The Rational Reminder Podcast

As author and financial expert Morgan Housel explains this episode, "people don't make financial decisions on a spreadsheet. They make financial decisions at the dinner table." Today we chat to Morgan about his key insights into financial decision-making — many of which are captured in his book, The Psychology of Money. Our conversation opens with an exploration of how investing success has less to do with what you know and more to do with how you manage your behaviour. We then look into the dangers of emulating top investors and how luck can fuel success. Reflecting the theme that people invest according to their unique circumstances, Morgan shares why he prioritizes endurance as an investor by minimizing his debt and having high cash reserves. After hearing his take on debt and whether young people should use leverage, we dive into how financial expectations impact investing and the importance of deciding what 'enough' means to you. We discuss the virtues of saving like a pessimist and investing like an optimist before looking into the role that financial advisors play in guiding their clients. In the latter part of the end of the episode, Morgan touches on active versus passive investing, the purpose that bonds serve in your portfolio, his top lesson from 2020, and why he's empathetic toward people who sell their portfolios during a downturn. Throughout our discussion, Morgan shares his clear understanding of how our psychology affects our relationship to money. Tune in and benefit from his incredible perspective. Key Points From This Episode: Introducing today's guest, financial author Morgan Housel. [0:00:15] Morgan shares his view that succeeding in investing has little to do with how you behave. [0:02:31] Hear about the problems that can arise from trying to emulate top investors. [0:05:02] Exploring the impact of luck on your success. [0:07:37] The differences between being conservative and having a margin of safety. [0:08:35] Insights into Morgan's personal investing strategy. [0:09:48] Morgan's thoughts on leverage and how debt impacts behaviour and peace of mind. [0:10:31] Stepping off the hedonic treadmill and the importance of defining your financial expectations. [0:14:02] The link between money, independence, and having a high quality of life. [0:16:44] What it means to be wealthy and what motivates the drive to be rich. [0:19:18] Morgan's advice to save like a pessimist and invest like an optimist. [0:21:34] Why no one makes perfectly rational investing decisions. [0:23:54] The role of financial advisors in guiding clients towards their investing decisions. [0:26:22] Why Morgan has embraced the simplest investing strategy available to him. [0:29:02] How you should be thinking about fixed income in your portfolios. [0:31:20] Why financial advisors can be priceless when understanding your finances and goals. [0:33:44] Life is surprising; hear why this is Morgan's top takeaway from 2020. [0:36:29] Morgan's thoughts on the FIRE Movement and retiring early in life. [0:38:53] Hear Morgan's predictions on the next big financial innovation. [0:41:49] Why Morgan is empathetic towards people who sell their portfolios during a downturn. [0:43:50] The tendency for people to embrace more extremist views during times of financial crisis. [0:47:34] We ask Morgan how he defines success in his life. [0:50:25]

There is a sharp divide between those who invest in dividend-paying stocks and those who don't. Underpinning this is the question of whether dividends are relevant to the evaluation of shares. Today we answer this question by digging into the data and parsing the maths before exploring what the future of financial planning looks like. But first, we open our episode with news from the Rational Reminder community — including the fact that we just passed one million podcast downloads. We then touch on lessons from Seth Godin's new inspiring book, along with the latest from the financial world. Following this, we dive into a discussion on dividend stocks. We begin by unpacking the assumptions behind Miller and Modigliani's theory of dividend irrelevance. Host Benjamin Felix presents a case study and applies the Fama-French Model to explain differences in returns on dividend portfolios and if dividends truly affect share valuation. After sharing our practical takeaways from Benjamin's analysis, we move onto our financial planning topic for the week. From technology to retirement decumulation and demographics, we discuss the five key areas which will most impact the future of financial planning. We then wrap up another informative episode with the bad financial advice for the week. Tune in for more insights into the role of dividend stocks and the future of financial planning. Key Points From This Episode: Community news, Benjamin's 3D printing project, and