune in to get it all!

Key Points From This Episode:

• A reminder to comment on the new comments section on the RRP website. [0:00:44.2]
• Why Elon Musk ways he intends throw away his possessions. [0:04:36.1]
• New books about productivity and the links between science and empathy. [0:07:08.2]
• Factor tilting: being aggressive versus non-aggressive. [0:12:43.6]
• Is there a benefit in capturing size premium using a combination of ETFs? [0:16:54.2]
• How to adjust RESP asset allocation as kids get closer to school age. [0:18:46.2]
• What ETFs are best to use while implementing the Smith Maneuver. [0:22:36.2]
• Has the role of bonds ETFs changed in light of COVID-19? [0:24:12.2]
• Thoughts on Wealthsimple’s claim to have protected their clients in this downturn. [0:28:34.2]
• Critiquing long term bonds: is volatility/drawdown a good measure of risk? [0:33:28.2]
• Ben’s model testing consumption objectives as a measure of risk. [0:36:28.2]
• Portfolio topic of the week: the historic state of value investing. [0:42:22.2]
• Considering Cliff Asness’s paper about whether value investing is dead. [0:46:05.2]
• Considering AQR’s paper addressing critiques levelled at value investing. [0:54:04.2]
• Planning topic: the psychometric approach to measuring risk tolerance. [1:05:50.2]
• Bad advice of the week: don’t make investment decisions based on predictions! [1:10:14.2]

Thanks for joining us for another episode of the Rational Reminder Podcast. We are proud to say that last week’s show received our highest amount of downloads yet, with 10 000 in its first week, so a big thank you to our listeners for that. We begin our discussion this week with some takeaways from the Playing With FIRE documentary about doing affordable things that feel good as a way of cutting costs. Next, we dive into some caller questions, discussing whether putting a downpayment on a rental property as a way of parking cash until you have enough to scale up to a bigger property would be a good idea. We also discuss whether it would make sense to invest in an individual Canadian bank stock based purely on the track record of our banks, which brings up some interesting points about how stocks work. We then dive into our main topic by beginning with some pointers on choosing the best belief system to evaluate investment strategies from, comparing our 5-Factor model with the Quality model and Jim Simons’s too. This leads into a deep dive we take into the legitimacy of the definition of quality given by a variety of American and Canadian funds. We share our main takeaways from this discussion with you which should prove very useful. Our planning advice for the week is around getting insurance for income replacement in retirement. Finally, we make a lot of good out of some bad bank advice by drawing from our recent research into reverse mortgages and annuities, so don’t miss out on this one!

Key Points From This Episode:

• Lessons for cutting spending in the Playing with FIRE [0:05:30.0]
• Whether a rental property is a good hedge against rising real estate prices. [0:12:15.0]
• The effect that leverage would have on equity through market fluctuation. [0:13:50.0]
• How stock returns work and why not to invest in individual Canadian banks. [0:15:47.0]
• The challenge of choosing a belief system to evaluate investment strategies. [0:18:43.0]
• An explanation of the Market Efficiency model. [0:23:12.0]
• Using Occam's Razor to compare the 5-Factor model to the Quality model. [0:23:27.0]
• Assess products using US-listed funds, quantitative implementation, and more. [0:26:19.0]
• Evaluating different funds’ definitions of quality. [0:28:03.0]
• The clause about defensive positions which ruins VFVA and VVL products. [0:29:25.0]
• Why VLUE and QUAL funds have unreliable outcomes due to low holdings. [0:30:15.0]
• Fidelity FQAL is a waste of basis points due to insignificant factors loaded. [0:33:45.0]
• Why Fidelity FDVV shouldn’t use investment as a filter. [0:34:49.0]
• The main takeaways from Ben’s reading of the funds: read beyond the title. [0:36:33.0]
• Many value factor funds are actually actively managed. [0:37:14.0]
• What to do as far as getting insurance for income replacement in retirement. [0:38:09.0]
• Retirement variables such as a mortgage payment or spouse declining to work. [0:41:20.0]
• Why one should discount aggressive investments when choosing insurance. [0:47:08.0]
• How reverse mortgages and annuities can stretch out a portfolio. [0:48:01.0]
• And much more!

In this episode, we are joined by the CIO of Avantis Investors, Eduardo Repetto, to have an in-depth conversation about his philosophy and approach to many of the central concepts that are important to our listeners. Eduardo weighs in on asset pricing factor investing, premiums, and also shares some of his perspectives on what makes Avantis different from its competitors. Eduardo's wealth of experience and technical know-how make this very practical exploration, complete with some inventive and demonstrative analogies. Despite the high-level concepts discussed, our guest's ability to communicate these in an accessible manner also helped maintain a level of approachability throughout. Toward the end of the episode, we get to hear a little about Eduardo's Ph.D. in aeronautics and some of the surprising overlaps he sees between his two fields of interest.

Key Points From This Episode:

• Eduardo's approach to communicating what Avantis can offer their clients. (0:02:57)
• Advantages of the ETF structure for managing portfolios. (0:05:07)
• Advice for investors for quantitatively assessing the expected return advantage of a factor-tilted portfolio. (0:10:26)
• Practical approaches for individual investors when assessing a factor tilt in portfolios. (0:13:54)
• Eduardo unpacks the idea of trust in relation to the premium. (0:20:45)
• When does a completely small-cap value portfolio make sense? (0:27:23)
• Avantis' method for targeting value and profitability. (0:31:03)
• The weighting of different metrics that Avantis uses when building portfolios. (0:34:43)
• Eduardo unpacks cash profitability versus operating profitability. (0:36:53)
• The approach at Avantis to sector weights. (0:39:56)
• Understanding adjusted book value when pricing a company. (0:43:53)
• Eduardo describes the premium for the Goodwill adjustment. (0:50:02)
• How Avantis views pursuing credit premium in fixed income investments. (0:51:32)
• Determining the size of factors tilts on particular products. (0:57:05)
• Reasons that there are no emerging market small cap value strategies. (0:59:48)
• Comparing the research behind inflation-focused equity strategy to a more general value profitability premium. (1:06:03)
• Avantis' strategy for staying on the cutting edge of the latest research. (1:10:34)
• Conversations between Avantis and American Century Investments about different investment philosophies. (1:18:22)
• Eduardo shares his opinion about Avantis' competitive advantage. (1:19:56)
• Where Avantis and Eduardo are aiming their energy in the near future, and the succession plan for the company. (1:23:11)
• Some surprising similarities between aeronautics and asset management. (1:27:21)
• Eduardo talks about his personal definition of success. (1:31:31)

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/

Eduardo Repetto — https://www.avantisinvestors.com/content/avantis/en/about-us/our-team/eduardo-repetto.html

Avantis Investors — https://www.avantisinvestors.com/

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/?hl=en

Rational Reminder on YouTube — https://www.youtube.com/channel/
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on Twitter — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

We often talk about better planning, reduced spending and a consistent long-term strategy on the show and today we have a guest who not only gives that advice himself but clearly lives it too! Andrew Hallam is the author of the new book Millionaire Expat in which he details some strategies for what has been called geographic arbitrage, or moving to another part of the world in order to maximize your financial independence! His earlier book, Millionaire Teacher took a similar approach to education abroad and he has built out his philosophy from there. We hear from Andrew about his definition of wealth and why so many people who earn a relatively large amount of money can never be called wealthy. Andrew lays out the researched correlations between happiness and money and more clearly between debt and misery. He also shares how he has approached spending, saving and budgeting in his own life and relationships before we get into some more technical investing topics such as the benefits of index funds and why many advisors try to persuade clients away from them. Andrew weighs in on finding the right advisor for your needs and when to seek out help with your portfolio. The last part of the show is spent on the topics of education and expatriation. Andrew is a strong believer in leading by example for your children to learn about money matters and he explains his reasons for moving abroad and the gains he has accrued. For all this from a wonderful guest, tune in today!

Key Points From This Episode:

• How Andrew defines the term 'wealthy' and why it does not depend on income. [03:43]
• Links between spending and happiness, and debt and misery. [06:51]
• How Andrew and his wife have managed their own values around spending. [11:55]
• Benefits and costs of borrowing; could you handle it if interest rates doubled? [13:32]
• Andrew's thoughts on index investing and why it is a good idea. [19:06]
• Common tactics that financial advisors use to steer clients away from index funds. [22:40]
• Advice for staying steady for the long term, through market volatility. [25:45]
• Considering the place of investing in gold and the 60/40 portfolio model. [27:46]
• Ignoring all the false information that gets broadcasted and sticking to the data. [35:05]
• Why to only consider certified financial planners and how much this cuts the options down. [39:53]
• Going it alone versus using professional advice; average reactions to volatility. [41:22]
• Education for the younger generation and Andrew's advice for parents. [45:18]
• Who could benefit from moving abroad and the idea of geographical arbitrage? [49:56]
• How Andrew defines success in his own life! The importance of relationships. [54:01]

Today we welcome Rob Carrick back to the show to talk about a range of interesting topics, focusing on the Canadian housing market and some of the recent developments from the banking and investment space. Rob has such a balanced and measured approach, qualities that are visible in his long-standing work at The Globe and Mail. We start today's episode with some fun recommendations of books and TV content, before diving into the meat of our conversation. Rob weighs in on the range of perspectives on whether to rent or buy, offering the assurance that renting is a completely acceptable way to manage your needs and means. He also comments on the utility of robo-advisors, the impacts of the recent banking regulations, and shares his surprise at which of his articles have proved most popular. We always feel like we should have Rob on the show more often, and this episode is such a good argument for that very idea. So, to hear all Rob has to say, be sure to join us today.

Key Points From This Episode:

• This week's book and TV recommendations; Impeachment, Capital, Trillions, and more. [0:00:39.2]
• A call for applicants here at PWL Capital, and some recent reviews for the show. [0:07:17.7]
• Looking at an excerpt from Azeem Azhar's book, The Exponential Age. [0:11:45.4]
• A recent study comparing renting and buying in Canada. [0:18:18.6]
• Rob's observations on the new banking rules in Canada and what they mean for the advisor community. [0:29:27.2]
• Thoughts on trends in the banking space and the roles of financial professionals. [0:36:07.1]
• Canada's adoption of indexing: measuring the speed of changes in the country. [0:38:38.7]
• The role of robo-advisors and why Rob believes strongly in their value. [0:41:48.5]
• Rob weighs in on the debate of buying versus renting property. [0:44:39.6]
• Generational flows of money from boomer parents to millennial and Gen Y children. [0:50:52.3]
• Rob's message to Canadians feeling like they are stuck renting. [0:54:24.1]
• Some of Rob's most popular articles from over the years. [0:55:20.7]
• Lessons from Sweden's housing market and considering Canada's possible future. [0:59:03.6]
• A round of Talking Sense cards with Rob dealing with most prized possessions, lending, and happiness. [1:02:26.3]
• Assessing some of Robert Kyosaki's recent comments on a looming crash. [1:08:29.1]
• The present is exciting in finance; why Rob is enjoying the ride. [1:14:22.5]

Welcome to our limited edition crypto series. In this episode, we welcome back Professor John Cochrane, who was a guest on the Rational Reminder series, to talk everything money. Professor Cochrane has immense experience on the topic and is a Senior Fellow at the Hoover Institution at Stanford, as well as Stanford Institute for Economic Policy Research. He is also a Research Associate of the National Bureau of Economic Research, an adjunct scholar at the Cato Institute, and was a professor of finance at the University of Chicago Booth School of Business. He is also the author of several books and writes a popular blog called The Grumpy Economist. In this episode, we take a deep dive into the concept of money. We learn what numeraire is, how a numeraire is defined, and explore some of the intricacies of money. We also discuss and unpack the differences between fiscal theory and monetary theory, along with other ideas regarding the value of money. We then delve into how all this relates to cryptocurrencies, what future he sees for crypto, and much more. Tuning into this episode, listeners will challenge their thinking about the economy and how economic relations work.

Key Points From This Episode:

• Professor John Cochrane explains to us the short version of fiscal theory. [0:04:35]
• Find out the definition of numeraire and how it is determined within an economy. [0:05:21]
• Learn whether government backing is required to define a numeraire. [0:07:05]
• What Professor John Cochrane thinks is the primary function of money. [0:08:55]
• Whether money needs to be a medium of exchange that stores value. [0:09:45]
• He explains why money is valuable according to fiscal theory. [0:11:22]
• The role of taxes in adding to the value of money according to fiscal theory. [0:12:59]
• How fiscal theory’s explanation for why money is valuable differs from the monetarist explanation. [0:13:33]
• Find out whether the term ‘fiat’ is still a good adjective to describe money in a fiscal world. [0:17:24]
• We learn if ‘fiat’ is an appropriate term to describe money according to the monetarist view. [0:19:10]
• What the government debt valuation equations suggest about the stability of the price level. [0:20:21]
• An outline of what happens when discount rates become volatile. [0:23:29]
• Ways in which sticky prices affect the stability of the price level. [0:27:24]
• Whether the supply of money is still a useful perspective today. [0:31:01]
• Why monetarism theory has gained so much traction. [0:33:51]
• He unpacks the purpose of monetarism theory. [0:35:21]
• How fiscal and monetary actions set expected and unexpected inflation regarding fiscal theory. [0:37:10]
• The level of fiscal and monetary coordination required for price stability. [0:39:58]
• Whether the level of coordination needed is realistic considering the independence of the central bank. [0:42:10]
• Ways in which monetary policy debt sales and fiscal policy debt sales differ. [0:45:02]
• What effect the size of the central bank's balance sheet has on the price level. [0:49:52]
• Repercussions of inside money issued by private banks on the price level. [0:53:06]
• Statistical tests available that can be used to prove fiscal theory. [0:58:55]
• Find out why COVID-related effects on the economy lead to inflation. [1:04:17]
• Breakdown of the fiscal explanation for the US inflation of the 1970s. [1:11:24]
• Reasons why inflation targets have been successful in some countries and not in others. [1:16:14]
• A discussion about whether we have always lived in a fiscal-based economy. [1:19:24]
• Whether citizens should behave differently living in a fiscal world. [1:27:51]
• How the value of the dollar will be affected if more people buy cryptocurrencies. [1:28:49]
• Professor John Cochrane shares if he thinks anonymous digital cash is a good thing. [1:30:51]
• We discuss what the future has in store with regard to fiscal theory. [1:39:31]

What makes Warren Buffett’s investment legacy so iconic, and how has his advice shaped the world of investing? In this episode, we delve into Warren Buffet's investment philosophy and the lessons he offers everyday investors. In our conversation, we unpack the impact of his investment strategies on the financial world, debunk common misconceptions, and discuss how his strategies have changed over time. We also examine the structural barriers to replicating his success, the complexities of scale and changing market dynamics, and the parallels between his approach and modern asset pricing models. Discover Warren Buffett’s astonishing historical returns, his perspectives on diminishing returns for active managers, and the misunderstood nuances of his advice regarding index funds. Gain insight into academic research on Warren Buffett’s success, his pragmatic view on cash holdings, and his opinion on the value of dividends for investors. Tune in to learn about the world's greatest investor and how you can apply his wisdom to your own portfolio!

Key Points From This Episode:

(0:04:55) Warren Buffett’s legacy and Berkshire Hathaway's performance history.

(0:13:04) The problem of diminishing returns to scale and finding skilled active managers.

(0:18:37) Reasons Buffett repeatedly advises most investors to choose low-cost index funds. 

(0:23:14) Why identifying skilled managers before they outperform the market is impossible.

(0:30:15) Research explaining Buffett's success using multi-factor asset pricing models.

(0:35:30) Insight into why Berkshire Hathaway holds large cash reserves as part of its strategy.

(0:44:02) Buffett’s views on dividends and why his focus remains on reinvestment.

(0:48:16) Why diversification concentration is a bad strategy and Buffett's investing superpower.

(0:57:07) Aftershow: Ben’s experience of being on The Wealthy Barber podcast.

(0:58:07) Reviews and feedback from the episode with Randolph Cohen and Michael Green.

(1:04:58) Changes to our year-end episode format and what listeners can expect.

Links From Today’s Episode:

Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://pwlcapital.com/our-team/

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP

Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/

CPP by the Fire — https://pages.pwlcapital.com/webinar_cpp_by_the_fire

Braden Warwick on LinkedIn — https://linkedin.com/in/braden-warwick-a40b48a3/

PWL Capital CPP Tool — https://research-tools.pwlcapital.com/research/cpp

Berkshire Hathaway — https://berkshirehathaway.com/

Berkshire Hathaway Shareholder Letters — https://berkshirehathaway.com/letters/letters.html

Richard Ennis — https://richardmennis.com/author/richard-m-ennis

Home Trust — https://hometrust.ca/

Ben on The Wealthy Barber Podcast — https://thewealthybarber.com/podcast/ben-felix-a-deep-dive-into-the-world-of-investing-twb-podcast-5/

Episode 61: Ted Seides — https://rationalreminder.ca/podcast/61

Episode 220: Jonathan Berk and Jules van Binsbergen — https://rationalreminder.ca/podcast/220

Episode 332 - Randolph Cohen & Michael Green — https://rationalreminder.ca/podcast/332

Books From Today’s Episode:

The Intelligent Investor — https://amazon.com/dp/B0CBQ18KDB/

Papers From Today’s Episode: 

'Buffett’s Alpha' — https://doi.org/10.2469/faj.v74.n4.3

'Mutual Fund Flows and Performance in Rational Markets'— https://journals.uchicago.edu/doi/abs/10.1086/424739

At a time when the financial community provided inconsistent retirement advice, the 4% withdrawal rate was a data-backed strategy that revolutionized retirement planning. Today we speak with William Bengen, a literal rocket scientist and the influential personal advisor who popularised the 4% withdrawal rate, A.K.A, the 4% rule. After exploring what the 4% rule entails and the impact that it had on the financial industry, we talk about updates that William has made to his theory since first publishing about it in 1994. We then unpack more of the rule, talking about its conservative nature, whether young retirees should adhere to it, and if there are situations where you should break the rule. Reflecting on criticisms of the 4% rule, we ask William about how it fits with the notion of dynamic spending. His answers highlight his approach in helping his clients to maintain the same lifestyle that they have when they enter retirement. Later, we touch on tips to keep track of your expenses, whether you should taper your retirement income, the role of bonds and small-cap stocks in your portfolio, and William’s view that financial planning should be fee and not commission-based. We wrap up by discussing William’s career and how he defines success for himself. For more insights into the 4% rule from the man who created it, tune in to hear our incredible conversation with William Bengen.

