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S*** (Misguided) Financial Advisors Say (EP.203)
2 juni 2022 · 1 uur 24 min
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. Lees meer
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 …
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Antti Ilmanen: The Building Blocks of Long-Run Returns (EP.202)
26 mei 2022 · 1 uur 10 min
To carry on the trend of amazing guests on the show, today we welcome Antti Ilmanen. Antti is the co-head of the Portfolio Solutions Group at AQR, and the author of a couple of really impactful books that we highly recommend. His most recent is Investing Amid Low Expected Returns, and in today's chat, we get to hear all about the ideas contained in its pages, and the most important moments in his career that have shaped his philosophy. Antti received his PhD in Finance from the University of Chicago and has had a long career of working with high profile names that you might recognize from past episodes of this podcast. Our guest talks about the need for cultivating your patience in relation to your investment portfolio and shares many other great pieces of practical advice that you can implement today. We delve into some bad investment habits that Antti noted in his book and also touch on the usefulness of bonds, illiquid assets, trend following, and much more. Be sure to tune in today to hear all that this great mind has to offer. Lees meer
Key Points From This Episode:
The power and limitations of using historical data for calculating expected returns. [0:04:17]
Balancing historical data with market-implied expected returns. [0:07:47]
Antti comments on shifting into higher expected return equity markets. [0:11:37]
The role of bonds in revenue generation and why to not give up on them completely. [0:13:00]
Locating the roots of the positive premium that Antti associates with bonds. [0:16:35]
The effect of illiquid assets on expected returns. [0:19:44]
Why recent historical returns in real estate are not indicative of future expected returns. [0:23:40]
The response from institutional investors to lower expected returns. [0:26:09]
Situating value's current dip in a broader historical picture. [0:29:57]
Some comments on the recent performance of rates, growth, and value. [0:33:39]
Today's expected value returns in comparison with other points in history. [0:37:19]
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The Relevance of Dividend Irrelevance (EP.201)
19 mei 2022 · 58 min
Today, on the Rational Reminder Podcast, we are tackling a few interesting topics that tie into recent and forthcoming conversations with our amazing guests. In this 'us only' episode, we are focusing on thematic ETFs and the truth about dividend investing. After a quick look at The Quick Fix by Jesse Singal, some reflections on the past six months at ARK Invest, and the lessons we can still learn from the dot-com crash, we get into the meat of today's episode by way of Ben's recent experiences on a discussion panel about the utility of thematic investing. From there, we transition into the 'relevance of dividend irrelevance' and share some of the most illuminating and pertinent findings. In the end, our argument is simply that dividends are not the way to go and are an inefficient policy on many fronts. This has not deterred many investors, however, and we get to grips with the kinds of behaviours associated with dividends before espousing what this can mean for you and your objectives. To catch all of this and links to some of the best research available, be sure to listen in with us today. Lees meer
Key Points From This Episode:
Today's book review of The Quick Fix by Jesse Singal and its critique of popular psychology. [0:12:30]
Inflows at ARK Invest; the startling commitment that we are currently seeing. [0:21:48]
Reflections and information that we dug up on the dot-com crash in the '90s. [0:22:30]
Notes on thematic ETFs garnered from the recent panel Ben was on. [0:25:09]
Disentangling the relevance of dividend irrelevance. [0:35:45]
The performance of a dividend portfolio and a better idea of expected returns. [0:40:28]
Empirical findings about dividend investors and their actions in relation to yields, diversification, and more. [0:42:01]
The tax inefficiency of dividends and what this means for capital gains. [0:49:01]
Underlining the importance of dividend investor's consumption and its sensitivity to dividends. [0:51:31]
How the problem with dividends …
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Prof. Eugene Fama (EP.200)
12 mei 2022 · 1 uur 8 min
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. Lees meer
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 ag…
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What Happens after Bonds Crash? (plus Reading with Aydin Mirzaee) (EP.199)
5 mei 2022 · 1 uur 9 min
As we near the 200th episode of our little podcast, we wanted to have a chat with our friend Aydin Mirzaee about one of our favourite topics: books. Before welcoming Aydin into the conversation we round up some important news, go deeper than ever into the fascinating subject of bonds, and share some thoughts on Setting the Table. As the host of the Supermanagers Podcast and the CEO of Fellow, Aydin has an unusual and stimulating perspective on many of our usual interests, and we get to hear from him about the development of his own reading habit, what he most enjoys reading, what would make him recommend a book to someone else, and few pieces of advice for strengthening your reading practices. Aydin also talks about why advice can be dangerous, increasing your ability to retain information, and he is generous enough to do a round of Talking Sense cards with us to finish off the episode. To hear it all, make sure to join us. Lees meer
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 di…
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Gerard O'Reilly: Deep Dive with Dimensional's co-CEO & CIO (EP.198)
28 april 2022 · 1 uur 43 min
You don't need to be a rocket scientist to work at Dimensional Fund Advisors, but Gerard O'Reilly sees it as an asset, particularly when it comes to problem-solving. Now the Co-CEO and Chief Investment Officer of one of the fastest-growing US investment businesses, Gerard received a Ph.D. in aeronautics before entering fund management, attracted to Dimensional because of the opportunity it afforded him to learn from the world-leading economists at the company; including Eugene Fama, Myron Scholes, Merton Miller, Robert Merton, and Ken French. We recently sat down with Gerard to discuss the firm's research-based culture and rules-based approach to investing. In this episode, we get into the nitty-gritty regarding Dimensional's distinctive portfolio management decisions and the data sources they draw from and Gerard answers some technical questions regarding risk assessment, factor tilted portfolios, operating profitability, goodwill, and more. We also touch on the value of combining multiple metrics, why small-cap stocks deserve a place in your portfolio, and some of the biggest changes that Gerard has witnessed in Dimensional portfolios over the past decade, as well as how he applies his scientific learnings to make unique portfolio adjustments and some of the various benefits of Dimensional's integrated approach. Make sure not to miss this informative, insightful, and in-depth conversation with Dimensional CIO and Co-CEO, Gerard O'Reilly! Lees meer
Key Points From This Episode:
Market-cap-weighted passive strategies versus Dimensional's rules-based higher expected return strategy. [0:03:45]
Assessing risk based on the Intertemporal Capital Asset Pricing Model (ICAPM). [0:07:07]
Diversification in a factor tilted portfolio versus a cap-weighted market portfolio. [0:10:57]
What criteria the variables that Dimensional uses need to meet before they're considered dimensions of expected returns. [0:13:00]
Sources Dimensional draws from regarding portfolio decisions and impl…
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The Immortality of Bonds (EP.197)
21 april 2022 · 58 min
Many people have been contemplating the death of bonds, which is why for the main topic of today's episode we're going to be talking about their immortality. After a vicarious trip to The Masters, an overview of The Art of Insubordination, and an explanation of why we're concerned about the changes that WealthSimple has made to their business model, we get into the world of bonds. Bond returns have not been good this year, and bond index funds are down all round, but that doesn't mean that bonds are necessarily the riskier choice of investment in the long term, or that you should be feeling disheartened about them. Tune into our conversation today to hear why! Lees meer
Key Points From This Episode:
The incredible experience of attending The Masters, and how you can win a ticket. [0:02:21]
Three business-focused TV series that we highly recommend. [0:02:27]
Upcoming guests, and some very positive listener reviews. [0:03:34]
An overview of The Art of Insubordination. [0:09:16]
Why change is challenging for most people, and the value of creating environments that encourage dissent. [0:11:12]
How dissenters can make their actions more impactful, and what leaders can do to encourage dissent. [0:13:16]
Key takeaways from The Art of Insubordination. [0:16:39]
Why we are disappointed with the changes that Wealthsimple has made to their business. [0:18:47]
Nuances that Wealthsimple has left out of their venture capital analysis. [0:23:51]
Today's main topic: the immortality of bonds. [0:33:38]
Statistics which highlight the fact that bond returns have not been good this year. [0:33:51]
Why volatility is not the only risk that matters. [0:35:06]
How Ken French defines risk. [0:37:51]
Some of the pros and cons of bonds and stocks. [0:38:56]