celebrating our 1 millionth download. [0:00:15] Drawing insights from a recent Ted Seides-Shane Parrish interview. [0:03:44] Reflecting on Seth Godin's latest book, Practice: Shipping Creative Work. [0:06:44] How our culture overvalues outcomes while neglecting the creative process. [0:07:46] Why having meals delivered to you helps to limit decision fatigue. [0:08:28] Hear about the new TFSA limits and Tesla's addition to the S&P 500. [0:09:25] Exploring whether size affects premium in the US versus elsewhere. [0:12:28] Why long-only investors may overweight small caps. [0:15:44] How US junk stocks impact value and their place in your portfolio. [0:16:18] Introducing today's portfolio topic; should you invest in dividend stocks? [0:17:53] Unpacking the assumptions behind Miller and Modigliani's theory of dividend irrelevance. [0:18:45] Host Benjamin Felix creates a case study to show Miller and Modigliani's theory in action. [0:22:38] Why Miller and Modigliani's math and idea of financing are based on poor assumptions. [0:26:24] The predictive power and limits of frameworks like the Fama-French 5-Factor Model. [0:27:25] Applying the Fama-French Model to portfolio dividend returns. [0:28:28] Key investing lessons from the notion that dividends are irrelevant to the valuation of shares. [0:31:30] Reasons why people might only want to invest in dividend-paying stocks. [0:33:20] The argument that firms seeking external financing may be subject to greater scrutiny. [0:35:33] Introducing our financial planning topic on the paper 'Financial planning: A research agenda for the next decade.' [0:37:02] Ties between psychology, communication, and financial decision-making. [0:39:02] Exploring the five key research areas informing the future of financial planning. [0:40:16] This week's bad financial advice; invest with active managers. [0:46:31]. What it actually means to say that a fund is actively or passively managed. [0:47:56]

Dr. Brian Portnoy and Josh Brown's book How I Invest My Money, captures the stories and investment strategies of 25 top financial advisors. The book highlights that while there are established dogmas that tell you how and why you ought to invest, there is no 'one-size-fits-all' way to invest. Today we speak with Brian and Josh about the key insights that we can derive from their work. We open our conversation by exploring how they conceived and developed their book before talking about why fully rational investing is a myth. After diving into how we allocate money to solve our unique needs, Brian and Josh share how people use their portfolios to express themselves. We then discuss common investing themes in the book, including how most advisors have an aversion to debt, and how their experiences have guided their strategies and outlooks. From why we should place more value on social and human capital, we look into why financial planning has a profound impact on how you manage your investments. We touch on direct indexing, the relationship between money and happiness, and the unexpected yet incredible perspectives that came from giving advisors a license to tell their stories. Near the end of the episode, Brian and Josh reflect on how their book might have changed their views and how their work fits into their visions for the financial industry. Tune in to hear more on the usually secretive topic of how financial advisors invest their money. Key Points From This Episode: Introducing Brian Portnoy and Josh Brown, authors of How I Invest My Money. [0:0:15] Why we invest and reflections on commentary made by the Rational Reminder community. [0:02:58] Josh shares his motivations for being transparent on where and how he invests. [0:05:25] Hear about the genesis and subsequent development of Brian and Josh's book. [0:07:19] The common needs that individual investors have beyond getting a return. [0:10:18] How the uniqueness of everyone's life affects their investing decisions. [0:13:09] Why there is no strict 'right way' to invest — invest according to what's right for you. [0:14:35] ESG investment and seeing your portfolio as a form of expression. [0:17:21] Exploring common investment themes that arise in Josh and Brian's book. [0:20:07] How Brian and Josh developed their personal investing outlooks. [0:21:44] Why we should place more value in human and social capital. [0:25:16] Brian expands on why we should invest in human and social capital. [0:28:35] The importance of financial planning in managing both your life and investments. [0:31:50] Answering the question: is direct indexing the future for outcome-driven portfolios? [0:36:55] Assessing a client's risk profile as central to modern financial advising. [0:39:34] Portfolio customization and direct indexing versus helping clients create a portfolio around their purposes. [0:40:58] Funding contentment and the relationship between money and happiness. [0:42:22] Whether the stories featured in their book have Brian and Josh's views. [0:46:18] When your life is your benchmark, how do you derive your portfolio benchmark. [0:49:15] How their book fits into Brian and Josh's visions for their industry. [0:54:43]