Key Points From This Episode:

• Introducing today’s guest, financial advisor and 4% rule creator William Bengen. [0:00:15]
• Exploring William’s original 1994 research that led to the 4% rule. [0:03:58]
• Hear why the 4% rule has been so impactful to the world of financial planning. [0:05:06]
• William shares details about the ‘hate mail’ his findings inspired. [0:06:07]
• Why William updated his theory to include small-cap stocks. [0:07:43]
• William’s view that you might be able to get away with withdrawal rates that are higher than 4.5%. [0:08:26]
• Whether young retirees should adhere to the 4% rule. [0:11:48]
• The scenarios that break the 4% rule. [0:13:02]
• How the 4% rule applies in countries outside of Canada and the US. [0:13:55]
• Insights into how much you should be spending in your retirement. [0:15:28]
• What your triggers should be if you want to deviate from the 4% rule. [0:17:45]
• William’s views on dynamic spending. [0:20:09]
• Tips on keeping track of your expenses and William’s throughs on fixed annuities. [0:21:20]
• Whether you should taper your retirement income. [0:22:54]
• The role of bonds versus small-cap stocks in your retirement portfolio. [0:24:04]
• From rocket scientist to financial advisor, hear about William’s extraordinary career. [0:28:29]
• Reasons why financial planning should be fee and not commission-based. [0:32:02]
• Reflecting on the impact that William has made on his client’s lives and in the financial world. [0:32:55]
• Details on William’s current research and what most excites him. [0:34:48]
• How William defines success for himself. [0:37:01]

One of the pillars of our approach at The Rational Reminder Podcast and PWL Capital is the idea of index investing, a concept that is both fundamental and deeply embedded. Today we are very lucky to have John 'Mac' McQuown on the show, who was behind the creation of the first equity index fund. It is hard for us to overstate just how important this contribution has been to the world of finance and any fund managers and investors that share our philosophy. Mac's work back in the 1960s, his position at Wells Fargo, and his contribution to the founding of Dimensional Fund Advisors all speak for themselves, and we are extremely grateful to get some perspectives from this titan of the world of rational and data-driven investing. In our chat, we get to hear about some of the key points in Mac's career and the general arc of the rise of indexing and diversified investing, the key figures that he worked alongside, his thoughts on the future, and the importance of environmentalism in today's world. So, to hear it all from a hero and giant in the space, be sure to listen in with us today.

Key Points From This Episode:

• Looking back at the role of data at the beginning of Mac's career. [0:03:00.2]
• Wall Street in the 1960s, and the amusing experiences Mac had early on. [0:04:20.6]
• Mac's initial findings when he started analyzing institutional portfolios. [0:07:44.5]
• Joining Wells Fargo and the team that Mac found himself on. [0:08:28.1]
• The strong support that Mac and the quantitative approach were given at Wells Fargo. [0:13:36.7]
• Early tracking of index funds and Mac's memories of the first index they tracked. [0:18:21.3]
• The initial institutional responses that Mac received to his work with data. [0:20:46.5]
• How Wells Fargo contributed to the first commercially available index fund. [0:22:24.6]
• Mac's connection to Jack Bogle and the results of their relationship. [0:27:18.2]
• The seeds of iShares; Mac traces the beginnings at Wells Fargo. [0:29:57.7]
• Perspectives on why people still have belief in active investing. [0:33:19.4]
• Mac's memories of working with David Booth during the founding of Dimensional. [0:34:41.8]
• Differentiating between Dimensional funds and index funds. [0:36:44.3]
• Weighing concerns about the growth of indexing and how this may affect pricing and governance. [0:39:52.5]
• Mac's environmentalist philosophy and his thoughts on practical steps against climate change. [0:42:10.6]
• How Mac defines success in his life and its relationship to increased curiosity. [0:45:00.2]

On the show today we are going back to basics, just Cameron and Benjamin going through some useful topics for your financial benefit! We start talking about GIC's and the article on MoneySense that led to this conversation. GIC's have a somewhat mix and match reputation, one which we believe has been often misunderstood and misrepresented. We try to show in which ways people have been misled into thinking that GIC's are the best option when, we believe, they are not. From there we turn to more general portfolio ideas, comparing the performance of the S&P 500 over time and drawing on a very useful study that illuminates the index's limitations. Our last topic for today is around saving for college and RESP's or registered education saving plans. We talk about asset allocation, how to think about starting and best practices when drawing on these funds. We finish off the show with some bad advice regarding dividend investing that actually referenced a video we made! So for all and a bunch more great stuff, be sure to tune in today!

Key Points From This Episode: 

• Our recent summer travels and getting away from it all! [0:03:02.4]
• The article by Jonathan Chevreau that sparked part of today's discussion. [0:05:46]
• GIC's, long term returns and the financial implications of your choices now. [0:07:15.2]
• Reasons why returns on GIC's can be misleading in the short term. [0:11:02.7]
• The S&P 500's performance against other portfolio options. [0:13:56.3]
• Market drops and risk appetites during panic periods. [0:19:15.2]
• Saving and drawing on college funds and education plans. [0:22:40.2]
• Asset allocation and the best way to think about covering costs. [0:27:41.1]
• Withdrawing funds and making the most of unused college savings. [0:31:21.3]
• This week's bad advice! An argument about dividend investing. [0:33:30.8]
• And much more!

Quantitative easing is a monetary policy whereby a central bank buys government bonds or other financial assets in order to inject money into the economy to expand economic activity. But what exactly does that mean? In today’s episode, Benjamin and Cameron are going to address this topic, avoiding highly politicized aspects, like whether or not central banks should be involved in the economy in the first place, and focusing purely on the operational perspective of quantitative easing – what is it, how it works, and what the intended transmission mechanisms are. Benjamin explains what he has learned through his extensive research, from what money printing and the stock market have to do with one another, where the money for loans comes from, how central banks can influence lending rates, and the difference between regular open market operations and quantitative easing. We also cover how quantitative easing works, the relationship between bank reserves and money in the economy, and what causes inflation, as well as the effect of quantitative easing has on stock prices (if any). We also catch up on recent news stories, and Cameron takes us through five key personal finance lessons we can learn from this crisis. If you’re looking to understand quantitative easing, this episode will hopefully become a useful resource! Tune in today.

Key Points From This Episode:

• This week’s book of the week is Mindf*ck: Cambridge Analytica and the Plot to Break America by Canadian, Christopher Wylie [0:04:38]
• A chart showing the ratio of the Nasdaq 100 index divided by the Russell 2000 [0:08:22]
• University endowment sued for active investing by 94-year-old Clarence Herbst. [0:10:02]
• This was not the first time Clarence Herbst had an issue with his alma mater. [0:13:05]
• Multimillion-dollar mismanagement of public pension funds in Maryland, 2014. [0:13:22]
• Benjamin introduces the main topic, quantitative easing (QE), a central bank action. [0:14:42]
• What do money printing and the stock market have to do with one another? [0:17:37]
• You can summarize money as a social construct that facilitates economic activity. [0:20:06]
• As long as there are credit-worthy borrowers, banks will print money out of thin air. [0:22:28]
• The distinction between central banks and private banks, which interact with customers and have to monitor their net flow of money. [0:25:27]
• Open market operations allow a central bank to influence overnight lending rates. [0:28:30]
• The difference between regular open market operations and QE. [0:33:14]
• A couple of theories about how QE might work, like the portfolio balance theory. [0:37:42]
• There is no relationship between reserves and money in the economy. [0:41:11]
• What causes inflation? It’s not reserves! Demand for loans drives demand for loans. [0:43:07]
• What about the effect of QE on stock prices? We would expect a positive impact. [0:45:14]
• Money is this medium that facilitates economic activity and that's all it does. [0:47:40]
• Five key personal finance lessons we can learn from this crisis: Stocks are volatile [0:50:35]
• Debt is dangerous and emergency funds have a very important purpose. [0:50:35]
• Don’t stop spending, always prepare for the worst – disability insurance is crucial! [0:54:51]
• Cameron still wants to understand how fee-free trading platforms make money – nothing is for free! [0:50:35]

Unlocking the power of education savings is often a complex task, but with the right strategies, a Registered Education Savings Plan (RESP) can be a game-changer for Canadian families planning their children's future. In this episode, Ben Felix, Dan Bortolotti, and Mark McGrath take a deep dive into the mechanics of the RESP, covering everything from optimal contributions and grant maximization to tax-efficient withdrawals and asset allocation. They discuss critical factors like the Canada Learning Bond (CLB) for low-income families and the intricacies of group RESPs, noting how pooled plans, though easy to join, can financially penalize those who don’t stay the course. With the RESP’s unique 35-year lifespan and its flexible range of education options, this in-depth conversation brings clarity to a valuable tool often overshadowed by its complexity. Tune in to discover practical strategies that could transform how you fund education, optimize your investments, and make the most of Canada’s RESP benefits.

Key Points From This Episode:

(0:02:43) Purpose and structure of the RESP as a tool to fund post-secondary education.

(0:06:25) Insight and tips for how contribution limits and government matching grants work.

(0:07:13) How the CLB supports low-income families with up to $2,000 without contributions.

(0:10:13) Family RESPs, which allow multiple beneficiaries to share contributions and earnings.

(0:11:54) Distinguishing between Education Assistance Payments (EAP), Post-Secondary Education Payments (PSE), and their tax implications for beneficiaries.

(0:14:27) Front-loading versus annual contributions: optimal contribution strategies to maximize grants and investment growth.

(0:23:22) Tips for tax-efficient RESP withdrawals, especially if beneficiaries have other income.

(0:35:28) Education outside of Canada, over-contribution penalties, and other considerations.

(0:37:28) RESPs and estate planning, including naming a successor subscriber in your will.

(0:42:54) Asset allocation advice: prioritize growth early and stabilize as educational costs near.

(0:48:00) Constructive criticism of RESP policies to increase access for low-income families.

(1:02:02) Summing up the benefits and challenges of RESPs and encouraging families to use them wisely as part of their education savings plan.

(1:07:39) The aftershow: reviews, praise for Dan, and a community debate on expected returns.

Links From Today’s Episode:

Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://pwlcapital.com/our-team/

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP

Dan Bortolotti — https://benderbenderbortolotti.com/about/our-team/

Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/

Registered Education Savings Plan (RESP) — https://www.canada.ca/en/services/benefits/education/education-savings/plan.html

Canada Learning Bond — https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/canada-education-savings-programs-cesp/canada-learning-bond.html

Aaron Hector: ‘Optimal RESP funding strategies if you have $50,000 to invest’ — https://x.com/AaronHectorCFP/status/1787188396248731967 

Aaron Hector: ‘How to draw down a $200k RESP over a 4 year university program’ — https://x.com/AaronHectorCFP/status/1788196751821738360

Employment and Social Development Canada (ESDC) — https://www.canada.ca/en/employment-social-development.html

'How to Invest Your RESP’ — https://benderbenderbortolotti.com/how-to-invest-your-resp/

‘The Regulation of Group Plan RESPs and the Experiences of Low-Income Subscribers’ — https://seedwinnipeg.ca/wp-content/uploads/2024/09/The_Regulation_of_Group_Plan_RESPs_and_the_Experiences_of_Low-income_Subscribers.pdf

Episode 326: Dr. Sunil Wahal: Exploring the Nuances of Financial Science — https://rationalreminder.ca/podcast/326

Papers From Today’s Episode: 

‘The Anatomy of Value and Growth Stock Returns’ — https://dx.doi.org/10.2139/ssrn.806664

‘Migration’ — https://dx.doi.org/10.2139/ssrn.926556

In many episodes of this podcast we refer to the psychological component of investing, and today we are very happy to host a global authority on the subject and share an absolute masterclass about behavioural psychology as it relates to our finances and the decisions we make. We welcome Professor Hersh Shefrin to the show, who is the author of many books including the seminal Beyond Greed and Fear, which he wrote in the last 1990s, and still holds much value and relevance in today's climate. Professor Shefrin is kind enough to share some reflections on how his understanding of the themes discussed in the book has evolved since those days and unpacks some great pieces from the book for listeners to digest. We get into some specific and technical questions about investing, looking at pursuing the alpha, momentum, and index funds, before our guest also weighs in with some broader, more philosophical responses to our queries. The conversation covers the psychological needs of investors, expected returns, and of course biases. Listeners can expect to come away with a clearer and more detailed picture of ideas we often reference, so make sure to join us for this incredible exploration with Hersh.

Key Points From This Episode:

• The key message about market psychology from Beyond Greed and Fear. [0:03:23.1]
• Beyond Greed and Fear's three themes: heuristic-driven bias, framing effects, and inefficient markets. [0:04:39.3]
• Reflecting on these themes in a modern context and how our understanding has been refined. [0:12:53.6]
• Considering index funds in light of market efficiency frameworks. [0:21:08.3]
• Assessing one's ability to pursue the alpha and Professor Shefrin's advice to this end. [0:27:14.1]
• Possible reasons for large numbers of active money managers at institutions. [0:30:20.6]
• Understanding risk-based asset pricing models and expectations of higher returns when investing in riskier stocks. [0:34:41.8]
• The impact of behaviour-based versus risk-based explanations for investors. [0:40:00.2]
• Utilizing momentum in a portfolio: Professor Shefrin's explanation of this interesting phenomenon. [0:41:58.6]
• Comparing the current trading landscape with the advent of online trading in the '90s. [0:46:25.5]
• The addictive potential of stock trading; what we know about the neuroscience. [0:49:02.3]
• Unpacking the idea of growth opportunities bias and implicit assumptions about averages. [0:52:14.4]
• Weighing the relevance of the mean-variance framework to individual investors. [0:57:48.2]
• 'Carrying a psychological call option'; why Professor Shefrin's depicts advisors in this way. [0:59:09.3]
• Professor Shefrin's perspective on the interchangeability of dividends and capital gains. [1:04:42.9]
• The big influence that Professor Shefrin's uncle had on his career! [1:08:53.1]
• How Professor Shefrin defines success in his personal life and career. [1:12:12.7]

How we are handling the situation as a firm, investing through a crisis, historical comparisons, and more.  

In our second episode of 2025, Ben, Mark, and Dan continue to work through the listener questions we received in our 2024 AMA. We begin with home country biases and how to continue to grow your money from an already diversified portfolio before comparing the benefits of stock trading strategies and EFT portfolio strategies. Then, we discuss the impact of volatile blockchains on the wider securities market, whether you need to adjust your investment strategy when new tariffs are imposed, the ins and outs of terminal wealth management, the benefits of focusing on a total market index, and the personal finance perspective of renting versus buying in Canada. To end, we explore the best practices for increasing risk exposure, take a closer look at FIRE (financial impendence, retire early), assess investing behavioural biases and misconceptions that still pose a threat to even literate investors, and learn about how the Rational Reminder podcast is changing the lives of our listeners.

Key Points From This Episode:

(0:01:59) Whether owning a home affects your home country bias and financial asset portfolio.

(0:02:43) The correlation between the economic risks of housing and the local stock market.

(0:07:21) How to keep growing your money if you already have a diversified portfolio.

(0:14:16) When to split your portfolio, and stock trading strategy versus EFT portfolio strategy.

(0:22:20) The impact of Bitcoin and volatile blockchains on the wider securities market.

(0:24:46) Adapting your investment strategy after the introduction or increase of trading tariffs. 

(0:26:20) Maxing out tax-free savings accounts for non-incorporated high-income professionals.

(0:33:22) Switching to a total market index to avoid index funds that overvalue the market.

(0:37:48) Renting versus buying in Canada, from a personal finance perspective.

(0:42:39) The best practices for increasing risk exposure. 

(0:51:19) Unpacking FIRE – financial independence, retire early. 

(0:56:05) Balancing allocations between traditional retirement savings vehicles and real estate.

(1:00:56) Investing behavioural biases and misconceptions that harm even literate investors. 

(1:09:24) Whether bonds actually exist, and everything we’ve changed our minds about in 2024.

(1:19:21) Shaping worldviews, on-demand information, and other highlights from your reviews. 

Links From Today’s Episode:

Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://pwlcapital.com/our-team/

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://pwlcapital.com/our-team/

Cameron on X — https://x.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP 

Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/ 

Peter Mladina on LinkedIn — https://www.linkedin.com/in/peter-mladina-177194125/ 

Benjamin Felix Quote on X — https://x.com/benjaminwfelix/status/1760356591000301739 

Robb Engen — https://boomerandecho.com/robb-engen/ 

Renaissance Technologies — https://www.rentec.com/Home.action?index=true 

Long Blockchain Corp — https://cryptohead.io/acquisitions/long-blockchain/ 

Nick Maggiulli on X — https://x.com/dollarsanddata 

Canadian Couch Potato Podcast — https://canadiancouchpotato.com/podcast/ 

Bitcoin Uncensored — https://www.podchaser.com/podcasts/bitcoin-uncensored-463350  

Episode 335 - What About Warren Buffett — https://rationalreminder.ca/podcast/335 

Episode 332: Randolph Cohen & Michael Green — https://rationalreminder.ca/podcast/332

Papers From Today’s Episode: 

'Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice' — https://dx.doi.org/10.2139/ssrn.4590406

‘Action Bias among Elite Soccer Goalkeepers: The Case of Penalty Kicks’ — https://www.researchgate.net/publication/222676583_Action_Bias_among_Elite_Soccer_Goalkeepers_The_Case_of_Penalty_Kicks

On today’s show, we explore rational explanations for pricing bubbles, how the concept of human capital relates to financial decisions, and a whole lot more! We kick things off with a discussion of Ashley Whillans’ book Time Smart, which explores proven strategies for improving your ‘time affluence’. Diving into this week’s portfolio topic, we use a previous discussion about Carlota Perez’s model for technological revolutions as a springboard to introduce Lubos Pastor and Pietro Veronesi’s mathematical arguments that present a rational explanation for pricing bubbles. Perez maintains that prices get bid up too high during technological revolutions due to ‘frenzy’ but we unpack two papers by Pastor and Veronesi where they argue differently, drawing on the concepts of uncertainty and discount rates. From there, we dive into the relationship between human capital, life insurance and asset allocation for our planning topic. We provide some definitions for the term ‘human capital’ and discuss how it differs from other forms of capital. A key idea we explore here is that the more risky your human capital is, the less life insurance you should take out. Along with this, you’ll hear a few quick suggestions for how you should approach life insurance and bonds depending on age, financial wealth, risk aversion, and other factors. Tune in today!