Calculations which show that stocks are not necessarily less volatile than bonds in the long run. [0:40:48]
The five components of long-run predictive variance. [0:43:23]
An explanation of a model we created for the dispersion of …
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Sebastien Betermier: Hedging, Sentiment, and the Cross-Section of Equity Premia (EP.196)
14 april 2022 · 1 uur 17 min
Welcome back to the show all about sensible investing in Canada! Today we have yet another masterclass with a wonderful guest, Sebastien Betermier. Sebastian is an Associate Professor of Finance at Desautels Faculty of Management at McGill University, where he teaches investment management, applied investments, and pension funds retirement systems. We have a deep, thoughtful, and precise conversation with him about his recent research and papers, much of which stands in contrast to our usual fare on the show. In our chat, we dive into the nuts and bolts of asset allocation, hedging risk, and his research into what demographics can teach us about investment behaviours and returns. We also hear from our guest about interesting topics of expected persistence and tilting towards value stocks, before shifting the conversation towards homeownership and property investment. Sebastien provides some sound advice around when it might be a good idea to purchase property over other asset classes, and we evaluate this position from a number of different investing perspectives. Lastly, we spend some time looking at pension plans, and what we can learn from those available in Canada right now. Lees meer
Key Points From This Episode:
Sebastien explains the theoretical relationship between labor income and financial asset allocation. [0:04:30]
Findings on hedging labour income risks and the paper that Sebastien published on the subject. [0:06:47]
The relationships between risk and age, gender, wealth, and heterogeneity across households. [0:10:05]
Unpacking Sebastien's investigation into value and growth investors. [0:12:07]
The effect that the characteristics of labor income have on the rate of progression on the value ladder. [0:18:43]
What we can learn about expected persistence in the value premium. [0:22:39]
Weighing the possibility of predictive demographics for future value premiums. [0:24:29]
Advice for young investors looking to tilt towards value stocks. [0:27:50]
Explain…
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Common Misconceptions Among Beginner Investors (EP.195)
7 april 2022 · 1 uur 4 min
The world of personal finance is full of axioms, and new investors can get caught up in investing myths and 'rules of thumb' that are limiting at best and lead to underperformance and unnecessary losses at worst. In this week's episode, we outline some of the common misconceptions that new investors have, the evidence (or lack thereof) surrounding them, and how to think more like a seasoned investor. Is value investing really a safer strategy with lower expected returns? Do you need to employ a Buffett-Lynch stock picking approach when value investing? Are all index funds good investments? Tune in to find out the answers to these questions and gain some insight into the relationship between risk and return, dividend investing versus total risk investing, and whether or not exclusively investing in US stocks is a good idea, plus so much more! Lees meer
Key Points From This Episode:
Upcoming guests, including Professor Eugene Fama in Episode 200. [0:01:27]
An update on our 22 in 22 Reading Challenge, with over 1,000 books read. [0:05:30]
A review of The Great Depression: A Diary by Benjamin Roth and lessons learned. [0:07:18]
A quick overview of The Bond King, the story of Bill Gross by Mary Childs. [0:17:10]
This week's news stories: 24/7 investing from Robinhood, stock splits, Wealthsimple portfolio changes, and more. [0:20:02]
Our main topic: some of the common misconceptions that new investors have. [0:28:50]
Whether or not value investing is a safer strategy with lower expected returns. [0:30:42]
Some examples of where the myth that value stocks are safer comes from. [0:33:25]
The fallacy that value investing requires discounted cash flow (DCF) analysis. [0:40:52]
Why Warren Buffett's outcome could be a challenge to systematic value investing. [0:43:41]
Debunking the misconception at all index funds are good investments. [0:46:48]
Conversely, Ben shares why not all actively managed funds are bad investments. [0:47:34]
Why all exchange-traded funds (ETFs) tra…
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Bill Janeway: Investing in the Innovation Economy (EP.194)
31 maart 2022 · 56 min
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. Lees meer
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…
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(Modern) Modern Portfolio Theory (EP.193)
24 maart 2022 · 1 uur 18 min
Today on Rational Reminder we take a deep dive into the evolution of modern portfolio theory. We kick the show off with some updates and reviews on some of the brilliant shows and books we are watching right now. A key item from this selection is Stolen Focus: Why You Can't Pay Attention and the points it makes about the value of flow state for learning and creativity. After this week's news stories, we get into the main topic, and Ben starts with a breakdown of portfolio theory as it was laid out by Harry Markowitz in 1952. From there we talk about research that shaped the current understanding of portfolio theory, exploring the distinction between the mean-variance efficient portfolio and the multi-factor efficient portfolio, and how they theoretically combine to make the market portfolio. One of the biggest takeaways here is that your financial asset portfolios can look the same in terms of asset allocation but the person with more macroeconomic risk in the remainder of their financial situation is taking on more risk. Additionally, even if somebody is the perfect candidate to be the mean-variance investor and they could theoretically tilt toward value, it doesn't necessarily mean they have to. We wrap up our conversation by inviting our good friend Larry Swedroe onto the show to speak about his love of reading and share his methods for incorporating what he learns from books into his work and thinking. Lees meer
Key Points From This Episode:
Updates: Shows, books, upcoming guests, reviews, and our reading challenge. [0:00:22]
A review on Stolen Focus: Why You Can't Pay Attention. [0:11:00]
News stories for the week: Wealthfront offers thematic ETFs and more. [0:18:47]
Moving onto the main topic for today: How modern portfolio theory has changed since 1952. [0:23:00]
Lessons to be taken away from Markowitz's 1952 portfolio theory. [0:25:09]
How the math changes when you have a risk-free asset in your portfolio problem. [0:26:59]
The capital asset pricing model: th…
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Alex Edmans: Growing the Pie: A Different Take on ESG (EP.192)
17 maart 2022 · 1 uur 3 min
We always appreciate research-based arguments here at the Rational Reminder and when those arguments might rattle some assumptions we get particularly excited. Today we have an eye-opening conversation with finance professor Alex Edmans, in which he discusses his idea of growing the pie and how social change and value relate to investor decisions. Alex's work is deeply rooted in skepticism and a critical method of assessing evidence, an approach that has resulted in surprising and sometimes paradoxical findings. We get into a fascinating conversation dealing with employee satisfaction and ESG, with Alex challenging some commonly held beliefs around socially responsible investing, with the data to back it up. A strong theme that emerged during our chat is the need for these conversations to be grounded in research, instead of empty rhetoric, and Alex's data-rich perspective is a great inspiration. Towards the end of the episode, Alex talks about the practical, individual application of his ideas, and how an empowered employee can add value on any level. So, to hear all this and a whole lot more unmissable insight, join us on the show. Lees meer
Key Points From This Episode:
Unpacking what Alex means by 'growing the pie' and differentiating this from other similar-sounding goals. [0:02:38]
How to go about measuring the growth of the pie, and the pieces that cannot be measured. [0:05:14]
Alex addresses Milton Friedman's famous quote about responsibility and profits. [0:06:48]
The role of big asset managers in directing investment towards more socially responsible causes. [0:08:56]
Thoughts on the value of divestment as a means to effect social change. [0:11:34]
How much impact are typical ESG funds having currently? [0:15:05]
The subjective discussion around sustainability and Alex's definition of what makes a company sustainable. [0:17:06]
The inconvenient truth about sustainable funds' performance against the market. [0:20:56]
Alex's research into the relationship b…
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Emerging Markets: Diversifying Asset or a Reverse Lottery? (EP.191)
10 maart 2022 · 1 uur 1 min
There seem to be many differing opinions out there about investing in emerging markets, and unfortunately, many of these are inaccurate. This is mostly due to the fact that emerging markets and your involvement in them, perform in ways that are somewhat counterintuitive. In today's episode, we tackle this tricky subject from a number of angles and try to give all of our listeners a better understanding of the strengths and weaknesses of using emerging markets within your portfolio, without falling prey to some common traps. To kick off the episode we talk about some financial news and the interesting recent book Making Numbers Count, before diving into the main course of the show. Listeners can expect to come away with some new insight into the history of emerging markets theory, realistic emerging markets returns, the appropriate amount of caution to exercise when investing in them, and more. Towards the tail end of the show, we are joined by our friend Morgan Housel, author of the prominent new book, The Psychology of Money, and we briefly discuss reading habits and how implementing a few small practices for learning can have an extraordinary impact on ones' life. Don't miss out on this great show. Lees meer