On today's show, we explore rational explanations for pricing bubbles, how the concept of human capital relates to financial decisions, and a whole lot more! We kick things off with a discussion of Ashley Whillans' book Time Smart, which explores proven strategies for improving your 'time affluence'. Diving into this week's portfolio topic, we use a previous discussion about Carlota Perez's model for technological revolutions as a springboard to introduce Lubos Pastor and Pietro Veronesi's mathematical arguments that present a rational explanation for pricing bubbles. Perez maintains that prices get bid up too high during technological revolutions due to 'frenzy' but we unpack two papers by Pastor and Veronesi where they argue differently, drawing on the concepts of uncertainty and discount rates. From there, we dive into the relationship between human capital, life insurance and asset allocation for our planning topic. We provide some definitions for the term 'human capital' and discuss how it differs from other forms of capital. A key idea we explore here is that the more risky your human capital is, the less life insurance you should take out. Along with this, you'll hear a few quick suggestions for how you should approach life insurance and bonds depending on age, financial wealth, risk aversion, and other factors. Tune in today! Key Points From This Episode: Talking COVID, next week's guests and Rational Reminder Community updates. [0:0:18] Book of the week: Rethinking conventional notions of time well spent in Time Smart. [0:04:07] News updates: Stories about Bitcoin, marijuana stocks, and more. [0:08:56] Portfolio Topic: Whether pricing bubbles are caused by rational behaviour. [0:14:19] Unpacking Pastor and Veronesi's paper connecting uncertainty to high prices. [0:18:25] Pricing bubbles as caused by discount rates; a second Pastor and Veronesi paper. [0:27:48] 'IPO waves' connected to the bubble discussion in a third Pastor and Veronesi paper. [0:37:58] Planning topic: How the concept of human capital relates to financial decisions. [0:44:45] The importance of considering asset allocation decisions and life insurance needs together. [0:54:46] Bad advice of the week: 'The Market's Invisible Guardrails Are Missing'. [1:01:16]

Professor Lubos Pastor's brilliant and varied research has been consistently referenced on this podcast. From how politics impacts stock returns to measuring the skill of active fund managers, Lubos joins us today as we explore some of the 'greatest hits' of his research. With Lubos's position on the board of the Slovakian Central bank, we ask him about how quantitative easing can be used to strengthen the economy. His answers highlight how easing can prop up asset prices and raise inflation — and why inflation is the "least bad" option to deal with post-pandemic debt. We then discuss Lubos's research on how political cycles affect stock returns and why stock returns are higher when a Democrat is in the White House. After diving into how stock prices respond to political uncertainty, we look at why green assets tend to generate higher stock prices but low expected returns. While talking about his research on measuring volatility, Lubos argues against the conventional wisdom that stocks are stable, in the long run. We touch on how this can affect your retirement asset allocation before chatting about whether young people should use leverage. With so many people moving from active to passive and index fund investing, we analyze the relationship between the scale of active funds and the skill of active managers. Near the end of the episode, we talk about the effect that market-wide liquidity has on stock prices and why you cannot diversify away from liquidity risk. Our conversation with Lubos is filled with insights, each of which could inspire hours worth of discussion. Tune in to hear more from our discussion with Professor Lubos Pastor. Key Points From This Episode: Introducing Professor of Finance and today's guest, Lubos Pastor. [0:0:15] The role of central banks and the goal of quantitative easing. [0:05:06] Whether quantitative easing props up asset prices. [0:07:58] Exploring different findings on quantitative easing by central banks and academics. [0:08:51] Why inflation may be the "least bad" option to deal with post-pandemic debt. [0:10:27] How increased inflation helps shift the burden of debt from those who are most impacted by lockdowns. [0:11:17] Lubos explains the relationship between political cycles and stock returns. [0:13:39] Hear how political uncertainty affects stock