Key Points From This Episode:

• Talking COVID, next week’s guests and Rational Reminder Community updates. [0:0:18]
• Book of the week: Rethinking conventional notions of time well spent in Time Smart. [0:04:07]
• News updates: Stories about Bitcoin, marijuana stocks, and more. [0:08:56]
• Portfolio Topic: Whether pricing bubbles are caused by rational behaviour. [0:14:19]
• Unpacking Pastor and Veronesi’s paper connecting uncertainty to high prices. [0:18:25]
• Pricing bubbles as caused by discount rates; a second Pastor and Veronesi paper. [0:27:48]
• ‘IPO waves’ connected to the bubble discussion in a third Pastor and Veronesi paper. [0:37:58]
• Planning topic: How the concept of human capital relates to financial decisions. [0:44:45]
• The importance of considering asset allocation decisions and life insurance needs together. [0:54:46]
• Bad advice of the week: ‘The Market’s Invisible Guardrails Are Missing’. [1:01:16]

There’s no doubt about it; money is a taboo topic in our society. But not talking about money only serves to uphold inequalities and injustices. Rebecca Walker is an advocate for transparency and, during this episode of the Rational Reminder Podcast, she shares the importance of exploring the factors that have influenced our relationship with money so that we can begin to understand how we can use money as a tool to effect the kind of changes we want to see in the world. This is the intention behind her latest collection, Women Talk Money. No matter your gender, race, or financial standing, this episode will provide you with a new perspective on how to approach money. Rebecca is a well-known speaker, author, consultant and was named by Time Magazine as one of the most influential leaders of her generation. Tune in today.

Key Points From This Episode:

• What money represents and why it is so important that we understand it better. [0:02:21]
• The intention behind Rebecca’s latest collection, Women Talk Money. [0:03:05]
• A brief overview of some of the stories Rebecca shares in her book about our relationship with money and how it impacts our lives and society as a whole. [0:05:13]
• How race, class, and gender impact how knowledge about money is transferred. [0:08:50]
• Problems that arise when we aren’t transparent about our finances. [0:11:22]
• How the way we approach money ties into many broader societal issues. [0:15:45]
• Examples of how not talking about money renders people powerless. [0:17:45]
• Rebecca explains how she has taught her son about money from a young age. [0:20:58]
• Rebecca’s approach to talking to other people about money. [0:22:30]
• Issues that may stem from an obsession with money. [0:24:32]
• How Rebecca defines “enough.” [0:27:09]
• The role that men can play in empowering women in relation to money. [0:29:24]
• Advice for women who are struggling to form a healthy relationship with money. [0:33:33]
• How Rebecca defines success in her own life. [0:36:04]

In this episode, we welcome back Hal Hershfield, Associate Professor of Marketing and Behavioral Decision Making at UCLA Anderson School of Management. Hal is renowned for his pioneering work in understanding how individuals make financial decisions, and he shares invaluable insights that can help us navigate the complexities of financial planning. In our conversation, live from Future Proof, we explore the intersection of behavioural economics, financial decision-making, and the potential for AI to enhance financial advisory services through the lens of Hal’s latest research findings. We explore framing insurance decisions, the impact of generative AI on financial choices, and the often-overlooked realm of end-of-life decisions. Discover why the key to success lies in understanding different consumer segments, how advisors can optimize the frequency of client meetings, and how clients and advisors should be working together. We also unpack the importance of personalized decisions, the value of a decision-making journal, the framework for making the right financial choice, and much more. Tune in to gain valuable insights into behavioural economics, consumer preferences, and the evolving financial planning landscape with Hal Hershfield!

Key Points From This Episode:

(0:02:41) Hal shares his motivation for writing the paper and why the topic of financial decision-making is so vital to understand. 

(0:04:28) An overview of our current understanding of financial decision-making and interesting findings from the latest work on the subject. 

(0:09:00) How to leverage the current knowledge of financial decision-making to your benefit. 

(0:10:27) Opportunities for the industry to improve, both in academia and industry. 

(0:15:09) Characterizing the framework for conceptualizing financial decisions, from decision-making to the consequences. 

(0:18:13) The biggest gaps and opportunities for future research and the value of writing and maintaining a decision journal. 

(0:22:33) The potential of AI to influence financial decision-making, and an example of an exciting use-case. 

(0:26:31) Exploring the role of human financial advisors in an AI-dominated world. 

(0:29:56) Insights into the steps for a client and advisory firm to work together effectively. 

(0:34:07) What area of research in behavioural finance excites Hal the most. 

(0:36:23) Bridging the gap between industry and academia. 

Links From Today’s Episode:

Future Proof Festival 2023 — https://futureproof.advisorcircle.com/

Advisor Circle — https://www.advisorcircle.com/

Hal Hershfield — https://www.halhershfield.com/

Hal Hershfield on X — https://twitter.com/HalHershfield

Hal Hershfield on LinkedIn — https://www.linkedin.com/in/hal-hershfield-a2b91510/

Episode 141: Hal Hershfield — https://rationalreminder.ca/podcast/141

Episode 256: Hal Hershfield — https://rationalreminder.ca/podcast/256

Your Future Self — https://www.amazon.com/Your-Future-Self-Tomorrow-Better-ebook/dp/B0BH4LL53X

‘Consumer Financial Decision Making: Where We’ve Been and Where We’re Going’ — https://www.journals.uchicago.edu/doi/full/10.1086/727194

Poruz Khambatta on LinkedIn — https://www.linkedin.com/in/poruz/

Writing for Busy Readers — https://www.amazon.com/Writing-Busy-Readers-Communicate-Effectively/dp/0593187482

‘Behavioural science is unlikely to change the world without a heterogeneity revolution’ — https://www.nature.com/articles/s41562-021-01143-3

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://twitter.com/RationalRemind

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 

Benjamin on X — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on X — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Today we are joined by a friend, hero, and a legend in the field fact based investing. Larry Swedroe is here to discuss his latest book, some of the timeless concepts he has been espousing for many years, and to give out a few golden nuggets of advice for your finances and retirement. Larry is so generous with his time and wisdom and we chat about a ton of chapters from his book, Your Complete Guide to a Successful and Secure Retirement, and he picks out a few ideas to focus on here in this quick discussion. Larry shares the biggest mistake he has noticed in retirement planning, lifestyle considerations moving into the final stages of life, estate transfer, underperforming stocks, and more! We draw on Larry’s wealth of experience to get some perspective on more current trends in the industry such as the fixation on costs of advisors and we finish off hearing from Larry about how he defines success as he nears the end of his professional career. For all this and more, be sure to join us for an extra special episode!

Key Points From This Episode:

• The four horsemen of the retirement apocalypse. [0:03:03.4]
• Larry’s pick for the biggest mistake made in retirement planning. [0:06:32.9]
• Non-financial considerations for those heading into retirement. [0:09:22.7]
• Day to day preparations for finding meaning in the retirement years. [0:13:04.5]
• Why it is important to expose yourself to independent risk factors. [0:15:34.6]
• Understanding the reasons for never actually avoiding factors. [0:26:53.9]
• How to avoid losing assets during the transfer of an estate. [0:29:16.4]
• Taking underperformance into account when considering your investments. [0:32:58.3]
• Looking at the financial industry’s shift in focus towards costs. [0:37:06.1]
• Larry’s own definition of success moving into the end of his career and retirement. [0:41:55.1]
• And much more!

For more information or to contact Cameron and Ben, visit pwlcapital.com

Welcome to this week’s Rational Reminded Podcast! Today we’re diving into the recent CPPIB report that portrays actively managed funds in the most optimistic light. But before you trade in your index funds, we look at the methodologies and calculations employed by the report and show why there are a number of issues with their findings. Benjamin shares his proposal for an alternative analysis that employs a more risk appropriate benchmark, and we discuss why the report can be seriously misguiding. We also talk about the transitional issues that have result from MD Financial being taken over by Scotiabank and why some MD Financial clients have not been too pleased with it all. We tackle the issue of value versus growth stocks and look at a number of research papers that could explain the developments that have taken place in this regard. Nearing retirement and unsure when to take your CPP? Be sure to join us to find the answer to this complex question!

Key Points From This Episode:

• The positive report about the active management strategy of the CPPIB. [0:01:19.0]
• Why there is a red flag about the calculations done for this report. [0:03:19.0]
• Benjamin’s alternative analysis and how he built up a more risk appropriate benchmark. [0:05:43.0]
• The problem of CPP comparing a relatively safe portfolio with a much higher risk one. [0:09:02.0]
• CPPIB’s argument for why they are investing in illiquid asset classes. [0:11:31.0]
• A few repercussions of MD Financial being taken over by Scotiabank. [0:16:16.0]
• Does value still make sense? Looking at the data of value relative to growth. [0:19:45.0]
• An overview of three research papers on on the overreaction hypothesis. [0:25:10.0]
• The complex question of when to take your CPP and when it’s better to wait. [0:33:27.0]
• And much more!

After a successful launch, the podcast will live on! Thanks for the support and feedback.

In Episode 4 of the Rational Reminder podcast we discussed the following:

• The longest bull market in history?
• Are we repeating the tech bubble?
• Why it still makes sense to hold bonds
• Rebalancing isn’t always easy
• The Lost Decade, sort of
• Is tax-loss selling worth it?
• Horizons’ marketing mistake
• One decision funds
• Index fund fees are finally at 0%
• Sec lending is the future of index fund revenue
• Charley Ellis on the history of active management
• There are less willing losers today than there were in the past
• The paradox of skill
• Active managers underperform consistently
• Daniel Kahneman does not believe active management works
• If you think you have intuition about stocks, you’re wrong
• Corporate DB pension plans are not risk-free

The stories we talked about:

• This bull market could become the longest in history this month
• Tax-Loss Harvesting: Should Investors Believe the Hype?
• Horizons ETFs Launching 0% Management Fee ETF Portfolio Solutions
• Free Fidelity Funds Stoke Price War in Bid to Catch Index Giants
• ETFs still gathering assets, but inflows slow as investors favor lower-cost funds
• CHARLEY ELLIS – INDEXING AND ITS ALTERNATIVES (EP.62)
• Then, and now
• Kahneman's Insights: Beyond Thinking Fast and Slow
• 'It's going to be hard': Sears pension payments cut by 30% this week

The charts we talked about:

Source: PWL Capital

Source: S&P Dow Jones Indices

For more information or to contact Cameron and Ben, visit pwlcapital.com 

When you see funds performing monumentally well, you may feel regretful for not investing in them earlier. There is, however, a long history of funds that skyrocketed only to have major falls from grace a brief period after. The bulk of today’s episode is spent exploring this idea in the portfolio topic section but before getting into that, we kick the show off with some updates. We begin by talking about the GameStop short and whether this casts any new light on the concept of market efficiency. From there, we take a look at some recent news, particularly one story about the meteoric growth of New York-based investment managers ARK Invest, who recently hit $50B in assets under management up from $3B this time last year. This story acts as a great segue into the portfolio topic where Ben traces a history of funds that performed colossally well for a brief period but then plummeted thereafter. These funds were under the direction of ‘star’ fund managers with a focus on investing in tech disruptors. The discussion acts as a cautionary tale about overpaying for growth leading to poor realized returns. For the planning topic, we continue to shine a light on the ‘Talking Cents’ card game, a financial literacy outreach strategy created by The University of Chicago Financial Education Initiative. We invite the director of the Financial Education Initiative, Rebecca Maxcy, onto the show to speak about some of the thinking around this project and then discuss a few of the questions posed by the cards ourselves. Tune in today!

Key Points From This Episode:

• This week’s updates: Gerard O’Reilly on The Long View podcast and more. [0:00:25.3]
• Exploring the theme of questioning our beliefs with this week’s book. [0:03:15.3]
• News: What does the GameStop short mean for market efficiency? [0:06:10.3]
• More news: The meteoric growth of the investment managers ARK Invest. [0:12:15.3]
• Portfolio topic: Why funds with star managers have skyrocketed and subsequently plummeted. [0:15:13.3]
• Why overpaying for growth leading to poor returns is relevant to indexes too. [0:31:31.3]
• Do fund returns mean revert? Questions of luck and skill in fund management. [0:39:00.3]
• Planning topic: Rebecca Maxcy speaks about the ‘Talking Cents’ initiative. [0:45:41.3]
• Other financial education tools developed by the Financial Education Initiative. [0:52:51.3]
• Discussing Talking Cents questions about outsourcing financial planning and more.[0:55:09.3]
• Bad advice of the week: Michelle Schneider’s investing resources. [0:58:33.3]

Dimensional Fund Advisors (DFA) and Vanguard have intersecting histories rooted in the development of the first-ever index fund. Vanguard's market-cap weighted index funds have been nothing short of revolutionary and they became synonymous with sensible investing for many good reasons, but Dimensional took implementing the ideas from academic finance a few steps further, leading to their own deserved acclaim. In today’s episode, Ben and Dan analyze over 30 years of history between DFA and Vanguard, from their founding and relationship to their rise as global leaders in asset management. We discover how their approaches to foundational finance theory differ, whether diversification is mostly semantics, and how DFA and Vanguard compare to one another over 25 years of matched US-domiciled mutual funds. We also discuss which approach is easier to implement, essential insights for fund advisors, DFA’s downsides despite its long-term outperformance of the Vanguard 500, and an uplifting cancer update from Ben in today’s After Show. For practical investment takeaways, tune in today!

Key Points From This Episode:

(0:01:14) Unpacking DFA and Vanguard’s history and relationship.

(0:03:10) Mac McQuown and the birth of index funds at Wells Fargo in 1964. 

(0:07:48) How DFA and Vanguard became global leaders in asset management.

(0:10:43) Understanding DFA and Vanguard’s approach to foundational finance theory.

(0:19:34) The semantics of diversification. 

(0:22:22) Comparing 25 years of matched Dimensional and Vanguard US mutual funds.

(0:33:36) Which fund advisor’s approach is easier for others to implement and why.  

(0:39:30) How DFA has outperformed Vanguard in the long run (with downsides to consider). 

(0:43:09) Recapping today’s conversation: what every fund advisor needs to know.

(0:46:41) The After Show: Ben’s cancer update, Dan as co-host, and listener reviews.

Links From Today’s Episode:

Meet with PWL Capital — https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://pwlcapital.com/our-team/

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/ 

Canadian Couch Potato — https://canadiancouchpotato.com/ 

Dimensional — https://www.dimensional.com/ 

Vanguard — https://investor.vanguard.com/  

‘Remembering John “Mac” McQuown, Whose Curiosity Drove a Life of Innovation’ — https://www.dimensional.com/dk-en/insights/remembering-john-mac-mcquown-whose-curiosity-drove-a-life-of-innovation  

‘Episode 182: John “Mac” McQuown: The Data Will Sort That Out’ — https://rationalreminder.ca/podcast/182 

Wells Fargo — https://www.wellsfargo.com/ 

‘Episode 131: David Booth: The First Index Fund, Competing Fiercely, and Keeping it Simple’ — https://rationalreminder.ca/podcast/131 

William F. Sharpe | Stanford University — http://web.stanford.edu/~wfsharpe/bio/bio.htm 

‘Episode 316 - Andrew Chen: "Is everything I was taught about cross-sectional asset pricing wrong?!"’ — https://rationalreminder.ca/podcast/316  

Marco Salmon on LinkedIn — https://www.linkedin.com/in/marco-a-salmon-a63512284  

Books From Today’s Episode: 

The Incredible Shrinking Alpha — https://www.amazon.com/dp/0857198246 

Papers From Today’s Episode: 

‘The relationship between return and market value of common stocks’ — https://doi.org/10.1016/0304-405X(81)90018-0  

‘Market Efficiency’ — https://www.jstor.org/stable/246460 

‘The Cross-Section of Expected Stock Returns’ — https://doi.org/10.2307/2329112 

‘A Five-Factor Asset Pricing Model’ — https://dx.doi.org/10.2139/ssrn.2287202 

‘The Performance of Mutual Funds in the Period 1945-1964’ — https://dx.doi.org/10.2139/ssrn.244153  

‘The Death of Diversification Has Been Greatly Exaggerated’ — https://ssrn.com/abstract=2998754 

In this episode, we welcome back one of Canada's most trusted and widely read financial experts to discuss the state of Canadian personal finance. Rob Carrick is a columnist for The Globe and Mail, where he has brought his boots-on-the-ground perspective to readers for more than 20 years. He also co-hosts the Stress Test Podcast, where regular Canadians offer real-life perspectives on the biggest stress tests that their personal finances face in the wake of COVID-19. Tuning in, you’ll find out which issues are at the forefront of Rob’s readers’ lives. Next, he shares his perspective on GICs and ETFs and draws a comparison between affordable housing today and the mutual fund market of 20 to 30 years ago. We talk about the lack of comprehensive advice that Canadians are receiving from their planners, the state of affordable housing in the country, and why so many Canadians say they are giving up on home ownership altogether. We also compare housing returns to the stock market and discuss successfully using a reverse mortgage, the non-financial challenges faced by retirees, and more. For a comprehensive overview of the state of personal finance in Canada (and some practical advice for protecting yourself and prospering in a challenging economy), don’t miss today’s episode!