Key Points From This Episode:
Rounding up some interesting recent content; TV shows, articles, and more. [0:01:16]
This week's book review of about the powerful, Making Numbers Count. [0:07:23]
Standout data points; Twitter's valuation, Deere Corp, and more. [0:13:14]
A few pieces of the most interesting financial news from the last week. [0:16:18]
The roots of the idea of emerging markets and its appearance in the 1980s. [0:20:05]
Unpacking the findings on emerging markets and the best examples of the thesis. [0:21:20]
What to expect with regards to returns from emerging markets. [0:26:37]
Reasons for the benefits of diversifying a portfolio using emerging markets. [0:29:26]
The importance of market integration segmentation and how this relates to emerging m…
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Leonard Mlodinow: Emotions are Rational (EP.190)
3 maart 2022 · 53 min
It is commonly believed that rational thought is threatened by emotion, but contemporary understandings of the brain paint a more complicated picture. Today's guest is Leonard Mlodinow and he joins us to talk about why. As a mathematician and theoretical physicist, Leonard might seem like an odd fit for this topic at first glance. However, when Leonard's desire to discover the secrets of the universe spilled over into a curiosity about the brain, he started publishing books on the subject, his most recent being Emotional: How Feelings Shape Our Thinking. In today's show, Leonard argues that the brain is essentially an information processing organ and that emotions play an integral role in feeding it data. As such, there is no way to separate emotions from thinking, and in fact, they often aid the decision-making process, as well as play a vital role in motivating us. However, our emotions evolved in a different world to the one we live in today, meaning that there are situations where a certain emotion might be influencing a decision in a way we don't want, and this is where the cultivation of emotional intelligence becomes a beneficial practice. So for all of this, as well as perspectives on its ramifications for sensible investing, be sure to tune in today! Lees meer
Key Points From This Episode:
Introducing Leonard Mlodinow and his book, Emotional: How Feelings Shape Our Thinking. [0:00:19]
The role of emotions in rational decision-making. [0:01:04]
How the brain processes data and the role of emotions in this process. [0:04:09]
Whether emotions are detrimental to decision making. [0:06:50]
The situations our emotions evolved in and how our world has changed. [0:09:05]
Whether it is wise or possible to separate emotions from rational thinking. [0:11:50]
New findings from affective neuroscience about emotion. [0:13:36]
Why simplistic categorizations of emotions and beliefs that they are associated with certain organs are wrong. [0:14:51]
What 'core affect' is, it…
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BONUS: Stocks, Bonds, and War
28 februari 2022 · 32 min
In this special episode, we review the relationship between war and financial markets. War is a tragedy. We are not minimizing the humanitarian tragedy of what is happening in Ukraine by focusing on the potential impact on financial markets. But we are offering a Rational Reminder for investors in a stressful time. Wars and financial markets have coexisted, and often been intertwined, for hundreds of years. Countries that have lost major wars have had their financial markets decimated, while global markets have been relatively resilient, even to major conflicts. In addition to the historical perspective, we offer some timeless lessons for investors to remember in times of stress. Lees meer
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Regret (and How to Read More w/ Neil Pasricha) (EP.189)
24 februari 2022 · 1 uur 6 min
Today's guest is Neil Pasricha and he joins us to discuss how to read more. Before our time with Neil, Ben and Cameron lead the discussion, working through a range of topics including how to grasp large numbers, the value of 'humbitious' leadership, and how to get a better understanding of regret. When Neil jumps into the conversation, he starts by making an argument for reading, telling us how it is the best form of compressed knowledge we have, and that readers effectively live a new life each time they read a book. We hear about how Neil got back into reading later in his life and the role it has played in shaping so many of his most significant projects over the last few years. He answers some common objections that people have to reading, busting the myth that there is no time for reading or that only certain kinds of books are worth it. In light of our current reading challenge, we hear Neil's views on whether making a public commitment is an effective approach to reading more. Wrapping up, Neil makes a great point about the importance of finding the right books for your personality and gives some helpful tips for how to do so. Lees meer
Key Points From This Episode:
Updates: things to watch, our reading challenge, top books, and more. [0:00:19]
How Cameron stumbled upon today's guest, Neil Pasricha. [0:02:34]
Finding ways to grasp big numbers in Making Numbers Count. [0:04:27]
Discussing the value of humble but ambitious leaders in [0:10:01]
This week's news: Wealth Front is contesting the value premium. [0:15:42]
The importance of understanding regret for making financial decisions. [0:25:00]
The main types of regret and things that people feel this emotion about. [0:31:58]
How to prevent future regret and manage current regret. [0:38:10]
Cameron's quasi-obsession with enabling teams as they scale. [0:45:00]
The tool Cameron and Ben are going to build to survey financial goals. [0:47:45]
Neil Pasricha joins us to talk about how to read more. [0:50:05]
Ac…
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Ayelet Fishbach: The Science of Motivation (EP.188)
17 februari 2022 · 1 uur 5 min
Goal-setting has been a divisive subject of discussion for us here on the Rational Reminder Podcast, and today we dive a bit deeper into the topic with the help of the amazing Ayelet Fishbach, author of the recent book Get It Done. Ayelet is an expert in motivation and a Professor of Behavioral Science and Marketing at the Chicago Booth School of Business. Her focus in her work is researching social psychology, management and consumer behaviour, and having her on the show to share some of this amazing insight is a real honour! In our conversation, we cover many sides of the goal-setting process, exploring the vast array of research that Ayelet has done and has examined. We talk about the difference between intrinsic and extrinsic goals, the outcomes of tracking progress, what makes an effective goal, and what is meant by a 'goal-system'. Ayelet also shares how this research can inform tasks such as retirement planning, and the work of financial advisors. So for this and a whole lot more that is bound to be illuminating, fascinating, and potentially life-altering, be sure to join us on the show. Lees meer
Key Points From This Episode:
Using goal-setting to address our inability to predict elements of the future. [0:03:50]
Differentiating between intrinsic and extrinsic goals. [0:05:00]
Ayelet lists some examples of effective goals and their qualities. [0:06:37]
The dangers of avoidance and unhealthy goals and how to recognize these. [0:10:48]
Exploring the parts of human psychology that push us to always want more. [0:14:46]
How quantifiable, self-set targets for goals can aid the process of achieving them. [0:17:18]
Weighing the benefits of creating incentives associated with the goals you set. [0:21:45]
The roots of intrinsic motivation and how to foster more of these. [0:25:13]
Making the pursuit of a goal enjoyable and why this is so important. [0:29:21]
How these findings on goal-setting relate to long-term retirement planning. [0:32:10]
Ways for financial ad…
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How to Set Financial Goals (EP.187)
10 februari 2022 · 1 uur 16 min
Identifying investment goals is a critical step in developing a sound financial plan that helps investors reach their objectives. Studies have shown that using a goals-based framework in financial planning can lead to an increase in wealth for investors and has the potential to strengthen planner-client relationships; but what goals should you be setting? And why is it often so difficult to make these kinds of decisions? In today's episode, Benjamin dives into some of the research he is conducting about goals-based financial planning for the paper he is writing on the topic, and we discuss why defining and prioritizing goals in the financial planning process is so important (and why it can be so challenging), as well as some practical guidelines to help you set effective goals. Additionally, you'll learn all about our 22 in 22 Reading Challenge, which we officially launch today with the help of Heather Reisman, book lover, entrepreneur, and CEO of Indigo, Canada's largest books, gift, and toy retailer. Heather is also the co-creator of the Kobo reading device, a former governor of the Toronto Stock Exchange, and the co-executive producer of the documentary, Fed Up. As you know, the objective of this podcast is to help improve listener's lives by communicating ideas about sensible investing and financial decision making; and reading is a big part of that. Make sure to tune in to find out where to sign up for the challenge, take note of our book recommendations, and more! Lees meer