returns. [0:18:46] Why green assets tend to generate higher stock prices and low expected returns. [0:20:38] What factors would cause green assets to perform well, and how long this might last. [0:25:22] The link between sustainable investing and firms pushing to turn green. [0:27:48] Dispersions among ESG rating organizations and issues related to ESG scoring. [0:29:45] Why green assets will, most likely, never outperform in the long-term. [0:32:37] Exploding the conventional wisdom that stocks are less volatile in the long run. [0:34:26] How long-term stock volatility affects your retirement fund asset allocation. [0:38:30] How human capital and mean reversion should factor into a young person's decision to use leverage. [0:39:54] Analyzing the skill and scale of active fund management. [0:42:49] Why consumers moving towards passive investing will increase active fund performance. [0:46:37] Answering the question: Did active funds do well over the pandemic? [0:52:39] Ways of selecting a good active fund manager. [00:54:28] Buffett's alpha strategies of replicating the decisions of top fund performers. [00:56:55] How market-wide liquidity impacts stock prices. [01:10:42] Whether current liquidity betas can predict future liquidity betas. [01:02:32] Lubos shares how he defines success in his life. [01:05:18]

As counter-intuitive as it may seem, most of the companies that push us into the next technological revolution deliver poor investment returns. Today we look at current and historical data to show why this is the case but first, we chat about the top financial news of the week. Borrowing heavily from Carlota Perez's Technological Revolutions and Financial Capital, we then explore how the links between tech revolutions and investing adhere to a consistent model. Following this model, we discuss how our current information-led revolution is as impactful as revolutions experienced in previous generations. We touch on the factors that lead to innovation, historical perspectives of technology companies, and the many investing phases resulting from tech revolutions. Despite making for poor returns, we talk about why the frenzy of investing that accompanies innovation is good for that industry and leads to a golden age of tech adoption and growth. A key takeaway, we dive into how investors are paying too much for the expected growth of new companies and that there is little to no link between massive growth and high stock returns. From guessing the next IPO winner, we move to our planning topic of the week — how to be a successful household CFO. We close this episode with our bad financial advice of the week. There's a lot of pressure in the market to invest in tech. Despite that, tune in to hear why you shouldn't invest in the next technological revolution. Key Points From This Episode: Hear about host Benjamin Felix's burgeoning 3D printing addiction. [0:0:06] Sharing listener feedback and messages from the Rational Reminder community. [0:02:02] Robinhood and why users are treated as the product, not the customer. [0:04:33] News on what might be the largest cash raise in IPO history. [0:07:25] How most ETF assets are in products that were launched prior to 2015. [0:09:24] Benjamin shares details about his project exploring the value of investing in tech revolutions. [0:11:05] Modelling the consistent sequences that technological revolutions follow. [0:14:38] Why current tech revolutions are as powerful as those experienced in previous generations. [0:16:55] Which common factors lead to tech revolutions. [0:18:31] Looking at historical examples of innovations and the performance of tech companies. [0:20:35] Why innovative big companies become unable to lead the next tech revolution. [0:23:18] How explosive growth and a frenzy of investment is common during early tech breakthroughs. [0:29:30] Signs that our current tech bubble has begun to pop. [0:34:45] The benefits of investment frenzy phases for tech industries and society as a whole. [0:36:15] Exploring what happens after phases of investment frenzy. [0:38:10] Evidence showing that investors pay too much for the expected growth of new companies. [0:42:42] Why there is no link between massive industry growth and stock returns. [0:50:00] Applying lessons from our discussion to our current investing environment. [0:52:03] Why you probably shouldn't put your money in the technological revolution. [0:58:04] How people operate as unofficial CFOs within their households. [01:02:45] The many tasks that household CFOs need to perform. [01:05:20] Bad advice of the week; swap your bonds for dividend-paying stocks. [01:10:42] Why increasing inflation may be a key post-pandemic government strategy. [01:15:40]