Key Points From This Episode:

(0:00:19) Introducing today’s returning guest, Rob Carrick. 

(0:02:38) Issues at the forefront of Rob’s readers’ lives today. 

(0:04:02) His perspective on GICs, ETFs, and simplification. 

(0:09:33) Comparing today’s EFT Market with the mutual fund market of 20 to 30 years ago. 

(0:15:24) The lack of comprehensive advice Canadians are receiving from their planners.

(0:20:03) Rob’s perspective on affordable housing, as outlined in his Globe and Mail article. 

(0:24:52) Why a growing number of adults continue to live with their parents into adulthood. 

(0:28:48) Reasons that many Canadians say they are “giving up on home ownership.” 

(0:31:44) Housing returns in comparison to the stock market. 

(0:35:13) Successfully using a reverse mortgage. 

(0:37:28) Some of the non-financial challenges faced by retirees. 

(0:41:06) The number of parents supporting their adult children today. 

(0:45:03) How adult children are pitching in to support their parents.

 0:49:06) Rob’s advice for educating the next generation on financial planning.

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on X — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on X — https://twitter.com/benjaminwfelix

Cameron on X — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Mark McGrath on X - https://twitter.com/MarkMcGrathCFP

Mark McGrath on LinkedIn - https://www.linkedin.com/in/markmcgrathcfp/

Rob Carrick — http://robcarrick.ca/

Rob Carrick on X — https://twitter.com/rcarrick 

Rob Carrick Email — carrick@globeandmail.com

Stress Test Podcast — https://www.theglobeandmail.com/stress-test/

Carrick on Money — https://www.theglobeandmail.com/carrick-on-money/

The Globe and Mail — https://www.theglobeandmail.com/

‘Young adults are giving up on home ownership, and a lot of them are furious about it’ — https://www.theglobeandmail.com/investing/personal-finance/article-young-adults-are-giving-up-on-home-ownership-and-a-lot-of-them-are/

How Not to Move Back in With Your Parents – https://www.amazon.com/How-Move-Back-Your-Parents/dp/038567192X

Wealthsimple — https://www.wealthsimple.com/

Episode 39 — https://rationalreminder.ca/podcast/39

Episode 172 — https://rationalreminder.ca/podcast/172

Is the government manipulating inflation data? Why do so many people feel like their personal costs are rising faster than official inflation numbers suggest? In this episode of the Rational Reminder Podcast, we dive deep into one of the most debated and misunderstood economic topics: inflation. Today, we are joined by Andrew Barclay, an economist and senior analyst in the Consumer Price Division at Statistics Canada, to discuss everything you need to know about inflation and the Consumer Price Index (CPI). Statistics Canada is Canada’s national statistical agency dedicated to producing accurate, relevant, and timely data to help Canadians better understand their country. In our conversation, we unpack how inflation and the CPI are calculated and why it is so important. We explore the controversy around CPI calculations and the influence of inflation on government benefits, tax brackets, and the overall economy. Andrew also addresses scepticism and conspiracy theories about government inflation reporting, uncovers drivers of the perception gap, and explains how Statistics Canada ensures the accuracy and integrity of its data. Join us to hear the real story behind CPI and inflation with Andrew Barclay!

Key Points From This Episode:

(0:00:00) Background about Andrew and what inspired today's topic. 

(0:05:33) Find out why measuring inflation is important and how the CPI is calculated. 

(0:10:08) What goes into the CPI basket and how frequently the contents are updated.

(0:12:42) How consumer choices impact inflation and how 'shrinkflation' is accounted for.

(0:15:43) Learn how quality adjustments are accounted for in the CPI and why they matter. 

(0:19:01) Scepticism surrounding quality adjustments and how the CPI adapts to crises.

(0:25:21) The role of grocery price tracking and why Canada uses a single CPI measure.

(0:28:08) Explore the idea of personal inflation and why it is usually different to the CPI.

(0:31:10) The difference between home prices and housing costs and how they are calculated.

(0:35:41) Hear how Statistics Canada's approach for housing compares to other methodologies.

(0:41:15) Perceived inflation versus actual inflation and drivers of the inflation perception gap.

(0:51:58) Statistics Canada's method of dealing with the perception gap and ensuring quality. 

(0:55:51) Uncover the most criticized indexes and how Statistics Canada includes feedback.

(1:01:52) Andrew's message for those who do not trust the CPI and his definition of success.

Links From Today’s Episode:

Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://pwlcapital.com/our-team/

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP

Andrew Barclay on LinkedIn — https://www.linkedin.com/in/andrew-barclay-a38b6035/

Statistics Canada — https://www.statcan.gc.ca/

Canadian System of National Accounts | 'Catalogue of products' — https://publications.gc.ca/Collection/Statcan/13F0029X/13F0029XIE2000001.pdf

Bank of Canada — https://www.bankofcanada.ca/

Canadian Real Estate Association (CREA) — https://www.crea.ca/

Episode 323: Renting Versus Buying a Home in Canada 2005-2024 — https://rationalreminder.ca/podcast/323

Surveys of Consumers | University of Michigan — https://data.sca.isr.umich.edu/

Statistics Canada | The Daily — https://www150.statcan.gc.ca/n1/dai-quo/index-eng.htm

Books From Today’s Episode:

The Courage to Be Disliked — https://www.amazon.com/Courage-Be-Disliked-Phenomenon-Happiness/dp/1501197274

Papers From Today’s Episode: 

'The naked eye versus the CPI: How does our perception of inflation stack up against the data?' — https://www.statcan.gc.ca/o1/en/plus/256-naked-eye-versus-cpi-how-does-our-perception-inflation-stack-against-data

Do you feel like you have a good grasp of financial markets? Think again! In this episode, we take a plunge into the world of financial markets with experts Jules van Binsbergen and Jonathan Berk. Jules is a Professor of Finance at the Wharton School of the University of Pennsylvania and Jonathan is a Professor of Finance at Stanford Graduate School of Business. They also host a popular podcast called Else Equal, which explores the science and strategy of making better financial decisions, and have written several academic papers that challenge the status quo. In our conversation, we discuss their research on the relationship between manager skill and fund performance, the best ways to measure performance, and reasons why benefits are in favour of the managers. We also explore the dogma surrounding mutual funds, the differences between active and passive management, and how to measure efficient capital markets. Listeners will also hear perspectives that challenge their understanding of capital markets and viewpoints that completely disagree with previous guests. Although we have covered this topic before in previous episodes, this conversation will fundamentally change the way you view financial markets and how to think about them.

Key Points From This Episode:

• What information fund performance contains about manager skill. (0:04:04)
• Reasons why manager skill and performance are unrelated. (0:04:59)
• We learn how manager skills should be measured. (0:06:57)
• How to choose the appropriate benchmark to measure value added. (0:09:26)
• Find out if you can use factor-mimicking portfolios to measure risk-adjusted returns. (0:12:05)
• Whether funds that directly target risk factors can be used as an investable benchmark. (0:16:35)
• What the skill of active managers are when skill is measured as value-added. (0:20:52)
• The proportion of value-added between security selection and market timing. (0:23:20)
• Discussion about how persistence manifests when it is measured by value-added. (0:25:43)
• Find out if investors should analyze mutual fund companies as opposed to managers. (0:32:36)
• Discover why research has focused on individual security pricing and not on evaluating manager skill. (0:34:25)
• We unpack the reasons why it's a zero net alpha as opposed to a negative net alpha in equilibrium. (0:38:19)
• We delve into why the research took so long to apply rational expectations to fund investors as with the stock market. (0:42:46)
• An explanation of how equilibrium zero net alpha fits into Bill Sharpe's arithmetic of active management. (0:48:16)
• Who benefits from the high amount of skill available within the sector. (0:51:11)
• Whether the increase in millionaires around the world drives inequality. (0:56:12)
• Hear if it is possible to identify skilled fund managers before the benefits of their skills are absorbed by fund size. (01:01:41)
• The implications on efficient market hypothesis for the stock market. (01:05:36)
• Advice for investors, considering that the benefits of skill are in favour of managers. (01:08:37)
• Details about their research on how multi-factor asset pricing models are not representative of risk. (01:12:45)
• We end the show by learning how our guests define success in their lives. (01:19:08)

Links From Today’s Episode:

Jules van Binsbergen — https://sites.google.com/view/jules-van-binsbergen/

Jules van Binsbergen on LinkedIn — https://www.linkedin.com/in/jules-van-binsbergen-a7b21a2/

Jules van Binsbergen on Google Scholar — https://scholar.google.com/citations/

Wharton School of the University of Pennsylvania — https://www.wharton.upenn.edu/

Jonathan Berk — https://www.gsb.stanford.edu/faculty-research/faculty/jonathan-b-berk

Jonathan Berk on LinkedIn — https://www.linkedin.com/in/jonathan-berk-07874a3b/

Jonathan Berk on Google Scholar — https://scholar.google.com/citations/

Stanford Graduate School of Business — https://www.gsb.stanford.edu/

Else Equal: Making Better Decisions — https://www.gsb.stanford.edu/business-podcasts/all-else-equal-making-better-decisions

Passive in Name Only — https://heinonline.org/HOL/LandingPage/

The Emperor of All Maladies — https://www.amazon.com/Emperor-All-Maladies-Biography-Cancer/dp/1439170916

Unsettled — https://www.amazon.com/Unsettled-Climate-Science-Doesnt-Matters/dp/1950665798

‘Episode 200 with Prof. Eugene Fama’ — https://podcasts.google.com/feed/aHR0cHM6Ly9yYXRpb25hbHJlbWluZGVyLmxpYnN5bi5jb20vcnNz/episode/MzA2MjM2OTctOTc5Yy00MDU4LWE3YzMtYTdmMGU4NGQ0Y2Jj?sa=X&ved=0CAIQuIEEahgKEwjI27ng_rH6AhUAAAAAHQAAAAAQsQQ

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/?hl=en

Rational Reminder on YouTube — https://www.youtube.com/channel/
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on Twitter — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Welcome to The Rational Reminder Podcast. On today’s episode we are going to roll out our new format for the show. We ended off our previous show format with a series of interviews, and today we are ready to jump into something new! Of course, we definitely don’t plan on doing that perfectly today because we do have a couple of things that we want to talk about before we make it official. The meat of the episode will be focused on discussing the cost of financial advice. Should you pay for it, how should you pay for it, and how much should you pay for it? On top of that, we are going to be discussing the performance of the markets, controlling the things you do have control over, being a DIY investor, and how to strategically choose where you get your investment advice from. It’s genuine and it’s out there, so keep listening to hear more! 

Key Points From This Episode:

• Performance of the markets - should you invest. [0:03:25.0]
• Having control over your asset allocation. [0:05:0]
• The use of robo advisors. [0:07:21.0]
• What should we be paying for advisors. [0:10:40.0]
• Service delivery - is the outcome positive for the client and the advisor. [0:13:49.0]
• How we use a tier fee structure at PWL. [0:16:17.0]
• Benjamin shares about the event he went to last week. [0:17:03.0]
• Who should you be getting your advice from - does licensed matter. [0:21:14.0]
• Being a DIY investor. [0:23:34.0]
• The key takeaway. [0:28:21.0]
• And much more!

For more information or to contact Cameron and Ben, visit pwlcapital.com

Today we have a guest join us on one of our 'us episodes', and we are very lucky to welcome Mathias Hasler to take part in the last section of today's podcast. Mathias is a Visiting Assistant Professor of Finance at Boston College, and his primary research focuses are empirical asset pricing, market efficiency, value investing, and corrections for data mining. In our chat with him today, we zoom in on a specific paper of his and its proposition about 'the six decisions' and their alternatives. Before we dive in with Mathias, we spend a little time with our usual round-up; looking at a new book by Hubert Joly, and fielding a very interesting listener question about value and investing in relation to green investments. Also, make sure to stay tuned for some thought-provoking Talking Sense cards with Mathias at the tail end of today's podcast.

Key Points From This Episode:

• This week's book review for The Heart of Business and a look at some of its main ideas. [0:05:12.4]
• A quick recap of some fundamental information regarding inflation hedging. [0:09:45.1]
• A listener question about value and ESG investing, and the relationship between factors and sectors. [0:13:40.4]
• Unpacking the six decisions that Mathias outlines in his recent paper. [0:34:42.8]
• The process that Mathias went through testing his alternatives to the six decisions. [0:40:18.3]
• Differences between conditional and unconditional value premiums estimates. [0:43:39.5]
• The implications of Mathias' findings for investors pursuing value. [0:47:08.2]
• A round of Talking Sense cards with Mathias relating to saving and spending, job outcomes, and more. [0:49:20.1]

Factor Investing with ETFs White Paper

Today on the show we are taking about the influence of feelings in the decision making process. As investors and as humans in general, we tend towards making decisions based on feelings over rational and well-balanced data collection, that is just part of how we are wired. Here at the Rational Reminder Podcast we want to remind everyone of the importance of balancing these feelings with rationality. This does not mean that we should be making decisions without feelings but just to keep in mind our own biases and how these work to our detriment. In our discussion we cover what a good decision might look like, the two systems of thought as detailed by Daniel Kahneman and the importance of framing when approaching a weighty choice. We also run through a little on the safe savings rate and the ETF model portfolio. We end off with some useful strategies that can help you to make better decisions, especially when it comes to your money. For all this and a whole lot more, be sure to tune in today!

Key Points From This Episode:

• The recurrence of feelings in decision making. [0:03:56.5]
• Lack of data in the safe savings rate research. [0:05:18.2]
• The ETF model portfolio and where to find it online. [0:10:53.8]
• A few of the twenty craziest investing facts ever! [0:12:13.5]
• What is a good money decision? [0:15:06.1]
• Confirmation bias and influences on our decision making. [0:18:50.9]
• Kahneman and the two systems of thought. [0:20:10.9]
• The effects of past experiences on our current strategy. [0:24:46.3]
• Framing as part of the discussion and decision making process. [0:27:36.2]
• Four things you can do to implement better decision making. [0:30:12.6]
• And much more!

If the wealthiest families of the past century spent a reasonable amount of their wealth, invested in the stock market, and paid taxes, there would be thousands of billionaires today. But there aren’t. So, what happened? To answer this question, we are joined by authors and finance professionals, Victor Haghani and James White. Their recently released book, The Missing Billionaires: A Guide to Better Financial Decisions, uses the missing billionaires puzzle to explore how and why most investors fail to capture the returns offered by the market. Victor was a founding partner of Long-Term Capital Management (LTCM), the multi-billion-dollar hedge fund that famously collapsed in 1998 and nearly took the global financial markets down with it. His participation in the downfall of LTCM led him to reassess much of the way he thought about investing, and in this episode, he shares some simple but powerful frameworks and personal finance recommendations. We also receive accessible explanations of the Merton model and expected utility theory from James, take a deep dive into dynamic asset allocation, discuss optimal solutions for lifetime spending, and learn more about the certainty equivalent return and Sharpe ratios, plus so much more. Whether you’re an entrepreneur invested in your own business or simply focused on building long-term wealth, Victor and James’ book (and this conversation about it) will be a valuable resource for better financial decision-making, so be sure to tune in today!

Key Points From This Episode:

• (0:05:19) The puzzle of the missing billionaires (and why it matters to Victor and James). 

• (0:09:45) Some common but critical financial decision-making problems most people face. 

• (0:12:39) Unpacking the coin-flipping experiment in their ‘What's Past is Not Prologue’ paper. 

• (0:19:57) What investors should aim to maximize when sizing positions in risky assets. 

• (0:24:22) An example that illustrates how the Merton model relates to bullish bets. 

• (0:29:04) What the Merton share tells us about dynamic asset allocation if it is or isn't possible to estimate expected equity returns. 

• (0:35:29) How real expected returns affect optimal risky shares for long-term investors. 

• (0:37:29) Different ways to forecast volatility to determine the optimal risky share. 

• (0:42:00) Easy-to-understand definitions of the utility curve and expected utility theory. 

• (0:50:20) Using the certainty equivalent return and Sharpe ratio to evaluate investments. 

• (0:57:56) Whether or not options belong in the portfolios of typical retail investors. 

•  (0:59:01) If expected utility is a good model for normative personal finance recommendations.

• (1:05:16) How Victor’s experience with LTCM affected him, both professionally and personally. 

• (1:09:08) What optimal solutions for lifetime investing and spending look like. 

•  (1:22:22) Questions to ask yourself to work out your own utility function and risk aversion.

• (1:28:19) Victor and James’ parting financial advice and respective definitions of success. 