Key Points From This Episode:
Learn more about the 22 in 22 Reading Challenge and where to sign up for it. [0:00:35]
Introducing today's special guest, Indigo CEO, Heather Reisman. [0:03:55]
Some of the exciting guests you can expect to hear from on the show in future. [0:06:38]
Our watchlist recommendations for you, including Ray Donovan: The Movie. [0:08:43]
Cameron's book recommendation: The Culture Code by Daniel Coyle. [0:10:05]
Benjamin shares his views on Facebook's one-day $232 billio…
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Andrew Hallam: Balancing Money, Relationships, Health, and Purpose (EP.186)
3 februari 2022 · 1 uur 1 min
One of our favorite things to do on this show is talk with the amazing authors of new books related to sensible investing. Today we do just that, welcoming back Andrew Hallam to the podcast to talk about his new book, Balance. In it, Andrew tackles the relationship between our finances and happiness, looking at the areas of life that need the most attention, and how we sometimes overlook important aspects of our wellbeing. This is Andrew's third book, and we previously hosted him on the show in Episode 99, so make sure to go back and catch up on that if you have not already listened to it. We have a fascinating chat with Andrew again today, getting to grips with some of the main findings in the book, with our guest unpacking his arguments about material purchases, spending on experiences, gratitude, and financial literacy. We also get to hear from him about the importance of staying light-hearted, and how he defines success and failure. Balance is such an eye-opening and illuminating piece of work, which we highly recommend our listeners check out, so tune in today to get a taste of what it's all about. Lees meer
Key Points From This Episode:
Andrew's explanation of his definition of a successful life. [0:02:53]
The questions to ask when prioritizing aspects of one's life. [0:04:35]
Worthwhile material purchases and when spending money can truly have a positive impact. [0:06:12]
Confusion about real estate and investments; Andrew clarifies the idea of buying property. [0:08:59]
Andrew's 'desert island litmus test' for evaluating purchases. [0:12:18]
The relationship between social media and our spending habits [0:14:03]
Times that more liberal spending might be a good decision; Andrew's emphasis on experiences. [0:17:39]
Thoughts on reaching a level of maturity regarding material wealth and satisfaction. [0:24:05]
Andrew's reflections on his experiences of cancer in 2009. [0:27:28]
The role of gratitude in a good life and increasing its presence in our practices. …
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Lighting your Money on Fire with Thematic ETFs (EP.185)
27 januari 2022 · 1 uur 6 min
As we all know, not all investments are equally exciting, but on today's show, we make the case that you should not put your money into an ETF just because it is trending. A thematic ETF is a fund that offers the opportunity to invest based on a particular theme, such as climate change or artificial intelligence. The concept behind investment themes is that they ostensibly offer investors the opportunity to participate in potentially disruptive trends with the idea of earning excess returns. The problem we find with these ETFs is that as the markets they are based on attract more attention and an influx of entrants, everybody's per-share earnings get reduced. By the time a themed ETF becomes investable, it experiences a mean reversion of prices and media sentiment, in contrast to the attractive returns shown in its backtested index. This means that while thematic ETFs are good business for the ETF providers, they do not create value for investors on average. Toward the end of our show, we invite Wes Gray from Alpha Architect to talk about their change from index to active ETFs and more. Wrapping up, Wes along with Robin Taub join us for a lively round of Talking Sense. Tune in today! Lees meer
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Robin Wigglesworth: The Story of Index Funds (EP.184)
20 januari 2022 · 1 uur 21 min
Episode 184: Robin Wigglesworth: Unpacking and Understanding Trillions Lees meer
Episode 184: Show Notes.
We have often spoken about the book Trillions on the show, and in today's episode, we are lucky enough to interview the author, Robin Wigglesworth. We get to speak to Robin about his book and some of its central and most interesting ideas, while touching on other subjects too. Listeners will definitely come away with some enriched perspective, and hearing Robin's thoughtful and articulate answers was an absolute pleasure for us. Our guest is also the Global Financial Correspondent for the Financial Times, with his contributions to the publication being well worth keeping up with. After distilling some of the history of index investing, Mac McQuown, Jack Bogle, and the building blocks of what we do here at the Rational Reminder, Robin is generous enough to also comment on crypto, tech disruption, private equity, ESG investing, and more. This episode ties in so well with previous conversations we have had and Robin's dedication to his craft as a financial writer is truly inspiring, join us to hear it all.
Key Points From This Episode:
Simple reasons for why index funds are the best option for investors. [0:02:40.1]
Tracing the roots of the culture of stock picking. [0:05:52.7]
The initial intellectual push that the idea of index fund received from Wells Fargo. [0:10:44.4]
Touching on some of the important yet lesser-known characters in the history. [0:15:05.8]
Robin unpacks the evolution that Jack Bogle went through in the 1960s. [0:17:40.1]
Jack Bogle's real superpower and getting to grips with the essence of his philosophy. [0:22:33.4]
The important relationship between Dimension and Vanguard. [0:25:42.7]
Differentiating between factor investing and total mark indexing. [0:29:24.5]
Robin's thoughts on where we are currently with an imaginary alpha. [0:32:46.3]
Reasons for Jack Bogle's decision to avoid embracing ETFs early on. [0:35:28.7]
Why Robin stands b…
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Market Efficiency Myths and Misconceptions (EP.183)
13 januari 2022 · 1 uur 30 min
While there is certainly room for rigorous debate regarding market efficiency versus inefficiency, there are many who dismiss Eugene Fama's Efficient Market Hypothesis (EMH) as an incorrect model without understanding what the implications are or how to test it. In today's episode of the Rational Reminder Podcast, we tackle some common market efficiency myths and misconceptions using Fama's 1970 paper on EMH as well as supporting papers by Kenneth French, Lubos Pastor, José Scheinkman, and many others. You'll also hear about behavioural finance, quantitative investing, human bias, and momentum as they relate to market efficiency before debunking some anecdotal misconceptions about EMH involving Warren Buffet and Renaissance Technologies. In addition to our fascinating main topic for today, you'll get a glimpse into the four waves of a career in Cameron's review of The Long Game by Dorie Clark and Benjamin shares some notes and corrections regarding the user cost model from Episode 180: Is Canada Really in a Housing Bubble? We also discuss housing as a depreciating asset, innovation stocks in deep value territory, and the size of innovation platforms relative to global market cap and what that means for investors, plus a whole lot more. Make sure not to miss this jam-packed episode for everything you need to know (and forget) about market efficiency! Lees meer
Key Points From This Episode:
Kicking off with a book review of The Long Game by Dorie Clark. [0:10:53]
Four waves of a career as per Dorie Clark: learning, creation, connecting, reaping. [0:13:04]
Benjamin readdresses the user cost model from Episode 180 on the Canadian housing bubble (or lack thereof). [0:16:06]
Insights from the user cost model regarding price sensitivity and rate changes. [0:20:13]
Addressing common confusion regarding housing as a depreciating asset. [0:22:53]
Speaking of bubbles: innovation stocks in deep value territory as per Cathie Wood. [0:26:08]
ARK's forecast for innovation platforms…
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John 'Mac' McQuown: The Data Will Sort That Out (EP.182)
6 januari 2022 · 46 min
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. Lees meer
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 …
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A Year in Review (EP.181)
23 december 2021 · 1 uur 37 min
We have reached the end of another year, our third while doing this podcast. We are spending this episode on our customary year-end review, and we will be pulling segments from some of the great interviews we hosted over the course of 2021. In doing so, we hope to create a bit of summary of the year and the biggest lessons we all learned together. The podcast has continued to grow beyond our wildest expectations and we are so grateful to be on this journey with our ever-increasing community and audience. We touch on many themes in this recap, moving from general ideas about life, goals, happiness, abundance, and purpose, to more financial subjects of money values, retirement, and crypto, and then into the deeper technical aspects of investment such as value premiums, factors, bonds, and much more. We have tried our best to focus on the segments that we found most enlightening and that changed our perspective, and have highlighted them with reflections and commentary. So to hear it all, join us today, and we'll see you next year, for more of the Rational Reminder Podcast. Lees meer
Key Points From This Episode:
Looking at some of the amazing numbers around the growth of our community. [0:02:37.2]
A few shoutouts to the wonderful people who make this podcast possible. [0:04:27.8]
Bill Schultheis on how to find and fund a good life. [0:08:34.5]
Hal Hershfield's thoughts on making better decisions with your future wellbeing in mind. [0:10:44.3]
Ashley Whillans on the relationship between time-poverty and wellbeing, and increased leisure time. [0:13:39.7]
Jennifer Risher weighs in on the importance of performing meaningful work. [0:17:24.5]
Robin Taub's family money value's from her book, The Wisest Investment: [0:20:04.1]
Jennifer Risher's approach to managing money values at home. [0:22:27.7]
Katy Milkman applies the central idea from How to Change to saving money. [0:23:22.7]
Johanna Peetz on how to use the idea of a future self to reach a goal. [0:26:38.6]
Paul Me…
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Is Canada Really in a Housing Bubble? (EP.180)
16 december 2021 · 1 uur 3 min
There is no doubt that housing in Canada is expensive, but are we really in a bubble? Today on the show we explore the user cost equation and how it can help us answer this question. Before the main topic, we get warmed up with a behind-the-scenes look at Dell's growth path in Cameron's review of Play Nice But Win. From there we address Peter Lynch's recent warning against passive investing as well as reiterate our position on the performance of small-cap value versus large-cap growth. Heading into our discussion on housing in Canada, we provide a working definition of a housing bubble and present the model used to work out user cost, addressing each factor in some detail. We discuss the risk premium for owning versus renting and highlight an interesting point on high price sensitivity during low-interest rates. The major takeaway after looking at Canada from within this framework is that user costs are in line with what they should be historically, and that saying we are in a housing bubble would be a little drastic! Lees meer
Key Points From This Episode:
The effects of the plot of Sex and The City 2021on Peloton stocks. [0:00:20.1]
A book review on Play Nice But Win which tells the story of Dell. [0:08:01.1]
Mixed responses to the paper, 'Want to Be Happy? Hire a Financial Advisor'. [0:13:01.1]
Active fund performance and thoughts on Peter Lynch's recent warning against passive investing. [0:17:14.1]
Responding to listener disagreement with our research on the high returns of small-cap value ETFs. [0:22:46.1]
The huge delta between the performance of ARC versus AVUV. [0:30:27.1]
Using the concept of user cost to assess whether there is a housing bubble in Canada.[0:33:52.1]
The different inputs into the model used to work out user cost. [0:38:22.1]
The definition of a housing bubble and how the facts hold up. [0:39:36.1]
The risk premium for owning instead of renting; why owning could be risky. [0:43:39.1]
Perspectives on the chance that high prices could be d…
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Professor Marco Di Maggio: Crypto, DeFi, and Monetary Policy (EP.179)
9 december 2021 · 51 min
Of all of the possible disruptive uses of cryptocurrency and blockchain, decentralised finance (or DeFi) might be the one most likely to bring this technology to a wider audience; and challenge the established finance industry in the process. For this week's episode on crypto-based decentralised finance, we welcome economist and faculty member in the Finance Unit at Harvard Business School, Professor Marco Di Maggio. Tuning in, you'll learn everything you need to know about DeFi and cryptocurrency, from the most basic definitions to the potential macroeconomic and geopolitical implications of a decentralised reserve currency and the effects of decentralisation on monetary policy transmission. Tuning in, you'll learn the definitions for DAOs, DEX, NFTs and more, and Marco elaborates on some of the reasons that decentralisation is seen as an improvement over central systems as well as some of the issues that it represents. Make sure not to miss this enlightening conversation with Professor Marco Di Maggio as he shares his powerful contrasting perspectives on this inherently libertarian technology. Lees meer
Key Points From This Episode:
Marco defines cryptocurrency; simply put, it's digital currency. [0:02:59]
Find out what a DAO is; a community-led entity with no central authority. [0:03:58]
How a DAO is different from a corporation in the way it values decentralisation. [0:05:56]
Stablecoins as cryptocurrency pegged to fiat currency and backed by collateral. [0:07:07]
Learn about decentralised exchanges or DEX, the bonding curve, and Uniswap. [0:09:28]
Why decentralisation is seen as an improvement over centralisation; greater transparency and access requiring no counterparty. [0:12:32]
When decentralisation is not a good solution given the lack of accountability. [0:14:40]
Marco expands on some other issues with the technology, including its environmental impact, volatility, and regulatory uncertainty. [0:16:07]
Understanding counterparty risk, returns, and intere…
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Are Inflation Concerns Inflated? (EP.178)
2 december 2021 · 1 uur 2 min
In today's episode of The Rational Reminder, we tackle the subject of inflation in a twofold manner. Firstly, there are details around how people perceive inflation that often get overlooked, and secondly, these expectations have investment implications that are worth unpacking. Before diving into the main topic, we talk about Colin Bryar's Working Backwards which tracks the role of failure and customer obsession in Amazon's growth path. After getting into this week's news and listener question, we begin the first part of our session on inflation. Some of the main points we make here are that everybody experiences inflation differently, that perceptions of inflation are connected to experience, and that biased inflation estimates can explain household borrowing and investing behaviour. This leads us to part two of our discussion, where we unpack how expected inflation influences asset pricing and the role of unexpected inflation in the performance of stocks and bonds. We attempt to locate other asset classes that can act as inflation hedges, but find that with the tradeoffs and poor correlations involved, it makes the most sense to vouch for a properly diversified portfolio of stocks and bonds with exposure to multiple sources of expected return. So before you base too much of your decision-making on inflation, be sure to consider some of the points we make in today's show. Lees meer
Key Points From This Episode:
TV shows, listener feedback, Peloton's stock price, and RRP updates. [0:00:19.2]
Lessons from Amazon's growth story in this week's book, Working Backwards. [0:07:55.2]
News: Vanguard's 'High-Conviction Active Funds' and Wealthfront's intention to sell. [0:14:23.1]
Whether size premium is influenced by a reduction in IPOs and publicly traded companies. [0:17:36.2]
Main topic: Overlooked aspects of inflation and their implications on investing. [0:23:46.2]
Metrics from the CPI and how everybody experiences inflation differently. [0:26:36.2]
How to work out you…
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Dr. Anna Lembke: Dopamine & Decision-Making (EP.177)
25 november 2021 · 1 uur 1 min
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. Lees meer
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…
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Is the Value Premium Smaller Than We Thought? Featuring Mathias Hasler (EP.176)
18 november 2021 · 52 min
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. Lees meer
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]
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Robin Taub: The Wisest Investment: Teaching Kids About Money (EP.175)
11 november 2021 · 1 uur 7 min
Today we are tackling the vitally important subject of financial literacy from the standpoint of parents wanting to educate their children. We have a true expert on the show today to help us with this discussion, and we cannot wait to share this highly actionable and impactful conversation with our audience. Robin Taub is a former CPA turned author, and her book, The Wisest Investment, approaches the need to educate children from an early age, and the best strategies that parents can use for this task. Robin previously worked at Citibank in derivatives marketing and brings the high-level expertise of accounting to her book and this episode of the podcast. We strongly support her perspective on financial education and believe the framework she discusses here and shares in her book is well worth any parent's time. In our conversation, we cover all the important bases; financial values, summer jobs, investment apps, human capital, and everything in between, so make sure to listen with us to hear it all. Lees meer
Key Points From This Episode:
Unpacking Robin's beliefs about the importance of financial education in the family. [0:02:55.2]
Financial education in the Canadian schooling system; Robin weighs in on its success. [0:04:08.6]
The assessment that parents can make about being role models to their children. [0:06:53.1]
The communication of values through the process of teaching and learning. [0:09:01.8]
Ideas for the appropriate time to start teaching kids about money. [0:11:40.5]
Using teachable moments to begin the conversation about money. [0:14:35.3]
Thoughts about allowances and best practices for parents. [0:18:09.7]
The evolution of money conversations as children grow older; increasing sophistication over the years. [0:23:46.9]
Benefits and considerations when introducing the concept of working for money. [0:27:30.3]
How social media can impact young people's spending, and how to mitigate these effects. [0:31:26.2]