There are seven equations that, if understood, will put you in the best possible position to tackle your retirement plan. Today we speak with business professor Moshe Milevsky about these equations, which he's written extensively about in his best-selling book, The 7 Most Important Equations for Your Retirement. After introducing Moshe, we dive straight into the first equation that maps out the longevity of your money. Following this, we talk about determining how long you will live by comparing your biological and chronological ages. Regarding the third equation, Moshe provides his insights into evaluating the usefulness of an annuity plan, and at what age they become relevant to you. We then chat about what annuity plans are offered in Canada versus elsewhere and why people don't want to buy annuities during a bull market. Despite the popularity of the '4% spending rule' — which we also unpack — Moshe discusses the importance of being adaptable with your retirement spending rates. Reflecting on the key theme of another of his books, we explore the question of whether people are stocks or bonds. Moshe shares some investing advice for younger listeners and touches on what the ideal mix of stocks, bonds, and human capital looks like. For the last equation, we look into the impact of probability frameworks and why financial advisors need to understand the math behind retirement plan probabilities to make meaningful recommendations. Throughout our discussion, Moshe presents coherent answers and pragmatic advice. Tune in and learn more about the equations needed to build the best possible retirement plan. Key Points From This Episode: Introducing today's guest, Professor Moshe Milevsky, and his work. [0:0:15] Exploring Moshe's book, The 7 Most Important Equations for Your Retirement. [0:02:57] Mapping the longevity of your money according to Moshe's 'Fibonacci Equation.' [0:03:25] Determining how long you will live when planning your retirement funds. [0:04:37] Understanding the difference between your biological and chronological age. [0:06:22] A challenge to our retirement system; it's based on chronological and not biological age. [0:08:45] Introducing the concept of annuities and how they can be valued. [0:10:03] Striking a balance with your annuity plan and answering — "How much is too much?" [0:11:42] Moshe shares his thoughts on how much insurance companies factor in biological age. [0:14:04] Ideas on using your biological age to your advantage. [0:15:35] Why you probably shouldn't even consider getting an annuity until you're 60. [0:17:16] Canadian annuity plans versus elsewhere; "The shelf feels empty here." [0:18:30] The correlation between being in a bull market and people not wanting annuities. [0:20:35] Establishing your ideal retirement spending rates — flexibility is important. [0:25:25] Unpacking the '4% rule' and why it's a ridiculous spending framework. [0:28:04] What your mix between stocks, bonds, and human capital should be. [0:31:08] Answering the question — are humans stocks or are they bonds? [0:33:28] Leveraging youth to get quicker exposure and equity. [0:36:03] Life insurance and measuring your financial legacy. [0:39:10] Details on the life of Andrey Kolmogorov and his effect on understanding probability. [0:40:54] How important probability frameworks and analysis are to retirement planning. [0:43:17] The impact of low-cost index funds on retirement income planning. [0:45:18] Keeping finance students engaged in the industry. [0:47:24] How Moshe defines success, his other research interests, and reflections on the success of his books. [0:49:53]

Despite the mountain of evidence against it, day trading is thriving. Today we dive into the research and explore why the practice is alive and well before answering the question — "Can too much confidence lose you money?" After touching on investing news, listener feedback, our books of the week, and our take on the 'Ultimate Ned Debate,' we open our discussion on day trading. In our conversation, we look at the results of numerous papers on the topic, none of which present-day trading as sound financial practice. We shed light on the reasons that people day trade, the performance differences between traders, what a day trader's learning process looks like, stock-picking strategies, and why it's impossible, except in outlier cases, to earn a living as a day trader. As we unpack the literature, we discuss key insights on the impact of day trading on the financial world. From one investing sin to another, we talk about how overconfidence can harm your investment performance. We balance the positives and negatives of having confidence, highlighting how too much confidence can lead to poor decision-making and a false sense of how much you know. Tune in to hear some of the latest investing news and to learn more about the pitfalls of day trading and overconfidence. Key Points From This Episode: Acknowledging the 33rd anniversary of Black Monday. [0:01:08] How the podcast is