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-270-what-happened-to-all-the-billionaires-with-victor-haghani-and-james-white/25122

Books From Today’s Episode:

The Missing Billionaires – https://www.amazon.com/Missing-Billionaires/dp/1119747910

Stumbling on Happiness — https://www.amazon.com/Stumbling-Happiness-Daniel-Gilbert/dp/1400077427

The Man Who Solved the Market – https://www.amazon.com/Man-Who-Solved-Market-Revolution/dp/B07P1NNTSD

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/ 

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on X — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on X — https://twitter.com/benjaminwfelix

Cameron on X — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Victor Haghani on LinkedIn — https://www.linkedin.com/in/victorhaghani/

James White on LinkedIn — https://www.linkedin.com/in/james-white-b4310a47/

Elm Wealth — https://elmwealth.com/

When Genius Failed — https://www.amazon.com/When-Genius-Failed/dp/0375758259/

Where are all the Billionaires?: Victor Haghani at TEDxSPS – https://youtu.be/1yJWABvUXiU

‘What's Past is Not Prologue’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3034686

‘Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case’ – https://www.jstor.org/stable/1926560

‘Stock Prices, Earnings, and Expected Dividends’ – https://www.jstor.org/stable/2328190

‘No Place to Hide: Investing in a World With No Risk-Free Asset’ – https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3903372

‘Sharpening Sharpe Ratios’ – https://papers.ssrn.com/sol3/papers.cfm?abstract_id=325942

‘A Sharper Lens for Sizing Up Nickels and Steamrollers’ – https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2874602

‘Do Options Belong in the Portfolios of Individual Investors?’ – https://elmwealth.com/do-options-belong-in-portfolios/

We are so happy to bring you all our 200th episode, and who better to have on the podcast on this auspicious occasion than the legendary, Professor Gene Fama? This is one of the most jam-packed episodes we have ever recorded, with Gene providing concise and thought-provoking answers to our many, many questions. After delving into the foundations of Gene's work and philosophy, covering market efficiency, and its competing theories, Gene entertains our queries about a wide range of ideas and models, and generously shares the decades worth of wisdom that he is so widely known for. We also find time to talk about retirement plans, inflation, cryptocurrencies, and the influence of machine learning. Towards the end of our conversation, our guest touches on some more personal ideas about productivity, his career, his partnership with Ken French, and what success means to him at this point. For a landmark episode, with a true hero of the evidence-based approach to investing, make sure not to miss this.

Key Points From This Episode:

• The basics of market efficiency and its main implications for investors. [0:04:49]
• Limitations of the efficient markets model for explaining specific cases. [0:08:02]
• Gene's perspective on the inelastic markets hypothesis and his interest in it for the future. [0:09:36]
• The anomalies that brought down the capital asset pricing model. [0:10:26]
• Unpacking the three-factor and five-factor asset pricing models that Fama and French created. [0:11:43]
• Thoughts on the Q-factor model, factor premiums, and data dredging. [0:15:43]
• Gene's reflections on building data sets dating back to the 1920s. [0:17:13]
• The best way to estimate expected returns and expected factor premiums according to Gene. [0:19:52]
• Structuring portfolios and how different investors should approach this. [0:24:10]
• Considering international diversification for investors in Canada. [0:29:05]
• Further thoughts on asset pricing models. [0:32:47]
• The assets that are hedged against expected and unexpected inflation. [0:33:31]
• Gene illuminates the role of the Fed in relation to inflation. [0:36:43]
• Advice for typical retirees from Gene. [0:38:22]
• The challenges that Gene has experienced translating theory into practice. [0:40:16]
• Lesson from Gene's work with Dimension Fund Advisors. [0:43:47]
• Gene's reflections on his impact and having his theories implemented in practice. [0:45:32]
• Weighing the value and impact of behavioral finance. [0:47:53]
• Technology and active managers; is it any different for those aiming to achieve alpha in the current context? [0:50:46]
• Gene weighs in on cryptocurrencies and how his perspective might have shifted. [0:53:08]
• A look at the people who have had the biggest influence on Gene's career. [1:03:05]
• Thoughts on productivity and making the most of periods of clear thinking. [1:03:39]
• Our guest's personal definition of a successful life. [1:06:17]

As many of you already know, we have been working hard to figure out the best way to model expected stock returns for financial planning and asset allocation. It has a lot of history in financial literature, which is to be expected, given the importance of the figure. In today’s episode, we’re looking all the way back to 1985, when Rajnish Mehra and Edward C.Prescott called the equity premium a puzzle, through to the present day, when the equity risk premium has only gotten larger. We dive into some of the theories for resolving the equity premium puzzle, explain why US stock market data isn’t the best way to estimate future premiums, thanks to its survivorship bias, and some of the general issues with interpreting past returns. Benjamin also gets into predictability, which is not as obvious as it seems, and highlights some of the information from the simulation he performed, and the big breakthroughs from running the numbers. All this and more in today’s episode on expected stock returns, so make sure to tune in today!

Key Points From This Episode:

• Kicking off with the fallout from the collapse of Archegos Capital, the death of Bernie Madoff, and the story of the $100 million New Jersey deli. [0:06:35]
• Reflecting on the recent article, ‘Could Index Funds be ‘Worse Than Marxism’?’. [0:11:05]
• On to today’s topic: do expected stock returns wear a cape? [0:13:05]
• Theories for resolving the equity premium puzzle; either the model is wrong or the historical premium was higher than it will be in the future. [0:14:14]
• Hear John H. Cochrane’s theory from his 1997 paper, ‘Where is the Market Going?’ [0:14:42]
• Why we can’t use historic US stock market data to approximate future premiums. [0:14:57]
• Other issues with looking to past returns, like no proof that the equity premium was stationary. [0:15:23]
• Why time periods characterized by decreasing risk should effectively see decreased discount rates too. [0:16:04]
• Dimson, Marsh, and Staunton (DMS) on expected stock returns using out of sample data. [0:16:40]
• Hear some of the equity risk premium stats from their world index versus the US. [0:19:38]
• How annual returns have been relatively unaffected by global financial crises. [0:21:15]
• From looking back, to what to expect going forward: the issues with interpreting past returns. [0:22:10]
• Why, according to DMS, expected returns equal the growth rate in dividends plus the dividend yield. [0:25:26]
• Hear the actual figures, which reflect the minor contribution of multiple expansion. [0:26:49]
• What a company is worth if it doesn’t distribute capital to shareholders. [0:29:03]
• Find out why the expected geometric equity risk premium works out to 3.5 percent. [0:30:13]
• While the DMS approach is reasonable, it still doesn’t account for whether expected returns are constant through time or if they vary. [0:32:21]
• Predictable stock returns dictate that changing risk aversion over time measurably affects risk premiums after good and bad events. [0:34:45]
• Diving into the vast literature on return predictability, including a paper by Goyal and Welch. [0:35:12]
• Why predictability is not as obvious as it seems, thanks to our sample data. [0:36:15]
• What we can learn from ‘Long Horizon Predictability’ by Boudoukh, Israel, and Richardson. [0:39:30]
• R-squared and market timing decisions; why it would need to be higher than it was historically. [0:40:32]
• Hear about the world index analysis Benjamin performed and what it proves about risk premiums over 30 and 60 year periods. [0:42:31]
• Bootstrap simulations and why they are criticized; because they ignore mean relationship, you get a much wider distribution of outcomes. [0:44:50]
• Big breakthroughs from running through these numbers, like noting the upward bias and tighter distribution in long-run historical data. [0:50:34]
• How to apply this on your own, using the 3.5 percent risk premium in the long run. [0:52:23]
• Some of the other interesting things we noted during these simulations. [0:53:10]
• We pull two cards: choosing between a holiday and a pet, and borrowing money with interest. [0:53:56]
• Bad advice of the week: a free lunch-esque article on investing in private credit. [0:55:53]

Few people have impacted the way the world works, and today, we have the privilege of speaking to one of them. Professor Robert C. Merton is the Distinguished Professor of Finance at The Massachusetts Institute of Technology (MIT) Sloan School of Management and Professor Emeritus at Harvard University. He has a Ph.D. in Economics from MIT and is currently the Resident Scientist at Dimensional Fund Advisors. Professor Merton was awarded the Alfred Nobel Memorial Prize in Economic Sciences in 1997 for his work establishing a new method to determine the value of derivatives. He also created the Intertemporal Capital Asset Pricing Model (ICAPM), a popular tool to help advisors make informed financial decisions and understand market trends. In our incredible conversation, we cover portfolio theory, moving from Capital Asset Pricing Model (CAPM) to the Intertemporal Capital Asset Pricing Model (ICAPM), and how financial models work. We also discuss the difference between the value of your capital and the value of the cash flow that can come from that capital, why size can't be a factor, what aspects to consider when calculating the worth of an account, and the definition of market efficiency. We also delve into retirement, how to safely invest for it, what pitfalls to avoid, and how retirement funds may change over time. He also shares his opinion about some popular financial advise and what the roles of financial advisors should be. For all this and more, tune in to hear from the man behind the model and Nobel laureate, Professor Robert C. Merton!

Key Points From This Episode:

• We start with Professor Merton describing the concept of market efficiency. (0:04:28)
• He explains the basics of his ICAPM asset pricing model. (0:09:10)
• How portfolio theory changes when moving from single-period to multi-period. (0:10:46)
• Hear a practical example of expected returns changing over time. (0:14:15)
• Why ICAPM is dependent on the sensitivities to risk of an individual investor. (0:22:52)
• Find out how to determine if the correct proxy has been identified for a risk. (0:25:34)
• Learn how home country bias fits into portfolio choice from an ICAPM hedging perspective. (0:31:54)
• The definition of a risk-free asset and how it changes with time. (0:33:24)
• What influence the time horizon should have on the mix between stocks and bonds in an investor’s portfolio. (0:35:33)
• His opinion about young investors using leverage to make investments. (0:41:50)
• What people should be doing to get more accessibility to leverage. (0:47:39)
• Professor Merton tells us who should focus on value stocks and growth stocks. (0:51:34)
• Discover what makes retirement income a difficult problem to solve and tips to ensure your retirement. (0:56:47)
• We discuss using Monte Carlo simulations to estimate how much people can spend in retirement. (1:09:04)
• He provides insight into how to get more from your retirement investment. (1:13:04)
• Whether nominal annuities are considered low-risk assets for retirees. (1:16:48)
• An overview of the impact mathematical models have had on the finance sector. (1:20:12)
• Areas of finance practice that are lagging behind the financial models. (1:27:35)
• Hear what popular financial advice Professor Merton thinks is misguided. (1:33:22)
• Ways his work on option pricing has impacted society. (1:41:26)
• The role he sees for financial advisors. (1:45:42)
• Why he decided to join Dimensional Fund Advisors. (1:48:54)
• Professor Merton unpacks the definition of product design. (1:52:14)
• Stay listening for the extended discussion. (1:57:24)

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-234-prof-robert-c-merton-icapm-retirement-and-models-in-finance-discussion-thread/20748  

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Prof. Robert C. Merton — https://robertcmerton.com/

Join us as we present a compilation of segments on expected returns and the dynamics that shape investment outcomes. We deep dive into the world of financial predictions and gain a comprehensive understanding of how expected returns influence your financial decision-making. We also go back to the episode with Dr. Brian Portnoy where we delved into his book, The Geometry of Wealth. Lastly, joining our conversation is our colleague Matt Gour who discusses The Power of Moments by Chip and Dan Heath. We discuss how extraordinary moments have the power to shape our lives and the pivotal importance of crafting unforgettable experiences. Tune in now!

Key Points From This Episode:

• What Pressor Fama had to say about expected returns. (0:03:35)
• Looking at returns through a historical lens with Professor Goetzmann. (0:08:23)
• Professor Cederburg explains the usefulness of historical data. (0:11:38)
• Hear Professor Cochrane’s perspective on expected returns. (0:15:19)
• Professor Cornell shares his contrasting view on historical returns. (0:23:41)
• We recap our discussion with Professor French about uncertainty. (0:34:23)
• Breaking down the conventional viewpoint of uncertainty with Professor Pastor. (0:38:34)
• A brief overview of our approach to estimating expected returns. (0:44:03)
• Highlights from our conversation with Dr. Brian Portnoy about his book. (0:47:56)
• Matt Gour joins us for our weekly book review of The Power of Moments. (0:51:15)
• He shares an impactful moment from his childhood. (0:54:04)
• We unpack a main takeaway from the book: the peak-end rule. (0:56:23)
• The four elements needed to create a defining moment. (0:57:51)
• Learn about the different types of defining moments. (1:01:02)
• How to be deliberate about creating powerful moments. (1:01:02)
• Main takeaways from the book. (1:04:55)
• The aftershow, planned meetups, upcoming projects, and more. (1:07:15)

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-259-comprehensive-overview-estimating-expected-returns-discussion-thread/24077

Book From Today’s Episode:

The Geometry of Wealth: How to shape a life of money and meaning — https://amzn.to/46qpjl5

The Power of Moments: Why Certain Experiences Have Extraordinary Impact — https://amzn.to/3pmYJJb

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
 Rational Reminder Website — https://rationalreminder.ca/ 

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Nick Maggiulli on Instagram — https://instagram.com/nickmaggiulli

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

'Financial Planning Assumptions for Market-Cap Weighted and Factor Tilted Portfolios – Methodology Guide' — https://www.pwlcapital.com/resources/financial-planning-assumptions-for-market-cap-weighted-and-factor-tilted-portfolios-methodology-guide/ 

Episode 38: Feelings in the Decision Making Process — https://rationalreminder.ca/podcast/38

Episode 92: Dr. Moira Somers and Dave Goetsch — https://rationalreminder.ca/podcast/92

Episode 100: Professor Kenneth French — https://rationalreminder.ca/podcast/100

Episode 102: Dr. Brian Portnoy — https://rationalreminder.ca/podcast/102

Episode 124: Professor Lubos Pastor — https://rationalreminder.ca/podcast/124

Episode 151: Professor Brad Cornell — https://rationalreminder.ca/podcast/151

Episode 169: Professor John Cochrane — https://rationalreminder.ca/podcast/169

Episode 189: Regret (and How to Read More w/ Neil Pasricha) — https://rationalreminder.ca/podcast/189

Episode 200: Professor Eugene Fama — https://rationalreminder.ca/podcast/200

Episode 224: Professor Scott Cederburg — https://rationalreminder.ca/podcast/224

Episode 248: Professor William Goetzmann — https://rationalreminder.ca/podcast/248

Today we are so happy to welcome the amazing Katy Milkman to the show. Katy is the author of the impressive and inspiring new book, How to Change: The Science of Getting from Where You Are to Where You Want to Be, and in this episode, we get the inside scoop from her about her work, with specific attention to how it can be applied to investment and finances. Emerging from an engineering background, Katy has a powerful and unique skillset to be tackling the social sciences, and we hear from her about how this path has impacted her thoughts on data quality and the areas she has chosen to research. Our guest shares some very interesting and sometimes surprising information on the idea of fresh starts, commitment devices, and ambitious goals, before we tackle the fascinating subjects of laziness and confidence in relation to our saving habits. Listeners can expect to come away with some renewed reasons for data-driven decisions as well as some new impetus to double down on healthy change. We cannot recommend Katy's book highly enough, so tune in to hear what she has to say and make sure to purchase this amazing read.

Key Points From This Episode:

• Unpacking the idea of a 'fresh start' and the ideal times for this. [00:02:26.2]
• Instances when fresh starts might be harmful instead of helpful. [00:07:28.1]
• Better methods for adhering to goals around saving money. [00:12:04.6]
• Commitment devices and how these can aid people in avoiding dipping into savings. [00:19:04.3]
• The value of ambitious goals and the impacts of different kinds of goal setting. [00:22:13.7]
• Using the power of a new identity in the process of goal setting around retirement savings. [00:26:00.8]
• Katy's suggestions for taking responsibility for independent saving. [00:29:58.7]
• Thoughts on laziness; utilizing this inherent tendency for our benefit. [00:31:43.6]
• Katy's perspective on habit-forming; habit loops, consistency, and triggering certain behaviours through rewards. [00:35:40.6]
• Decision-making and confidence; how much it matters and how to increase it. [00:42:11.4]
• More productive conversations around advice, assistance, and expertise. [00:46:31.2]
• The influence of community on our success; how determinant the people around us are. [00:49:38.6]
• Considering the permanence or perpetual struggle of behavioural change. [00:52:20.6]
• How accountability and the role of third parties can initiate meaningful change. [00:54:21.1]
• Katy's concerns over data quality and how this has impacted the areas of her research. [00:55:24.9]
• How Katy defines success in her life: leaving the world a better place and enjoyment. [00:56:49.8]

Gaining financial literacy is critical if you want to thrive in today’s society. And yet, only about a third of the global population can be described as being financially literate. Joining us today to unpack the concept of financial literacy and its impact is Dr. Annamaria Lusardi, Professor of Economics and Accountancy at George Washington University. Dr. Lusardi has taught Economics for over 20 years, and her passion for financial literacy is reflected in everything she does. Her career has been instrumental in furthering the cause of increased global financial literacy, from being the Founder and Academic Director of the Global Financial Literacy Excellence Center, to serving as the co-chair of the G53 Financial Literacy and Personal Finance Research Network. In our conversation, Dr. Lusardi breaks down the definition of financial literacy, how it’s measured by leading experts across the world, along with some of the key differences we see between people in richer and poorer countries. She explains why financial advice isn’t a replacement for financial literacy and provides guidance on what we should be doing to educate various population groups. We also discuss how global trends have created an increased need for financial literacy as an essential skill, especially for young people, and why greater global financial literacy is beneficial to everyone, including governments and wealthier individuals. Tune in as we delve into the many facets of financial literacy and the important role it plays in our collective health, happiness, and success!