Robin weighs in on the question of cel…
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The "Good Company is a Good Investment" Fallacy (EP.174)
4 november 2021 · 51 min
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! Lees meer
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 return…
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Antonio Picca: From Index Investing to Factor Investing at Vanguard (EP.173)
28 oktober 2021 · 56 min
In our conversation this week, we take a deep dive into factor investing. We are joined by the formidable Antonio Picca, Head of Factor Strategies at Vanguard, to help us navigate this complicated topic. Antonio is one of the largest asset managers in the world, with over seven trillion dollars under management. Among his credentials is a Master's in Finance and Economics from the London School of Economics, as well as a Doctorate in Finance and Economics from Chicago, where he was also a teaching assistant with Gene Fama. During our discussion, we cover a broad series of questions on factor investing, while also venturing into deeply technical territory. We examine how one might make the transition to factor investing after gaining confidence in passive investing and unpack important questions around factor investing and risk. Another fascinating topic we cover is how factor investing resembles active investing, including some crucial distinctions. Next, we take a look at some of the negative connotations of active investing and investigate why those issues may not apply to factor investing. Antonio goes on to explain why factor investing is a natural extension of a broad equity market investing and illustrates how it aligns with Vanguard's philosophy, which is a belief in low-cost, long-term focus, and broad diversification. You won't want to miss this excellent opportunity to gain a deeper understanding of factor investing from one of the leading experts in the field. Tune in today to hear it all! Lees meer
Key Points From This Episode:
Introducing today's guest Antonio Picca, Head of Factor Strategies at Vanguard. [00:00:17]
How Antonio would explain factor investing to an existing Vanguard client who's already sold on the idea of low-cost, cap-weighted index investing. [00:03:16]
Why clients need to be educated on factor investing, and why factor investing is a form of active investing. [00:04:31]
The benefits of targeting other factors in addition to the market ri…
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Is the debate over renting vs. buying a home really over? Featuring Rob Carrick (EP.172)
21 oktober 2021 · 1 uur 18 min
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. Lees meer
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 …
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Campbell R. Harvey: The Past and Future of Finance (EP.171)
14 oktober 2021 · 2 uur 1 min
For this week's episode (our longest to date), we get together with the legendary Professor Campbell R. Harvey and take a deep dive into a diverse range of topics that draw on his incredible breadth of knowledge and extensive research. Campbell is the Professor of International Business at Duke University and is also a Research Associate at the National Bureau of Economic Research. In 2016 he served as the President of the American Finance Association, and from 2006 to 2012 he occupied the incredibly demanding role of Editor for the Journal of Finance. One of his earliest achievements was identifying the inverted yield curve's ability to predict a recession, a highly regarded metric that is near-ubiquitous in its implementation. For the first half of our conversation, we focus on his research in areas like skewness and emerging economies. We cover specific topics like the factor zoo, why it's problematic, and how Campbell, along with his student Yan Lui, found through their research that approximately half of the published empirical research in finance at the time was, in fact, false. We also unpack his most downloaded paper entitled The Golden Dilemma and get into the intricacies of why gold is an unreliable inflation hedge. For the latter half of our conversation, we hear about Campbell's latest book DeFi and the Future of Finance along with his most recent research. Discover how Campbell first became interested in the topic several years ago and decided to put together a course for his students. We also delve into the rise of decentralized finance (DeFi) and how we can expect it to shape global finance, trading, and the future of the internet. Join us today for this essential episode on everything from the pitfalls of academia, to emerging markets, to Bitcoin, and much more! Lees meer
Key Points From This Episode:
Introducing this week's guest Professor Campbell Harvey. [00:02:46]
How Campbell's research brought him to Chicago's Ph.D. program. [00:03:55]
How Campbell …
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Are Homeowners Happier than Renters? (EP.170)
7 oktober 2021 · 1 uur
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! Lees meer
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 unpred…
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John Cochrane: Modern Modern Portfolio Theory (EP.169)
30 september 2021 · 1 uur 23 min
Today's conversation is an extremely enlightened and highly detailed one, that you may want to return to, in order to accrue all of its value. We host John Cochrane, an economist specializing in financial economics and macroeconomics. John has a popular blog and podcast called The Grumpy Economist and also hosts the GoodFellows Podcast. He is a Rose-Marie and Jack Anderson Senior Fellow at the Hoover Institution and a senior fellow at Stanford Institute for Economic Policy Research, and was a Professor at the Booth School of Business at the University of Chicago. In this fascinating chat, John shares so much of his expertise, going in-depth on the subjects that we and our audience are constantly exploring and excited about. We discuss long-horizon stocks, market inefficiency and return predictability, classic portfolio theory, risk-less assets, and performance evaluation. John also shares his perspectives on the future of centralized finances, digital and cryptocurrencies, and where the business of financial advice is headed. So for all this and more from a leader in his field, be sure to join us for this great episode of the Rational Reminder. Lees meer
Key Points From This Episode:
Breaking down the basics of why stock prices go up and looking at the market as a whole. [0:02:05.8]
The information contained in valuation ratios about long-horizon stock returns. [0:04:25.3]
Market inefficiency and return predictability; unpacking the opinions on the correlation. [0:07:17.8]
What the research on available information and market timing tells us about predictability. [0:12:59.6]
Under-appreciating risk and asking important questions about dividend growth in the future. [0:18:46.5]
The huge impact that predictability can have on classic portfolio theory. [0:22:36.2]
Volatility aversion and communicating important concepts across divides. [0:28:11.7]
John explains the risk-less asset for the long-term investor. [0:30:12.6]
Using the example of bonds to get to grips with …
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A Replication Crisis and a Housing Crisis (EP.168)
23 september 2021 · 1 uur 20 min
Today we have a somewhat unique episode for all of our listeners, rounding up the news and information from the world of finance and investment before we welcome Ben Rabidoux back to the show. Ben was a guest on Episode 96, which aired early during the pandemic last year, and we are so happy to have him here for another appearance, to touch in with his real estate expertise, and his thoughts on the current issues facing the Canadian housing market. Ben is the Founder of Edge Realty Analytics and North Cove Advisors and is essentially a real estate analyst, which means he has many clients that are institutional investors and fund managers, who he helps with the real estate side of their portfolios. In this conversation, Ben gives us loads of insight into the current landscape of Canadian real estate, the roots of the contemporary conditions, and what the data can teach us about the high prices that are so prevalent at present. We also hear from Ben about some potential policy solutions, and how the pandemic has affected the rental market. So for all this and a whole lot more in today's episode, be sure to join us on the Rational Reminder Podcast. Lees meer
Key Points From This Episode:
Some of the best media we have encountered recently; podcasts, documentaries, and more. [0:02:01.3]
News from the community and why we had to ban a user for the first time. [0:03:46.1]
Quick book reviews of the illuminating DeFi and the Future of Finance and Blockchain Bubble or Revolution. [0:07:05.8]
Changes in the world of finance and investment; Walgreens' new bank account and beyond. [0:12:22.3]
Today's listener question dealing with research-based investment decisions and frequently cited papers. [0:15:27.5]
Recent research from Robert Novy-Marx and Fama and French on US value premiums and factors that matter. [0:22:01.3]
How to view the possibility of a replication crisis in finance. [0:31:10.8]
Findings on US exceptionalism and the relationship between national economic growth …
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Professor Hersh Shefrin: Fear, Hope, and the Psychology of Investing (EP.167)
16 september 2021 · 1 uur 13 min
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. Lees meer
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 explanatio…
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Lessons from 100+ Years of Global Stock Returns (EP.166)
9 september 2021 · 1 uur 3 min