faring against other podcasts within the investing category. [0:02:07] News on past and upcoming episodes and responding to listener feedback. [0:04:09] From technological revolutions to starting with a 'why', we explore the books of the week. [0:07:23] Top news story; Fidelity Magellan Fund is moving to an ETF format. [0:12:06] Weighing in on the "Ultimate Nerd Debate" on the value and risks of small-cap allocation. [0:14:45] Why performance doesn't change when you invest in a fund using a different currency. [0:19:12] Introducing today's portfolio and planning topics — day trading and overconfidence. [0:21:56] Examining the data sets and papers that assess the effectiveness of day trading. [0:23:48] Analyzing two competing theories that explain the behaviour of day trading. [0:25:57] Attributing a portion of all portfolio return losses to the effects of day trading. [0:30:39] Comparing the performance of the best and worst day traders. [0:33:52] Why it might be impossible for you to earn a living as a day trader. [0:36:58] Applying Michael Mauboussin's 'Paradox of Skill' to day trading. [0:39:50] Three reasons why people still day trade, despite evidence that they make for bad investments. [0:42:38] Which stocks day traders trade and how they pick their stocks. [0:45:42] Why overconfidence can turn you into your worst enemy. [0:50:25] Trends in which investors develop an inflated sense of how much they know. [0:56:02] Hear this week's bad advice of the week; ignore the data and only invest in excellent companies. [01:01:24]

Good decision-making is a fundamental part of achieving our goals, so getting better at it would be in anybody's best interest. Here to talk about making better decisions is Annie Duke, expert poker player and author of How to Decide: Simple Tools for Making Better Decisions, and Thinking in Bets. Annie starts by defining what a good decision should look like and some of the steps involved. From there, we explore the idea of how to accommodate the fact that our preferences change and we sometimes do not even know what they are in our decision-making processes. Uncertainty is a big part of what makes future choices difficult, and Annie talks about how it is caused by either luck or ignorance, the latter of which we can control, thereby reducing uncertainty as much as possible. Another big theme today how to know which decisions to spend time on and which not to. We waste a lot of time on choices that do not affect our happiness much, and on the other end of the scale, big choices often are hard because the different outcomes they present look quite similar. Annie gives us a few tools to deal with both scenarios. Toward the end, Annie dives deeper into what a good decision involves, talking about the need to step outside our beliefs by building an evidentiary record of the process which involves outside input. Tune in for a fascinating conversation that will help you get better at choosing. Key Points From This Episode: Introducing today's guest, Annie Duke, and her work on decision-making. [0:00:16.3] The definition of a good decision and the steps involved in making one. [0:02:51.3] Examining probabilities of potential choices and the beliefs informing the examination. [0:05:00.3] Factoring in the possibility of preferences changing while making decisions. [0:08:56.3] Beliefs as formed by actions, and how to not see a change in course as failure. [0:13:30.3] When our preferences are clear and when they are not. [0:15:00.3] Dealing two kinds of uncertainty, one based on luck and the other on ignorance. [0:16:39.3] How to know how much time to spend on making decisions, and the need to record the process. [0:20:49.3] Using the 'happiness test' to judge decisions and free up time for the important ones.[0:27:46.3] Choosing 'quittable' things to gather information for more binding decisions. [0:30:03.3] Doing things in parallel so you don't have to make one choice. [0:31:57.3] Understanding that choices become hard when they present similar outcomes, thus that it is not sensible to deliberate too long. [0:32:32.3] How to speed up the harder decisions; the 'only option test'. [0:35:47.3] Involving others while producing an evidentiary record of a decision-making process. [0:37:11.3] How often we should aim to update our beliefs, making them less subjective. [0:37:11.3]