Key Points From This Episode:

• Lusardi defines the concept of financial literacy and the importance of being able to apply it as a skill. (0:04:30)
• How experts measure financial literacy and some of the key challenges involved. (0:07:55)
• The global survey that was conducted on financial literacy in 2014 and its dismal findings. (0:11:44)
• The areas of financial literacy that people struggle with most and why the need for financial literacy has increased over time. (0:15:26)
• The costs and benefits of gaining financial literacy and the concept of optimal financial knowledge. (0:22:42)
• An overview of the type of person who should be investing in financial literacy and why. (0:27:46)
• How the strength of your government’s social safety net affects financial literacy rates. (0:30:15)
• The extent to which financial literacy affects stock market participation and wealth accumulation. (0:31:18)
• Some of the common mistakes that those with low levels of financial literacy tend to make. (0:35:10)
• Why financial literacy’s end goal should be geared towards happiness and living a good life. (0:39:24)
• The impact that financial advice and financial advisors have on economic outcomes. (0:43:18)
• How financial literacy varies across demographic groups and some of the factors that account for disparities in financial literacy. (0:45:42)
• How financial education programs can yield positive results and where this education should take place for it to be optimal. (0:52:13)
• What listeners can do to increase financial literacy for those around them and why there is no alternative to good financial knowledge. (0:58:55)

Participate in our Community Discussion about this Episode:

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder Website — https://rationalreminder.ca/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Dr. Annamaria Lusardi — https://www.annamarialusardi.com/

'Financial literacy and financial resilience: Evidence from around the world' — https://onlinelibrary.wiley.com/doi/abs/10.1111/fima.12283

'The Economic Importance of Financial Literacy: Theory and Evidence' — https://gflec.org/wp-content/uploads/2014/12/economic-importance-financial-literacy-theory-evidence.pdf

'Optimal Financial Knowledge and Wealth Inequality' — https://www.journals.uchicago.edu/doi/10.1086/690950

'Financial literacy and stock market participation' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X11000717

'Employee Financial Literacy and Retirement Plan Behavior: A Case Study' — https://onlinelibrary.wiley.com/doi/abs/10.1111/ecin.12389

'Skating on thin ice: New evidence on financial fragility' — https://www.dnb.nl/media/uxldldkl/working-paper-no-670_tcm47.pdf

'Stereotypes in financial literacy: Evidence from PISA' — https://www.sciencedirect.com/science/article/abs/pii/S0929119920302753?via%3Dihub

'Fearless Woman: Financial Literacy and Stock Market Participation' — https://gflec.org/wp-content/uploads/2021/03/Fearless-Woman-Research-Final.pdf?x53868

'How Financially Literate Are Women? An Overview and New Insights' — https://onlinelibrary.wiley.com/doi/abs/10.1111/joca.12121

'Factors Contributing to Financial Well-Being among Black and Hispanic Women' — https://jor.pm-research.com/content/9/1/71

'Financial Education Affects Financial Knowledge and Downstream Behaviors' — https://gflec.org/wp-content/uploads/2020/04/Working-Paper-Financial-education-affects-financial-knowledge-and-downstream-behaviors-April_2020.pdf

We have a jam-packed episode for all of our listeners today, with two guests, a lot of news, and many great resource recommendations. We start off by rounding up some recent updates from the world of finance and the Rational Reminder community, and spend some time talking about Ben's recent paper, titled 'Finding and Funding Good Life'. We are then joined by Robb Engen, for his third appearance on the show, to talk about how he helps his clients move on from unhealthy advisory relationships. Robb shares some of the surprising, disturbing, and ridiculous rebuttals that he has come into contact with over the years, and we reflect on the recent Twitter storm that occurred as a result of Robb sharing some of these. After this great chat with Robb, we are very happy to welcome back author of How to Change, Katy Milkman, who was recently a guest on the show, to discuss her reading habits, tips for memory, and how she balances producing and consuming both podcasts and books. To take part in this bounty of great information and inspiring ideas from these two guests, please make sure to join us today.

Key Points From This Episode:

• Reflecting on and investigating Ben's paper, 'Finding and Funding Good Life'. [0:10:59]
• How this podcast has increased our interest in learning about and sharing non-financial ideas. [0:15:30]
• The part that hindsight and regret play in our estimations of happiness. [0:20:08]
• Looking forward to our podcast miniseries in which we explore cryptocurrencies. [0:22:41]
• The basics of the blockchain and digital cash in light of new technology. [0:29:02]
• The context that sparked today's conversation with Robb. [0:35:49]
• Robb explains his typical client, their portfolio, and why they contact him. [0:38:30]
• How Robb approaches assessing a portfolio and communicating possible drawbacks. [0:40:43]
• Ways in which active managers are practicing bad investment habits themselves. [0:44:02]
• Tracking the progress from active to passive for those that Robb works with. [0:47:09]
• Advice from Robb for managing the end of a relationship with an active manager. [0:48:15]
• Robb shares some examples of how advisors have responded to 'break-up notices'. [0:52:07]
• A round of Talking Cents cards with Rob; addressing social issues in a new business, quitting a job, saving versus spending, and more. [1:02:26]
• Katy describes her reading habits and her use of audiobooks. [1:08:15]
• Tips and tricks from Katy for information retention and idea compilation. [1:09:20]
• Thoughts on the connected nature of the behavioural science community and the benefits that Katy sees in this. [1:13:39]
• Some of the classic behavioural science books that Katy recommends. [1:15:07]
• How Katy approaches podcasting, writing, and consuming the different mediums. [1:17:05]
• Advice from Katy for anyone wanting to increase the amount that they read. [1:21:00]

This week on the podcast we are starting to wrap things up for the year, doing some house keeping and looking back at recent trends in the market. First of all we talk a bit about the podcast going forward and have a few comments on ratings and reviews. We also look at some of the upcoming content you can expect early next year! We chat about the client survey we recently held and what the data from this tells us. From there we move into more general information on the relationship between risk and profitability and try and explain why they are so closely linked. We also get into the market’s performance this year and the apparently bad year it has had. This exploration is located in the broader context of historical data and evidence based investing strategies and we try our best to show how a bad year like 2018 is not a reason to be reactive in you investments. For this and more, join us today!

Key Points From This Episode:

• The first critical review of the podcast. [0:01:52.3]
• Some of the upcoming content for the new year. [0:02:52.0]
• The recent client survey which we completed. [0:04:56.3]
• Interesting data that we collected during this survey. [0:07:02]
• The blog post from Michael James about our chat with Glenn Cooke recently. [0:08:57.8]
• How is being profitable riskier? [0:12:39.9]
• Behavioral explanations for factors and market timing. [0:15:10.7]
• The market this year and how it has dipped. [0:16:13.3]
• Comparing this year’s downturn with 2008. [0:17:38.6]
• This generation’s investors and risk seeking. [0:21:04.7]
• Understanding standard deviation in this context. [0:22:58.3]
• The potential impact of social media on markets compared to 2008. [0:26:02.4]
• The human bias towards action when in danger. [0:27:12.8]
• Don’t leave your seat to get a hot dog! [0:29:04.2]
• And much more!

For more information or to contact Cameron and Ben, visit pwlcapital.com

With private equity investments increasing in popularity, you may feel the pressure to expand your portfolio. Today’s episode, we look at the data behind private equity returns to see if these investments add something to your portfolio that you couldn’t get elsewhere. But first, we discuss some big news — that slow-moving Dimensional Fund Advisors are entering the ETF marketplace. After looking at the implications of this move, we use a Harvard paper as our springboard into the topic of private equity. By exploring the shift in demand for private equity, the paper establishes the context for why investors, especially institutions, are seeking higher returns. Looking at research from AQR, we talk about their finding that private equity returns are overvalued, despite them being historically good investments. You’ll hear how the risks underlying private equity are obscured by a ‘return smoothing effect’ and why people are willing to overpay to get smooth returns. We examine how the gap between private and public equity returns has narrowed along with AQR’s argument that market changes have caused private equity investments to perform poorly. After AQR, we move onto a paper by Erik Stafford which shows that small-cap investing yields similar returns to private equity — with the advantage that you don’t have to pay high private equity fees. We round off the episode with a discussion on the benefits of spousal loans before talking about this week’s bad financial advice. This is a valuable episode for those wondering about adding private equity to their portfolios. Listen to find out why that might not be in your best interest. 

Key Points From This Episode:

• Updates on our brilliant future guests — Jim Stanford and William Bernstein. [0:01:50]
• That Jim Stanford’s book provides an excellent view of money and banking in capitalism. [0:02:49]
• The big news; Dimensional Fund Advisors are entering the ETF marketplace. [0:04:50]
• The similarity between Avantis Investments and Dimensional Fund’s offerings. [0:06:05]
• Speculation on why Dimensional Fund Advisors are moving into the ETF space. [0:09:06]
• The benefit of ETFs — if you want out, then you have to pick up the spread [0:13:12]
• How ETFs might affect investor discipline and what ETF demand might look like. [0:14:06]
• Other Dimension news; 16 Canadian funds will get a management fee reduction. [0:15:39]
• Corrections to a chart on Twitter showing investors selling their equity holdings. [0:16:16]
• Hear about Capital and Ideology, Benjamin’s book of the week. [0:17:38]
• How private equity is becoming increasingly popular. [0:19:26]
• Why, generally, you shouldn’t include U.S ETFs in your portfolio. [0:21:20]
• The massive shift towards private equity investment from numerous entities. [0:24:08]
• How the timing has caused large institutions to look for higher returns. [0:25:33]
• Why expected returns from private equity were historically good and why this is no longer the case. [0:27:50]
• How private equity trading results in an artificial ‘return smoothing effect’. [0:29:10]
• That the valuation gap between private and public equity has narrowed. [0:31:40]
• What other mechanisms lead to an overvaluation of private equity. [0:32:28]
• Why IRRs, as opposed to PMEs, can be easily gamed, rendering them unreliable. [0:37:00]
• The historical conditions that led to high returns from private equity. [0:40:50]
• Comparing the expected return for public and private equity. [0:43:25]
• How Erik Stafford’s paper agrees that public equity risk is under-stated. [0:47:06]
• The difference in dispersion between private and public mutual equity funds. [0:49:30]
• Why private equity past performance isn’t a predictor of future returns. [0:50:55]
• How spousal loans allow your partner to make investments with your money. [0:54:24]
• The potential tax savings that result from spousal loans. [01:01:20]
• Why you should probably include spousal loan debt forgiveness in your will. [01:03:45]
• Hear the show’s bad advice of the week; the return of 90s investment ideas. [01:06:16]

On the show today we welcome Randy Cass, owner and founder of Nest Wealth, who were the first financial firm to employ the use of robo-advisors in Canada. Their unique business model and forward looking systems and practices are at the forefront of the industry in the country and hearing Randy's recollections from their processes as well as thoughts going forward will be of great interest to anyone interested in the future of their money. In our conversation we cover the basic history of Nest Wealth and what inspired their big decisions. Randy unpacks their fee structure and how some of the systems work and have changed over the last few years before going into the ins and outs of how robo-advisors field questions. Our guest also comments on the financial market's constant evolution and his personal and professional attitude to passive investment strategies. We chat about obstacles that currently stand in the way of the fintech industry and finish off the episode with Randy explaining his iterative approach to development as technology advances. For all this and more, be sure to tune in!

Key Points From This Episode:

• How Randy decided to launch the first robo-advisor service in Canada. [0:02:17.3]
• The evolution of the systems used by Nest Wealth since its inception. [0:04:25.1]
• Nest Wealth's unique fee structure. [0:06:38.0]
• Handling questions from clients at the firm. [0:09:50.0]
• Nest Wealth's place in the evolving financial advice market. [0:13:23.8]
• How Nest Wealth use technology to scale financial advice. [0:19:04.8]
• Randy's attitude towards passive and active investment management. [0:22:57.8]
• Some of the notable obstacles that Randy has encountered in Canadian fintech. [0:25:32.1]
• Looking forward to the future of the industry and developing iteratively. [0:29:19.0]
• How Randy measures success in his life. [0:31:39.4]
• And much more!

In our first ever episode of the Rational Reminder podcast we discussed the following:

• The purpose of the podcast
• How we invest
• DFA
• Factor investing
• Our worst investment ever
• Tripling our money in JDS
• Hedge funds still can’t beat the market
• CSA won’t deploy a statutory best interest standard
• The cheapest financial advice may not be the best
• Is a financial advisor worth it?
• Cost vs. complexity

The stories we talked about:

• Dave Butler Discusses Finance and Basketball
• Hedge Funds Should Be Thriving Right Now. They Aren’t.
• 2017 NACUBO-COMMONFUND STUDY OF ENDOWMENTS
• It just became clear we’ll never see an investment industry where clients must come first
• Why hiring an adviser who’s offering low fees could be a terrible move for your finances
• Podcast 18: Boots on the Ground with Rob Carrick
• Millennial looking to start investing asks: Should I go with Wealthsimple?

For more information or to contact Cameron and Ben, visit pwlcapital.com

Welcome to another episode of the Rational Reminder Podcast! Today’s main topic is how to pick an actively managed fund to invest in despite funds of this type producing lower returns than passive ones! Before getting into that, we hear a few updates on Ben’s research into dollar-cost averaging versus lump-sum investing, discuss the factors that influence choice making found in an amazing new book by Sheena Iyengar, and touch on an OSC report on QuadrigaCX being a big Ponzi scheme! We get into our main topic next, introduced by the point that while Peter Lynch managed the Magellan Fund so well, none of its investors made any money out of it. We talk about the decrease in popularity of actively managed funds and Ben attempts to find out if it would be possible to sketch out a framework for picking one despite this. He does this by firstly defining active and passive investing and then tracing the evolution of the definition of Alpha (excess risk-adjusted returns) found in different key papers, where at each new contribution to the definition, the window for actually achieving Alpha gets smaller. Finally, we end with a framework but you’ll find out how it falls short of being able to narrow the definition of a sensible actively managed fund to invest in down beyond a certain point. From there, we get into some amazing OAS clawback retirement hacks that could earn you a lot of extra income and wrap up with a glance at the bizarre upsurge in Robinhood investors in now-bankrupt Hertz since the pandemic!

Key Points From This Episode:

• Updates about Ben’s work, fans of RRP, and brilliant upcoming guests! [0:00:40.1]
• Discussing The Art of Choosing and its meditations on factors that impact choice. [0:05:11.3]
• Findings of an OSC report about QuadrigaCX being a Ponzi scheme. [0:11:00.6]
• An article on Peter Lynch and why Active Fund Management doesn’t work. [0:14:53.4]
• A framework for picking an active fund; defining active/passive investing and Alpha. [0:20:40.9]
• An evolving definition of Alpha showing active fund management doesn’t often produce it. [0:24:11.3]
• Findings of a 2017 Vanguard paper that help identify Alpha in actively managed funds. [0:36:20.3]
• When an active fund is less bad: it is low fee, low turnover, and invested in small-cap value stocks. [0:43:43.3]
• Adding a criterion to active funds to invest in: those that aren’t that big. [0:44:46.3]
• The last piece to consider when finding an active fund: active share concerning your belief in the manager. [0:46:29.3]
• How Ben’s point about active share ties back to investors not doing well under Peter Lynch despite him being a great active fund manager. [0:48:57.3]
• This week’s planning topic: OAS secrets for the high net worth. [0:52:11.3]
• Bad advice of the week: the Robinhood investors buying bankrupt Hertz shares. [0:58:08.3]

How do your perceptions of time influence your long-term decision-making and financial well-being? Today we speak with psychologist and UCLA Associate Professor Hal Hershfield to answer this abstract question. We open our conversation with Hal by exploring the concept of well-being. After chatting about the factors that impact financial well-being, Hal unpacks the balancing act that’s required to live in the present while safeguarding your wealth to support your future self. Hal shares exercises that can help you develop a more vivid sense of your future self and we discuss how this can lead to better financial decisions. We then dive into the role that free time plays in determining your well-being, leading into a discussion on how financial advisors can steer their clients towards achieving their idea of well-being. Returning to the notion of your future self, Hal shares insight into the importance of self-compassion, dealing with life and preference changes, and how hitting age milestones lead to periods of personal reflection and financial reevaluation. Later, Hal gives listeners his take on annuities and how retirees perceive them. We wrap up another informative episode by looking into the link between perceived wealth and spending before touching on how Hal views success. Tune in to hear more about Hal’s research and how it can give you a stronger and deeper conception of your financial future.

Key Points From This Episode:

• Introducing today’s guest, decision-making expert Hal Hershfield. [0:00:03]
• Exploring the definition of ‘well-being.’ [0:02:28]
• Ways that Hal measures well-being. [0:03:46]
• How financial behaviours and psychological factors impact financial well-being. [0:05:17]
• Hear how your relationship with your future self affects wealth savings. [0:06:52]
• Hal talks about how we can get closer to our future selves. [0:10:14]
• Reflecting on exercises that can help you imagine your future self. [0:13:14]
• We ask Hal when the present and the future begin. [0:17:01]
• The link between well-being and your perception of your present and future self. [0:20:32]
• Distinguishing between your present and future self versus having no distinction. [0:22:18]
• Whether not having little free time is detrimental to life satisfaction. [0:23:51]
• Hal discusses whether people would rather have more time or more money. [0:28:06]
• How financial advisors can help people achieve higher well-being. [0:30:59]
• How changes in your chronological age can trigger moments of reflection. [0:35:48]
• Differences in how retirees view lump sum and monthly income streams. [0:41:49]
• Helping people get a clearer idea of the value behind annuities. [0:44:42]
• How people can develop opposing ideas about when they’ll die. [0:47:33]
• Hal’s work on the relationship between meaning and spending. [0:49:21]
• Hear how Hal defines success in his life. [0:52:40]

What does it take to manage a $60 billion wealth management firm while keeping investment strategies grounded in scientific thinking? In this episode, we’re joined by Don Calcagni, Chief Investment Officer at Mercer Advisors. Don chairs the firm’s investment committee and provides guidance on mergers and acquisitions, investment integration, and long-term strategic planning. His expertise spans fiduciary oversight, portfolio management, private equity, and financial mathematics. In our conversation, we discuss how his firm constructs client portfolios, engages with academic and industry experts, and leverages a factor-based investment approach. He also explains the importance of having an investment philosophy rooted in fiduciary principles and delves into how Mercer Advisors manages fiduciary oversight for billions of dollars in assets across thousands of families. Explore the details of portfolio governance and the role of the firms’s alternative investment platform space. Gain insights on value metrics, factor investing, and how Mercer works to provide a family-office experience for everyday clients. Tune in for a deep dive into portfolio construction and the evolving landscape of wealth management with Don Calcagni!

Key Points From This Episode:

(0:05:22) Learn about Mercer Advisors and the range of services it has on offer.

(0:07:10) Unpack Mercer Advisors’ approach and philosophy to portfolio construction.

(0:11:55) The Building Better Portfolio Summit and the purpose of the event.