In this week's episode, Cameron and Benjamin share what's on their mind and delve into listener questions on subjects ranging from the CAPE ratio to how to go about changing someone's mind. Tuning in you'll get a preview of some of the formidable guests featured on future episodes, like John Cochrane and Hersh Shefrin. We also cover book recommendations and unpack the concept of libertarian paternalism from the highly influential best-seller, Nudge: The Final Edition by Richard Thaler and Cass Sunstein, and how it can be a force for good. We cover various facets of passive investing and index funds including how, despite its proven effectiveness, many people continue to take a dim view of it. Learn why certain personality types may be more drawn to active investing and why. We also share tips for reasoning with skeptics, including some useful questions to ask when things get heated. Next, we take an in-depth look at index funds and global returns over the last century based on the research of Dimson, Marsh, and Staunton and their book Triumph of the Optimists. We also answer questions from our Talking Cents Cards and take a look at the best bad advice from the previous week. This episode is packed with fascinating anecdotes and excellent recommendations that you won't want to miss! Tune in today! Lees meer
Key Points From This Episode:
We reflect on some of the reviews and feedback we've received over the past week. [0:03:00.7]
An overview of the guests that listeners can look forward to on future episodes. [0:06:15.8]
Talking Cents Cards and how they can introduce your family to conversations about money. [0:07:01.2]
Introducing Nudge: The Final Edition by Richard Thaler and Cass Sunstein, and the concept of libertarian paternalism. [0:08:50.0]
Cameron shares his story of the week, an article from Magnify Money on how emotions can influence investor decisions. [0:13:53.3]
An update on our response to a listener question on the CAPE ratio by discussing the work of Joh…
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Gordon Irlam: (Near) Optimal Retirement Planning using Machine Learning (EP.165)
2 september 2021 · 41 min
The evergreen subject of retirement planning is something that we prioritize here at the Rational Reminder Podcast, and today we have a very interesting conversation in which we explore the topic from a slightly different perspective. We are joined by Gordon Irlam, who is a notable researcher with a wealth of experience from the world of tech and beyond. We have the chance to ask Gordon about bonds, annuities, and optimal allocations for different outlooks, and also get his perspective on charitable giving, effective altruism, and different spending plans. Gordon has conducted some amazing research and even developed his own tools to help investors calculate the variables of their situations. This episode is a great gateway for listeners to explore these concepts, as well as make use of Gordon's resources. Our guest's personal story is equally fascinating, after working with Google early on, and subsequently starting a company that was then acquired by Google, Gordon has leveraged his experience and finances in order to continue asking questions that interest him and will definitely interest our listeners. So for this standout conversation with a great mind, be sure to take a listen. Lees meer
Key Points From This Episode:
Looking back on the Google equity that Gordon sold and how he feels about the decision now. [0:03:00.8]
Google's acquisition of a company that Gordon started and the impact of this financial windfall. [0:04:33.1]
Gordon's explanation of effective altruism and how he utilizes the idea. [0:06:25.3]
Approaches to asset allocation for foundations and how this differs from personal funds. [0:10:28.7]
Comparing practitioner and economist approaches to financial planning. [0:15:59.7]
An explanation of stochastic dynamic programming and its strengths. [0:17:45.5]
Why Gordon now favors reinforcement learning over stochastic dynamic programming. [0:20:12.6]
Considering the role of annuities in Gordon's optimal model for retirement planning. [0:25:05.3]
Con…
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Comprehensive Overview: The 4% Rule (EP.164)
26 augustus 2021 · 56 min
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. Lees meer
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 mak…
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Dave Plecha: The Long and Short of Investing in Bonds (EP.163)
19 augustus 2021 · 1 uur 12 min
Even among rational investors with diversified portfolios, there seems to be less known about the inner workings of the bond portion of their investments. Here on the show today to help us get a better understanding of fixed income investments is none other than Dave Plecha, Global Head of Fixed Income at Dimensional Fund Advisors. Dave is one of the authorities on the subject of bonds and is amazing at articulating the concepts at play in this arena. This conversation goes in-depth, but is also a great starting point for investors to begin thinking about this part of a portfolio, and deepen an understanding of something that is so often misunderstood or misused. As you will hear, Dave has a real passion for this subject and has been presenting and speaking on precisely this work for the last twenty years. We cover a lot of ground with Dave, talking about why his approach might be confused with a certain type of market timing, the impacts of inflation, the current low interest rates and if these affect bond investments, an explanation of forward rates, and so much more that you will not want to miss. We even find time for a quick story about Dave's early days working with Eugene Fama, so make sure to stay tuned in for that. Lees meer
Key Points From This Episode:
Assessing the role of bonds in a portfolio, in relation to the current low interest rates. [0:02:30.3]
Concerns over negative interest rates for bond investors. [0:05:30.1]
Bonds and real returns; the impact of inflation on Canada's market. [0:09:30.7]
Dave's perspective on the argument for long bonds as diversifying assets. [0:15:39.4]
Comparing and contrasting the bond market with the stock market. [0:17:55.7]
The trading of bonds and what differentiates it from trading stocks. [0:22:29.5]
The volatility of last March and Dave's reflections on trading during that period. [0:27:17.8]
Differentiating Dimensional's approach to bonds from the other big firms'. [0:29:21.7]
The primary factors that influence e…
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How to Select a (Good) Financial Advisor (EP.162)
12 augustus 2021 · 1 uur 4 min
Today our main topic expands on a recent episode in which we talked about what constitutes good financial advice, and here we look at how to go about finding the kind of advice that you want and need. It is one thing to know what it is, but that does mean it is straightforward to locate an advisor or firm that provides it. After our opening salvo of some media recommendations and a review of the fascinating book on different ideas on leadership, called The Starfish and the Spider, we dive into a listener question about where to geographically weight your investments and the idea of underweighting the US equity of your portfolio. This leads to a much bigger consideration of the research, which we try to breeze through, and in sum seems to lead us back to the idea of the non-predictability of markets. For our main subject, we share an extensive list of questions to ask yourself before even beginning any conversations with advisors, and using your answers to determine the kind of advisor you need. From there, we get into the questions you can ask the advisor and firms you approach in order to make sure you find the best fit for your needs. We talk about credentials, investment philosophies, firm policies, and everything in between, and we will be posting this full list on our community platform for your reference too. Stay tuned for today's Talking Sense card, and Bad Advice of the Week too, and make sure to tune in for the great guests we have lined up in the coming weeks. Lees meer
Key Points From This Episode:
The positions that we are currently looking to fill here at the podcast! [0:05:48.2]
This week's book of the week: unpacking The Starfish and the Spider and its lessons on leadership. [0:09:53.1]
Looking at an interesting blog post about the power of systems over goals. [0:12:57.8]
A listener question dealing with underweighting US equity in comparison to emerging markets. [0:14:40.5]
Plotting trend lines and the inconsistent relationship between forecasts and ou…
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Katy Milkman: How to Change your Financial Habits (EP.161)
5 augustus 2021 · 58 min
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. Lees meer
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-…
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Day Trading in 2020: Did Free Trading Change Everything? (EP.160)
29 juli 2021 · 1 uur 4 min
Today we get the chance to take some very interesting listener questions and dig into fascinating findings on day trading in 2020. To kick things off we have a quick review of Simon Sinek's insightful new book, The Infinite Game before rounding up some of the news from the investing space. Then it's time to tackle a number of questions from a member of our thriving community and break down some helpful responses to queries about bonds, retirement, convexity, different types of ETFs, and more. We were lucky enough to draw on some great wisdom within our network of advisors to help us answer these complex questions, so you will not want to miss the specifics that we dive into. From there, we dive into the main course of today's show, exploring the topic of day trading in 2020. With the rise of mobile trading on apps like Robinhood, there has been a spike in what some may call casual or free trading. We unpack some of the surprising and not-so-surprising findings on the impact of Robinhood's model, looking at the community's trend towards herding and how the smartphone platforms are changing the way people invest. The main conclusion here may not be a big surprise to any of our listeners, with the higher frequency of transactions leading to worse returns in the long run. For all this, plus some Talking Sense questions cards, and a whole lot more, listen in with us. Lees meer