(0:17:08) How the meetings are structured and the main takeaways from the last event.

(0:24:45) What topics cause extreme points of agreement and disagreement at the meetings.

(0:29:21) Find out how takeaways from the events are implemented into client portfolios.

(0:31:19) Mercer Advisors’ recently launched alternative investment platform space.

(0:40:23) Don shares valuable recommendations and advice for the average investor.

(0:42:23) Aftershow: the controversy surrounding the RBC options trading incident.

(0:49:57) Listener feedback, reviews, updates, and upcoming events.

Links From Today’s Episode:

Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://pwlcapital.com/our-team/

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://pwlcapital.com/our-team/

Cameron on X — https://x.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP

Dan Bortolotti on LinkedIn — https://linkedin.com/in/dan-bortolotti-8a482310/ 

Canadian Couch Potato — https://canadiancouchpotato.com/blog/ 

Don Calcagni on LinkedIn — https://linkedin.com/in/donald-calcagni-8104b546/

Mercer Advisors — https://merceradvisors.com/

‘Building Better Portfolios | 2023 Summit’ — https://youtu.be/TWYukQogQPA

Dimensional Fund Advisors — https://dimensional.com/

BlackRock — https://blackrock.com/

Avantis — https://www.avantisinvestors.com/

AQR — https://aqr.com

Carlyle — https://carlyle.com/

Royal Bank of Canada (RBC) — https://www.rbcroyalbank.com

Future Proof Festival — https://futureproofhq.com/festival/

Episode 316: Andrew Chen — https://rationalreminder.ca/podcast/316

Episode 323: Renting Versus Buying a Home in Canada 2005-2024 — https://rationalreminder.ca/podcast/323

Episode 325: Addressing 200+ Comments on Renting vs. Owning a Home — https://rationalreminder.ca/podcast/325

Papers From Today’s Episode: 

‘Portfolio Selection’ — https://doi.org/10.1111/j.1540-6261.1952.tb01525.x

It has been an amazing year for the podcast. We have had some incredible guests during 2022 who have provided us and listeners with insights and thought-provoking ideas about the world of finance. We covered a lot of ground and to wrap up the year we decided to recap some of our favourite moments for listeners. In this episode, we highlight the many themes covered during this year, such as the basics of investing, stocks and bonds, how to make wise investment decisions, gender inequality, asset management, index funds, market trends, and portfolio management. We also highlight some of the indirectly topics indirectly related to finance such as the value of happiness, enjoying the pursuit of happiness, the importance of goal setting, and much more. Join us as we reflect on some of our best moments from the year and provide an overview of the many vital lessons we have learned in this final episode of the year for the Rational Reminder podcast.

Key Points From This Episode:

• Mac McQuown explains how the data revolution changed the game of investing. (0:09:05)
• Robin Wigglesworth and tracking the performance of portfolios in the 60s. (0:12:56)
• Professor Fama shares what it is like to see the impact of his academic work on the practice of asset management. (0:16:02)
• Gus Sauter tells us about the role the University of Chicago played in the index fund revolution. (0:18:41)
• Professor Fama unpacks what it means for a market to be efficient. (0:20:52)
• Gerard O’Reilly and the differences in the types of market strategies available. (0:24:27)
• Professor Betermier shares his research from multiple papers concerning tendencies towards growth and value stocks. (0:28:50)
• Eduardo Repetto tells us whether having a portfolio consisting of 100% small-cap value stocks makes sense. (0:36:06)
• Professor Koijen explains whether index funds distort market prices and make markets less efficient. (0:40:30)
• Professors Berk and van Binsbergen discuss if it is possible to find skilled fund managers before they are absorbed by their fund. (0:43:44)
• Professor Cederburg explains how data sets can be upwardly biased and why you need to be aware of it when looking at data. (0:48:15)
• Bill Janeway describes the three-player game regarding investments. (0:50:51)
• Professor Phalippou compares the performance of private equity relative to public equities. (0:53:42)
• Antti Ilmanen tells us how investors can stick with an investment strategy during times of low performance. (0:59:10)
• Professor List tells us how often people should check their investment portfolios. (1:01:56)
• Leonard Mlodinow explains how the rational mind and the emotional mind are intertwined. (1:04:56)
• Professor Edmans’s Grow the Pie and making the world a better place. (1:07:27)
• Rebecca Walker outlines the effect learning about money has on people. (1:11:15)
• Colleen Ammerman describes the current state of women in the workplace. (1:13:21)
• Find out why the pursuit of a goal should be enjoyable with Professor Fishbach. (1:15:40)
• Andrew Hallam talks about life satisfaction after middle age and how to get there sooner. (1:20:28)
• Jay van Bavel details the effect of group identity on goal setting. (1:23:08)
• Professor Frank unpacks the relationship between the consumption of luxury goods and happiness. (1:26:55)
• Professor Bohns provides insight into why people are under-confident in their social lives. (1:31:01)
• Professor Fama reveals how many hours a day the brain can handle deep work. (1:34:24)
• Cassie Holmes and why happiness is a good thing from a scientific perspective. (1:35:30)
• Colonel Chris Hadfield shares the lesson he learned as an astronaut that he applies to his everyday life. (1:38:52)

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-233-a-year-in-review-discussion-thread/20856

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

Episode 182: John 'Mac' McQuown — https://rationalreminder.ca/podcast/182

Episode 184: Robin Wigglesworth — https://rationalreminder.ca/podcast/184

Episode 186: Andrew Hallam — https://rationalreminder.ca/podcast/186

Episode 188: Professor Fishbach — https://rationalreminder.ca/podcast/188

Episode 192: Professor Edmans — https://rationalreminder.ca/podcast/192

Episode 194: Bill Janeway — https://rationalreminder.ca/podcast/194

Episode 196: Professor Betermier — https://rationalreminder.ca/podcast/196

Episode 198: Gerard O’Reilly — https://rationalreminder.ca/podcast/198

Episode 200: Professor Eugene Fama — https://rationalreminder.ca/podcast/200

Episode 202: Antti Ilmanen — https://rationalreminder.ca/podcast/202

Episode 204: Professor List — https://rationalreminder.ca/podcast/204

Episode 206: Professor Bohns — https://rationalreminder.ca/podcast/206

Episode 208: Rebecca Walker — https://rationalreminder.ca/podcast/208

Episode 210: Professor Phalippou — https://rationalreminder.ca/podcast/210

Episode 212: Professor Koijen — https://rationalreminder.ca/podcast/212

Episode 214: Jay Van Bavel — https://rationalreminder.ca/podcast/214

Episode 216: Gus Sauter — https://rationalreminder.ca/podcast/216

Episode 218: Colleen Ammerman — https://rationalreminder.ca/podcast/218

Episode 220: Professors Berk and van Binsbergen — https://rationalreminder.ca/podcast/220

Episode 222: Cassie Holmes — https://rationalreminder.ca/podcast/222

Episode 224: Professor Cederburg — https://rationalreminder.ca/podcast/224

Episode 226: Colonel Chris Hadfield — https://rationalreminder.ca/podcast/226

Episode 228: Eduardo Repetto — https://rationalreminder.ca/podcast/228

Episode 230: Professor Frank — https://rationalreminder.ca/podcast/230

Michael Burry says we should get out of indexing. Jim Cramer says it’s time to jump in. These are interesting times in the world of investing! On today’s episode, we discuss Burry’s recent claims about passive investing and advise on a plan of action should he turn out to be right. Benjamin recently posted a new video on dividends, and we have a conversation about the responses the video triggered and give some good reasons for our stance about the irrelevance of dividends. We also talk about negative interest rates, how they affect that market and explain why it’s not a good idea to do day trading for a living. In the second part of the episode, we are thrilled to be joined by Benjamin’s mom to whom we will attempt to explain the ABCs of factors. Following many requests from listeners to discuss factors in layman’s terms, we hope that our explanation today will shed some light on the topic!

Key Points From This Episode:

• The irrelevance of dividends and the debate our video provoked. [0:01:54.0]
• How much a portfolio should be tilted towards each factor and the overlaps. [0:05:57.0]
• A balanced perspective on Michael Burry’s assertions about index funds. [0:09:43.0]
• What you should do if Michael Burry is right and why you should do it anyway. [0:15:25.0]
• How negative interest rates affect a global fixed income allocation. [0:17:57.0]
• Some interesting facts about day trading for a living and why to stay away. [0:22:05.0]
• Unpacking the terms “discounted cash flow” and “discount rate”. [0:26:58.0]
• How the risk of a stock is determined and what the market mechanism does. [0:30:37.0]
• Where the factors come from and the different types of risk. [0:33:26.0]
• Using factors to explain the differences in returns between two portfolios. [0:40:03.0]
• The crux of why you want a diversities portfolio. [0:41:20.0]
• And much more!

When it comes to DIY investing, there’s always a temptation to make things more complicated than they need to be. But, in reality, embracing simplicity is one of the best ways to ensure good investment outcomes. Today’s episode features an exceptional conversation with our long-time friend and colleague, Dan Bortolotti, who has worked alongside us as an Portfolio Manager at PWL Capital for over ten years. Some of our Canadian listeners might recognize Dan as the man behind the Canadian Couch Potato blog (one of the most popular resources for Canadian investors) and the voice behind the Canadian Couch Potato podcast. Dan is a consummate communicator, both on paper and in person; beyond his extensive blogging, he has also written a number of books, both fiction and non-fiction, the most recent of which includes Reboot Your Portfolio: 9 Steps to Successful Investing with ETFs. Dan has played a pivotal role in making PWL Capital what it is today, and in this episode, we learn about his surprising journey to becoming an advisor, before hearing his wide-ranging insights on DIY investing. Dan breaks down key components for investors, from how to approach your asset allocation and picking index funds to navigating fees, taxes, and performance. We also discuss how the investing landscape has changed since Dan started writing and essential lessons he has learned over the years. To hear all about investing from the Canadian Couch Potato himself, be sure to tune in for this expansive conversation!

Key Points From This Episode:

(0:03:52) The origin story of the Canadian Couch Potato blog, by Dan Bortolotti.

(0:08:17) How the availability of index funds in Canada has changed since Dan started writing about them in 2010, and his role in the index fund revolution.

(0:10:01) Why Canadians have been slower to adopt index funds than Americans.

(0:12:09) How the model portfolios on his site have changed over time.

(0:14:20) Why simplicity is so important to a good investment outcome.

(0:16:38) The biggest obstacle Dan has observed when it comes to successful investing.

(0:19:40) Advice on how to approach decisions around stocks, bonds, and asset allocation.

(0:24:34) How to select the ideal ETF or index fund to express your asset allocation.

(0:27:22) Some of the ways that Dan’s views have changed since starting the Couch Potato portfolio, and the evolution of his blog.

(0:31:46) Why you should be clear on your financial goals before investing and the importance of saving rate relative to fees and performance.

(0:37:32) Understanding the value of financial advice if we consider investing to be effectively solved by low-cost ETF mutual funds.

(0:40:23) Why it’s so important to close the gap between providing a financial plan and implementing it.

(0:43:25) What surprised Dan about his clients during his transition from blogger to advisor, and what he has learned about earning his clients’s trust.

(0:48:22) Dan’s thoughts on how people should make the decision between DIY investing or hiring an advisor, and what people should look for in a financial advisor.

(0:55:46) The story of how Dan connected with PWL Capital and the key ways he has helped shape the company.

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://twitter.com/RationalRemind

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 

Benjamin on X — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on X — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Dan Bortolotti — https://www.pwlcapital.com/profile/dan-bortolotti/

Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/

Canadian Couch Potato Blog — https://canadiancouchpotato.com/

Canadian Couch Potato Podcast — https://canadiancouchpotato.com/podcast/

Larry Swedroe on LinkedIn — https://www.linkedin.com/in/larry-swedroe-18778267/

Larry Swedroe books on Amazon — https://www.amazon.com/Larry-E-Swedroe-Books/s?k=Larry+E.+Swedroe&rh=n%3A283155

Books From Today’s Episode:

Reboot Your Portfolio: 9 Steps to Successful Investing with ETFs — https://www.amazon.ca/Reboot-Your-Portfolio-Successful-Investing/dp/1988344328

Wild Blue — https://www.amazon.com/Wild-Blue-Natural-History-Largest-ebook/dp/B005BP0E3W

In this episode, we are joined, for the third time, by renowned author and commentator Morgan Housel. Many of you are familiar with Morgan's bestseller, The Psychology of Money, and he is back to discuss his latest book, Same as Ever: A Guide to What Never Changes. He is also the partner at The Collaboration Fund, a network of fund managers investing across asset classes while identifying and supporting companies at the intersection of for-profit and for-good. In our conversation, we delve into the timeless principles that shape our perspectives of the world and why things are the Same as Ever. We discuss the importance of holding cash, challenging traditional analytical approaches and encouraging a broader reflection on life beyond numbers. Discover the recurrent nature of once-in-a-lifetime events, the pitfalls associated with the insatiable desire for certainty, the value and power of storytelling, and the complex interplay between incentives and expectations. Gain insights into the value of forecasting behaviours instead of market dynamics, why pessimism is more common and more captivating than optimism, embracing slight inefficiencies on the path to success, and much more! Don't miss this engaging discussion with a master storyteller and gain new perspectives on finance, human behaviour, and the principles that remain the Same as Ever with Morgan Housel. Tune in now!

Key Points From This Episode:

(0:03:28) Why it is important to understand the aspects that never change, with examples. 

(0:05:58) Morgan explains the value of random and seemingly inconsequential events.

(0:07:43) Discover the most persistent characteristic of risk and the ways expectations impact behaviour and decision-making. 

(0:13:04) How he has been dealing with the success of his book, Psychology of Money. 

(0:15:11) What makes once-in-a-lifetime events more common than expected and the problems that a desire for certainty brings with it. 

(0:19:16) Leveraging storytelling to understand the world and how to filter out the good information from the bad information. 

(0:25:41) Explore the role of incentives in influencing expectations and how calm can turn into crazy. 

(0:31:06) Learn how success can develop into failure and the problems that stem from investors trying to squeeze too much too soon from their investments. 

(0:37:13) Advice for understanding the normal ‘growth rate’ and what motivates innovation. 

(0:42:29) Balancing stress and adversity and why being slightly inefficient is a good thing. 

(0:46:46) Navigating hassle and nonsense on the path to success. 

(0:48:30) The time scale differences in materializing good news and bad news. 

(0:50:31) Strategies for combining optimism and pessimism to make informed and effective long-term decisions. 

(0:53:03) Examine the challenges of predicting the impact of future innovations. 

(0:55:43) The tendency for people to perceive others or businesses as better. 

(0:58:38) Hear about the difference between permanent and expiring information. 

(1:00:36) Reasons why complexity and length are appealing and how personal experiences shape perspectives. 

(1:05:00) Morgan shares the biggest takeaways from his books. 

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://twitter.com/RationalRemind

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 

Benjamin on X — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on X — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Morgan Housel — https://www.morganhousel.com/

Morgan Housel on LinkedIn— https://www.linkedin.com/in/morgan-housel-5b473821/

Morgan Housel on X — https://twitter.com/morganhousel

Morgan Housel on Instagram — https://www.instagram.com/morganhousel/

The Morgan Housel Podcast — https://podcasts.apple.com/us/podcast/the-morgan-housel-podcast/id1675310669

Collaborative Fund — https://collabfund.com/

Collab Blog — https://collabfund.com/blog/

Episode 128: Morgan Housel — https://rationalreminder.ca/podcast/128

Episode 191: Emerging Markets — https://rationalreminder.ca/podcast/191

Episode 224: Scott Cederburg — https://rationalreminder.ca/podcast/224

Books From Today’s Episode:

Sapiens — https://www.amazon.com/Sapiens-Humankind-Yuval-Noah-Harari/dp/0062316095

Seinfeldia — https://www.amazon.com/Seinfeldia-About-Nothing-Changed-Everything/dp/1476756112

The Snowball — https://www.amazon.com/Snowball-Warren-Buffett-Business-Life/dp/0553384619

Same as Ever — https://www.amazon.com/Same-Ever-Guide-Never-Changes/dp/0593332709

The Psychology of Money — https://www.amazon.com/Psychology-Money-Timeless-lessons-happiness/dp/0857197681

In today’s episode, we beg the question: is factor investing worth it? Factor-tilted portfolios tend to perform independently of the market and today, we break down a few of the characteristics associated with higher expected returns, as well as the challenges of factor investing. We give a brief history of pricing models and walk step-by-step through a hypothetical factor investment; taking the Fama and French five-factor model into account. Additionally, we discuss liability duration and bond returns and speculate whether pooling finances results in greater relationship satisfaction. Tune in to hear our take on everything from book clubs and the impact of inflation on consumption liability assumptions to our final verdict on whether factor investing is, in fact, worth your while.

Key Points From This Episode:

• The latest phenomenon of people paying to go on popular podcasts. [0:01:58]
• Interesting feedback we’ve received for our Crypto series. [0:03:49]
• Why not to make an investment decision based on one person's opinion. [0:04:53]
• The evaluation skills our Crypto series equips listeners with. [0:06:05]
• Upcoming guests on the Rational Reminder Podcast! [0:07:31]
• Some interesting LinkedIn connections we’ve made in the past few weeks. [0:16:06]
• Recommended book for kids: Way of the Warrior Kid 3. [0:18:11]
• Recommended book for adults: The Psychology of Money. [0:21:08]
• The model of our firm’s book club and our experience of it so far. [0:22:02]
• Does pooling finances result in greater relationship satisfaction? [0:24:35]
• Liability duration and bond returns according to the current change in bond yields. [0:26:22]
• How inflation impacts consumption liability assumptions. [0:29:11]
• The positive effect the changes in the bond market have had on pension funds, relative to their liabilities. [0:30:20]
• The main topic of the day: is factor investing worth it? [0:32:30]
• The long-term volatility for factor-tilted portfolios. [0:33:56]
• What factor investing is and the added risk it entails. [0:34:51]
• A brief history of pricing models. [0:35:53]
• A few characteristics associated with higher expected returns. [0:39:25]
• The challenges of factor investing. [0:39:47]
• How to determine the mix of factors that captures all relevant state variable sensitivities. [0:42:56]
• The significance of size premium. [0:46:07]
• Speculating whether factors deliver premiums. [0:47:57]
• The steps involved in a hypothetical factor investment. [0:48:57]
• A few important facts about factors. [0:53:23]
• The benefits of having more independent risk premiums in a portfolio. [0:54:56]
• Our verdict as to whether or not factor investing is worth it. [0:57:02]
• Why it’s important to take tracking error into account. [0:57:38]
• The tendency of factor-tilted portfolios to perform differently from the market. [0:57:48]

Welcome to another episode of the Rational Reminder Podcast! We start by reviewing The Fearless Organization, and learn some important concepts such as psychological safety in the workplace, allowing people to voice their concerns, and the value of continuously learning. We also discuss a paper on index investing followed by a quick discussion on gender equality in finance.  We then take a deep dive into today’s main topic, ‘Stocks for the Long Run…?’, by unpacking research to see if stocks are still a valuable long-term investment. Finally, we end the show with a conversation about our 22 and 22 book challenge with Mark Sutcliffe, and find out about his reading habits and the books that have had the biggest impact on him.

Key Points From This Episode:

• An update about the podcast and feedback received about the crypto series. [0:03:55]
• A rundown of the guests we have planned for future episodes. [0:07:43]
• Outline of the ‘mixed-bag’ reviews received about the show. [0:08:28]
• News and updates regarding the Rational Reminder reading challenge. [0:13:07]
• This week’s book review of The Fearless Organization by Amy C. Edmondson. [0:14:45]
• We talk about an interesting paper ‘On Index Investing’ [0:24:42]
• Follow-up on and discussion concerning gender equality in finance from previous episodes. [0:28:34]
• We dig into today’s main topic, ‘Stocks for the Long Run.’ [0:33:38]
• Issues surrounding using Stocks for the Long Run data to draw insights. [0:35:22]
• What has been achieved to solve issues regarding a lack of data on stock returns. [0:41:45]
• An important insight from research on the value of stocks and bonds in the long term. [0:47:17]
• A breakdown of some interesting findings from the paper, ‘Global factor premiums’. [0:48:00]
• Overview of the research discussed and whether stocks are still valuable long-term investments. [0:53:54]
• The Rational Reminder 22 and 22 book challenge conversation with Mark Sutcliffe. [0:55:09]
• What Mark has discovered about the world of social media while working remotely. [0:56:58]
• Mark shares details about his reading habit and his favourite books growing up. [0:57:53]
• Whether he has a favourite genre of book. [01:00:11]
• How Mark sources books to read and how he captures interesting information. [01:00:44]
• The books that Mark commonly recommends to family and friends. [01:03:05]
• Find out if Mark thinks being an author changes how you read books. [01:05:12]
• Advice that he has for people who want to read more. [01:06:33]

In Episode 3 of the Rational Reminder podcast we discussed the following:

• Should you lease or buy your vehicle?
• How are the new mortgage stress tests affecting Canadian real estate?
• Home ownership is not required to build wealth, with a little discipline
• Amazon’s size is not unprecedented
• Successfully investing in growth stocks is really hard
• Consolidation in the Canadian asset management industry
• Independence benefits wealth management clients
• Are backend loads on mutual funds still a thing?
• Fund companies pushing anti-evidence
• Financial advice is about more than just the portfolio
• We are still waiting for lower stock valuations, high inflation, and high interest rates
• If you’re not worried, you don’t have a high expected return
• Are we living in exceptionally uncertain times?
• Small cap and value returns comes from rebalancing

The stories we talked about:

• Report on the Housing and Mortgage Market in Canada
• Federal policies suppressing housing activity, creating a negative shift in sentiment for homebuyers, according to latest consumer report
• Amazon’s eating the world – and the stock market
• Is Amazon Changing the World, and the Stock Market?
• The Most Valuable Companies of All-Time
• TD Bank becomes Canada's biggest money manager with $792-million deal to buy Greystone Managed Investments
• Banning Embedded Commissions Would Not Have Fixed Financial Advice in Canada
• Transforming Practices in the Wealth Business: A preliminary assessment of the June 2018 CSA reforms to the client-advisor relationship
• Not So Predictable
• In these uncertain times

The charts we talked about:

Source: Financial Market History: Reflections on the Past for Investors Today, CFA Institute

Source: Visual Capitalist

For more information or to contact Cameron and Ben, visit pwlcapital.com

In this episode, we delve into the best time to claim your Canada Pension Plan (CPP) benefits. Although the focus of this episode is on Canada, there will be many relevant and valuable insights for our non-Canadian listeners. In our conversation, we discuss the importance of understanding the intricacies of CPP benefits, the fundamentals, and how individuals can optimize their retirement income by making informed decisions. Explore the importance of understanding when to claim CPP benefits, how much future financial security a CPP offers, and why the CPP is one of the most valuable retirement assets for most Canadians. Gain insights into how wage growth ties into CPP benefits, the exceptions to deferring a CPP claim, and what made 2022 different regarding CPP claims. Join us as we uncover the nuances of CPP benefits!

Key Points From This Episode:

(0:03:25) Unpack the fundamentals of the Canada Pension Plan (CPP) benefits.

(0:10:04) How the timing of making a CPP claim is linked to the benefits.

(0:14:15) Ben explains the financial implications of deferring a CPP claim.

(0:21:34) Uncover common approaches to identify the best time to claim a CPP.

(0:26:06) Learn about the situations when it is best not to defer a CPP claim.

(0:31:12) Why the CPP is one of the most valuable retirement assets for most Canadians.

(0:39:11) The after-show: ideas for the podcast, feedback, segregated funds, and more!

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://twitter.com/RationalRemind

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 

Benjamin on X — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on X — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://twitter.com/MarkMcGrathCFP

Prof. Meir Statman — https://www.scu.edu/business/finance/faculty/statman/

Prof. Meir Statman on Twitter — https://twitter.com/meirstatman 

Episode 258: Prof. Meir Statman — https://rationalreminder.ca/podcast/258

The Canadian Institute of Actuaries (CIA) — https://www.cia-ica.ca/

Society of Actuaries (SOA) — https://www.soa.org/

FP Canada — https://www.fpcanada.ca/

When Should You Start CPP? — https://www.youtube.com/watch?v=r9vYji99fhk

CE Drive with Jason Watt — https://cedrive.podbean.com/

Episode 137: David Blanchett: Researching Retirement — https://rationalreminder.ca/podcast/137

Episode 254: David Blanchett: Regret Optimized Portfolios and Optimal Retirement Income — https://rationalreminder.ca/podcast/254

Episode 289 - Retiring Retirement Income Myths with the Retirement Income Dream Team — https://rationalreminder.ca/podcast/289

Jason Yi on LinkedIn — https://www.linkedin.com/in/jason-yi-cpa-ca-56544446/

Episode 225: The Index Fund "Tipping Point” — https://rationalreminder.ca/podcast/225

Books From Today’s Episode:

Wealthier — https://wealthierbook.com/

The Algebra of Wealth — https://www.amazon.com/Algebra-Wealth-Formula-Financial-Security/dp/0593714024

Sleep Well, Take Risks, Squish the Peas — https://www.amazon.com/Sleep-Well-Take-Risks-Squish/dp/0757324711/

Papers From Today’s Episode: 

‘The CPP Take-Up Decision: Risks and Opportunities’ — https://www.soa.org/4a223f/globalassets/assets/files/resources/research-report/2020/2020-cpp-take-up-decision.pdf

‘Get the Most from the Canada & Quebec Pension Plans by Delaying Benefits’ — https://www.fpcanadaresearchfoundation.ca/media/5fpda5zw/cpp_qpp-reseach-paper.pdf

‘Financial Advisor Compensation Structure and Client Equity Allocations’ — https://www.tandfonline.com/doi/full/10.1080/15427560.2023.2294812

We’ve previously compared IPOs to lotteries that are prone to inflated valuations and low returns. Today we welcome “Mr. IPO,” Professor Jay Ritter onto the show for a deeper dive into IPO performance, for his insights into SPACs, and to hear his research into why economic growth doesn’t correlate with stock returns. Early in the episode, Jay unpacks how long-term IPO returns perform against first-day trading. While exploring the role that venture capital plays in tech IPOs, Jay talks about why negative earnings don’t affect tech IPOs in the short-term before sharing how skewness factors tend to impact young companies. Reflecting on how IPOs are usually underpriced, Jay discusses how the interests of companies are not aligned with the interests of IPO underwriters. After looking into IPO allocation, Jay compares the 2020 ‘hot IPO market’ with the internet bubble of the late 90s. Later, we ask Jay about what special-purpose acquisition companies (SPACs) are and why they’ve exploded in recent years. His answers highlight their investing benefits, risks, and why SPACs might be a better option for companies than IPOs. We examine how SPACs have historically performed and then jump into our next topic; why economic growth isn’t a good indicator that a country is worth investing in. He touches on why returns don’t correlate with economic growth, the place of capital gains and dividend yields when investing abroad, and how innovations in an industry can lead to higher stock returns. We wrap up our conversation by asking Jay for his take on whether the stock market is efficient before hearing how he defines success in his life. Tune in to hear our incredible and informative talk with Jay Ritter.

Key Points From This Episode:

• Introducing today’s guest, finance professor Jay Ritter. [0:00:03]
• How long-run returns of IPOs perform against the first trading day. [0:03:06]
• Industry differences in IPO returns and how venture capital affects tech IPOs. [0:03:33]
• Why it’s not always a bad idea to invest in IPOs. [0:05:22]
• Whether negative earnings for tech companies affect IPO performance. [0:07:32]
• Exploring the idea of skewness in IPO valuations and returns. [0:08:56]
• Jay shares advice on investing in IPOs. [0:11:07]
• Why IPOs tend to be underpriced. [0:12:44]
• Whether individuals get IPO allocations compared with hedge funds and brokerages. [0:18:00]
• The factors that lead to ‘hot IPO markets.’ [0:20:53]
• How technical innovation is linked to an increase in IPOs. [0:23:32]
• Whether hot IPO markets tell us anything about future expected returns. [0:26:33]
• Why 2020 was a hot IPO market and how it compares with the late 90s. [0:28:19]
• The dubious value of individual investors getting exposure in the private market. [0:30:50]
• Jay unpacks what special purpose acquisition companies (SPACs) are. [0:33:51]
• How new SPAC prices are rising despite not having acquired an operating company. [0:37:11]
• Ways that promoters benefit from launching SPACs. [0:38:34]
• Whether SPACs are a better route for going public than traditional IPOs. [0:42:44]
• We talk about the risks and historical performance of SPAC investing. [0:44:06]
• Jay details the upsides and downsides of investing in SPACs. [0:48:02]
• Insights into which foreign countries have been the best to invest in. [0:50:11]
• How industry growth can lead to higher returns in that industry. [0:56:30]
• What Jay uses to work out expected stock returns. [0:59:58]
• We ask Jay the big question; “Is the stock market efficient?” [01:04:29]
• Hear how Jay defines success in his life. [01:05:57]

Welcome back to The Rational Reminder Podcast. Today we are joined by Daniel Weinand. Daniel is the cofounder of Shopify, which is a company based in Ottawa that has had enormous success, not just in Ottawa or Canada, but all over the world in the last few years as a public company. Shopify is a great commerce platform that supports over 600,000 different stores worldwide. It is an incredible success story, and the best way that we can describe the conversation was that it was very intense. Everything from the way Daniel thinks about things to what he’s been able to achieve comes down to his intensity, and you can actually see the wheels turning in his head while he speaks. So for an incredible interview, keep listening to hear more!

Key Points From This Episode:

• How Daniel chose Canada and got involved in Shopify. [0:02:13.0]
• Decisions that were transformational for the company. [0:04:21.0]
• Daniel’s transition into retirement from Shopify. [0:06:07.0]
• The role of happiness and self-fulfillment. [0:10:18.0]
• The beauty of poker — a game of incomplete information. [0:11:19.0]
• Creating a company culture. [0:19:16.0]
• The impact financial security has on productivity and engagement for employees. [0:25:04.0]
• How Daniel defines success. [0:26:25.0]
• Why Daniel chose to work with PWL. [0:29:41.0]
• The impact of money in Daniel’s life. [0:33:50]
• And much more!

For more information or to contact Cameron and Ben, visit pwlcapital.com

The type of assets which usually come to mind when considering investments are stocks, bonds, or cash, but what are the alternatives? And what kind of returns do alternative asset classes offer? In today’s episode, we delve into the returns which can be expected from alternative asset classes such as private equity, venture capital, angel investing, private credit, hedge funds, direct real estate, and cryptocurrencies. Hear an in-depth analysis based on empirical studies and the expertise of your hosts, Ben and Cameron, to discover whether there is any merit to alternative asset classes as investments. We unpack the extra layer of complexity associated with predicting returns on alternative assets, how to approach calculating returns, and why the associated fees are an essential consideration. We also hear details about an interesting conference Cameron recently attended and briefly recap cryptocurrencies as an investment. You’ll also hear our conversation with our 22 in 22 reading challenge guest David Senra about his reading habits, the books that most inspire him, and his advice for people who want to read more.

Key Points From This Episode:

• Outline of today’s main topic: expected returns for alternative asset classes. (0:01:51)
• Why predicting returns of alternative asset classes has an extra layer of complexity. (0:03:18)
• How to approach estimating the returns of private equity, specifically buyouts. (0:05:04)
• We unpack historical data regarding the returns of private equity. (0:07:35)
• Calculating the returns on venture capital and reasons to be cautious about it as an asset class. (0:16:35)
• The distribution of returns from venture capital based on the market numbers. (0:20:09)
• Learn what angel investing is and its associated returns. (0:20:54)
• What returns on angel investing are most dependent on and why. (0:22:21)
• The different types and the associated returns. (0:25:23)
• Hear about the fees associated with private credit. (0:27:42)
• We unravel the concept of hedge funds, the associated fees, and expected returns. (0:29:29)
• A limiting factor on hedge funds: capacity constraints. (0:33:38)
• The takeaway regarding private real estate investments. (0:36:25)
• How private real estate is valued as an asset class. (0:37:48)
• Cryptocurrencies and the returns to be expected. (0:39:34)
• We discuss some of the key takeaways from today’s main topic. (0:43:30)
• We follow up on a previous topic we covered: financial literacy. (0:45:10)
• Find out about an interesting conference that Cameron recently attended. (0:48:46)
• Hear about the recent reviews we have received about the podcast. (0:57:58)
• We introduce our 22 and 22 reading challenge guest, David Senra. (01:00:15)
• Where David’s passion for reading about founders originates from. (01:02:25)
• David shares details about his reading habits. (01:05:57)
• His approach to finding founders that he wants to read about. (01:08:49)
• David’s approach to note taking while reading a book. (01:11:07)
• We learn about the stories that have impacted David the most. (01:13:53)
• He explains the benefits of reading a book for a second time. (01:17:11)
• Books about founders that he thinks everyone should read. (01:19:20)
• David’s observation of the role of luck in a founder’s success story. (01:23:19)
• Advice he has for people who want to read more. (01:29:33)

Links From Today’s Episode:

AQR Capital Management — https://www.aqr.com/

BlackRock Asset Management — https://www.blackrock.com

Bank of America — https://www.bankofamerica.com/

‘The risk and return of venture capital’ — https://www.sciencedirect.com/science/article/pii/S0304405X04001564

‘Performance of Private Credit Funds: A First Look' — https://jai.pm-research.com/content/21/2/31.short

‘Do Hedge Funds Hedge?’ — https://jpm.pm-research.com/content/28/1/6.short

‘The Performance of Hedge Fund Performance Fees’ — https://www.nber.org/papers/w27454

‘Higher risk, lower returns: What hedge fund investors really earn’ — https://www.sciencedirect.com/science/article/abs/pii/S0304405X1100016X

‘Another Look at Private Real Estate Returns by Strategy’ — https://jpm.pm-research.com/content/45/7/95/tab-pdf-trialist

'The Characteristics and Portfolio Behavior of Bitcoin Investors: Evidence from Indirect Cryptocurrency Investments' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3501549

‘Beliefs and the Disposition Effect’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3516567

‘Once Bitten, Twice Shy: The Power of Personal Experiences in Risk Taking’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2506627

S&P Global FinLit Survey — https://gflec.org/initiatives/sp-global-finlit-survey/

Future Proof Conference — https://futureproof.advisorcircle.com/

Invest Like the Best Podcast — https://investlikethebest.libsyn.com/

David Senra on LinkedIn — https://www.linkedin.com/in/david-senra-278843236/

David Senra on Twitter — https://twitter.com/FoundersPodcast?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor

David Senra on Facebook — https://www.facebook.com/david.senra.1

The Founders Podcast — https://founders.simplecast.com/

A Triumph of Genius — https://www.amazon.com/Triumph-Genius-Edwin-Polaroid-Patent/dp/1627227695

Cable Cowboy — https://www.amazon.com/Cable-Cowboy-Malone-Modern-Business/

Titan — https://www.amazon.com/Rare-Chernow-Titan-Life-Rockefeller/

A Man for All Markets — https://www.amazon.com/Man-All-Markets-Street-Dealer/

Against the Odds — https://www.amazon.com/Against-Odds/

Estee: A Success Story — https://www.amazon.com/Estee-Success-Story-Lauder/

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/?hl=en

Rational Reminder on YouTube — https://www.youtube.com/channel/
Ben Felix — https://www.pwlcapital.com/author/benjamin-felix/

Ben on Twitter — https://twitter.com/benjaminwfelix

Ben on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on Twitter — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/