Key Points From This Episode:
This week's book review of The Infinite Game by Simon Sinek. [0:06:02.7]
News from the world of investing: Vanguard's latest move into indexing, and more. [0:10:30.8]
A series of listener questions dealing with bonds and retirement. [0:15:51.2]
An argument for federal government bonds when prioritizing liquidity. [0:18:26.7]
Understanding convexity and 'bullet' portfolios in this context. [0:20:36.7]
Ten-year treasury ETFs versus all duration ETFs. [0:23:52.4]
Weighing provincial bonds and their lack of liquidity against Canada's governmental bonds. [0:26:12.1]
Looking…
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Bill Schultheis: Build Wealth and Get on With Your Life (EP.159)
22 juli 2021 · 55 min
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! Lees meer
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.…
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Loss Harvesting and the Myth of Tax Alpha (EP.158)
15 juli 2021 · 1 uur 2 min
Welcome back to another episode of the Rational Reminder Podcast, where we give you the most considered and evidence-based information about investing in Canada. Our focus for this episode is the topic of tax loss harvesting, a subject we have touched on before but felt warranted a revisit, with some updates. To kick off the show, we review Playing to Win, looking at the illuminating perspective it offers with regards to strategy and preparation. From there we turn to some recent investing news on ETFs and Robinhood, before we get into the main course of today's show. There are plenty of pitches and arguments for why tax loss selling can be very rewarding, and while these are not necessarily false, there are certain ways in which the information can be misleading, or not comprehensive for all investors. We discuss how best to think about the supposed gains, noting the importance of high expected returns and the time frame in which a case study is made. We also think about some of the potentially negative results of letting tax drive your investment decisions, despite the seeming attractiveness of this route. One of the most important points here is the adjustment needed in order to apply these strategies to the Canadian market, as many of the pitches and research are based in the US system, which has significant differences when it comes to taxation. We highlight some red flags to look out for and give some more general warnings around rushing into investments that lean too heavily in this direction. So for all this and a bunch more great advice for your portfolio, join us for the show. Lees meer
Key Points From This Episode:
This week's book review of Playing to Win by Roger Martin and A G Lafley. [0:08:43.3]
Continued increases for ETFs and comparing the statistics with recent history. [0:12:30.7]
Some amazing statistics about Robinhood users and cryptocurrency investments! [0:15:18.5]
A reintroduction to, and revisited analysis of, tax loss harvesting. [0:18:20.8]
T…
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Rob Arnott: Dissecting Smart Beta, Investing in Disruption, and Momentum (EP.157)
8 juli 2021 · 1 uur 8 min
Today we welcome Rob Arnott to the show! Rob is the founder of Research Affiliates and is a prolific writer who has published hundreds of articles for many different journals. We know firsthand, the power of Rob's work, and how it can alter the way you think about investing, and this depth of knowledge, coupled with his ability to make complex topics understandable makes him a dream guest for us! Rob is the co-author of The Fundamental Index, and we get some insight into this subject along with many other groundbreaking areas he has worked on. We cannot stress enough the rarity of Rob's gift for getting difficult ideas across in a deliberate and approachable way, and this is apparent through this illuminating conversation. For us, it was quite surreal to speak to someone so influential, and listeners can expect to come away with a greater understanding of 'smart-beta', intangible assets, forecasting, and some insight into the interesting areas of earnings dilution and 'the big market delusion', before Rob shares some very surprising information on factor momentum at the end of our chat. So for this and a whole lot more, in a truly stand-out episode, be sure to listen in! Lees meer
Key Points From This Episode:
Rob's perspective on the drawbacks of cap-weighted indexing. [0:02:47.2]
Getting to grips with 'smart-beta' and its links to RAFI. [0:06:21.6]
Building a fundamental index and what the weights are based on. [0:11:17.4]
Misconceptions of the value of backtesting when making investment decisions. [0:13:43.3]
The prevalence of extreme factor-drawdowns for investments. [0:17:22.7]
Weighing the importance of intangible assets and what to trust in this regard. [0:23:32.8]
Value stocks in the current drawdown; value's relative cheapening over recent years. [0:25:53.8]
Stories about the inner workings of a company and how this can vary in importance. [0:28:41.5]
Unpacking 'the big market delusion' and the paper that Rob co-authored on the subject. [0:33:33.2]
Rob's …
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Climate Change vs. The Stock Market (EP.156)
1 juli 2021 · 59 min
The looming issue of climate change has far-reaching implications, not least of which are relevant to the financial and investment world. Today we spend some time considering these impacts, with a focus on the question of whether climate risk is a priced investment. The short answer, conferred by the numerous academic explorations into the subject, is yes. This answer, however, still leaves investors with many options and contrasting possible approaches as to how to act. We get into some of the different avenues to explore when considering your best route, taking into account both ethical constraints and returns, as well as a long-term vision of sustainability. We also talk about why big companies with less of a focus on ethics may be tempted to go green for financial reasons, how investors might enact a moral stance by investing in fewer green companies, and many more surprising possibilities that arise out of the current findings. Rounding out all this serious discussion, we squeeze in an interesting book review from Hans Rosling, some Talking Sense questions, and of course, bad advice of the week, all of which you are not going to want to miss. Lees meer
Key Points From This Episode:
This week's book review, looking at Hans Rosling's Factfulness. [0:08:09.2]
Recent financial and investment news; penalties, TFSAs, and a big shift from Wealthfront. [0:14:36.7]
The question of climate change and markets connected to the use of fossil fuels. [0:19:04.5]
Expected rate of returns in relation to the costs of capital, and the idea of climate hedging. [0:26:46.2]
Looking at empirical evidence on the pricing of climate risk. [0:28:40.1]
Recent scholarly findings on the subject of whether climate risk is priced. [0:31:50.3]
Summing up the academic arguments for why and how pricing of climate risks operates. [0:38:35.7]
The cost of capital incentives for companies to reduce their exposure to climate risk. [0:40:19.3]
Participating in the transition of companies to greener a…
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Don Ezra: Planning for Life After Full Time Work (EP.155)
24 juni 2021 · 1 uur 3 min
One of the major topics we hope to help our listeners with is retirement planning, and today we have a really informative and illuminating conversation with a true expert in the field, Don Ezra. His approach is typified by his focus on retirement and happiness, and their important intersection, subjects he has broached in his many published books, notably Life Two, and Happiness. Don is a self-professed financial nerd, so you know that he will fit right in on this podcast! His advice is relatable and easy to understand, a result of working on his own retirement along the way. Don is an actuary by trade and helped establish Russell Investments Canada in 1984, through which he worked on many huge pension funds across the world, endowing him with amazing expertise in the space. In our conversation, Don gives us such a wide-ranging view of his approach, and the amazing conglomeration of ideas he has amassed on the subject of better retirement, or as he likes to call it, graduation from full-time employment! He breaks things down in easy and catchy ways, giving us some fundamental questions that can help initially guide the retiree, around purpose, action, and money. From there he talks about the seven asset classes of your life's abundance portfolio, needs versus wants, and even finds a spot to comment on the strengths and weakness of the FIRE philosophy. So for all this and much more, join us on the Rational Reminder today! Lees meer
Key Points From This Episode:
Don's feelings around the time of his retirement from such a successful career! [0:02:10.4]
The common feeling of discombobulation around retirement and Don's thoughts on addressing it. [0:03:41.2]
Questions people should be asking and answering as they approach retirement. [0:06:45.8]
Safety, growth, longevity; the three things we need for our finances in retirement. [0:08:49.7]
Don explains the sequence of returns and some misconceptions about averages. [0:10:21.1]
Weighing the uncertainty of life expectancy a…