Thank you for tuning in to this episode of the Rational Reminder. We start this show with some great news about the comment section and our migration to Discourse. Having an open dialogue has always been crucial for us—it has even led to our latest hire—so we felt it was time to add more structure to it. We then talk about mortgage rates and why so many people do not know that it is possible to negotiate them down even further. There is often a big gap between what is publicly advertised and what you can actually get, so it's worth shopping around. Following this, we touch on IPOs, SPACs, and why some are saying it is similar to 1999. In the heart of this discussion, we unpack the relationship between the US election and stock market returns. If you are like Ben, perhaps you thought there is not much material difference, and while over the short-term there is not, the election cycle data is truly astonishing. We find out the fascinating explanation of why there are higher excess returns under Democratic leadership, and it is probably not what you think! Moving on, we chat with our newest advisor Jordan Tarasoff where he sheds light on his previous employment at a sales and product-centric advisory firm. We talk about how this affects both the customer and the advisor, and Jordan ends with talking about his positive time at PWL so far. To hear more, be sure to tune in today! Key Points From This Episode: Some great news about migrating the comment section to Discourse. [0:00:09.3] The new PWL team member we are welcoming and our shop opening. [0:01:27.3] Why Cameron recommends everyone watch The Social Dilemma. [0:04:19.3] Recommended books: Open and Succession Planning for Financial Advisors. [0:08:27.3] Results from a survey around people's knowledge of mortgage rates. [0:11:43.3] Some of the reasons that mortgages can be tricky. [0:14:20.3] What is happening with IPOs and why it is being likened to 1999. [0:15:26.3] Insights from Hendrick Bessembinder about how investors should use his findings to structure their portfolios. [0:19:16.3] A follow up about safe withdrawal rates we touched on a while back. [0:21:44.3] Today's investment topic: The US election and stock market relationship and Ben's assumptions prior to research. [0:24:13.3] Are returns affected by US elections? Hear Ben's findings. [0:27:26.3] The relationship between beliefs and optimism in the market. [0:30:31.3] Unpacking the link between volatility and the election. [0:32:09.3] Looking long-term at the stock market through election cycles. [0:33:14.3] How the timing of a Democratic president being elected results in positive excess returns. [0:39:26.3] The short-term effects of the election are minimal compared to changes over an entire election cycle. [0:44:39.3] Get to know Jordan Tarasoff, PWL's newest advisor, and his previous experience. [0:47:01.3] Some of the conflicts and tension Jordan experienced in his former advisory role. [0:49:33.3] What to keep in mind about adding segregated funds to your portfolio. [0:54:47.3] Why you should not put a great deal of money into life insurance. [1:01:11.3] The flawed hiring model that Jordan experienced at his former workplace. [1:02:49.3] Jordan's advice for anyone with a product-centric financial advisor. [1:05:49.3] What PWL does better, according to Jordan. [1:07:55.3] Bad advice of the week! [1:08:57.3]

What are the psychological conditions that allow investors to make rational decisions, and how do these processes of decision-making occur? These are the questions that our guest, Victor Ricciardi, is dedicated to answering and what he is here on the show today to talk about! Victor is the Visiting Assistant Professor of Finance at Washington and Lee University as well as the Coordinator of Behavioral and Experimental Research at the Social Science Research Network. He has an MBA in finance and an advanced professional certificate in economics from St. John's University and holds graduate certificates in personal financial planning and financial therapy from Kansas State University. Victor is the co-author of Investor Behavior: The Psychology of Financial Planning and Investing, in which he and H. Kent Baker explore and unpack the exact topics we look at in this episode. In our conversation, we talk about the steps that investors can take in order to make better decisions, and for Victor, this means maintaining a balanced portfolio and recording the circumstances and conditions in which decisions are made. Victor's starting point for better investing is self-knowledge and understanding one's own psychology and risk tolerance. He also underlines becoming familiar with the environments that allow you to make the best decisions and refining this wisdom over time. We also dig into the topics of the subconscious, checking biases, and financial therapy, so make sure to join us to hear it all. Key Points From This Episode: The history of academic studies on investor behaviour. [0:02:11.2] Victor's thoughts on the rational decisions investors should aim for. [0:04:50.5] The idea of 'bounded rationality'; sufficing and the factors that influence decisions. [0:06:38.9] Benefits and dangers of group investments — more or less rationality. [0:09:43.2] Weighing the usefulness of heuristics in the investment process. [0:11:54.1] The role of the subconscious in human decision-making. [0:13:33.8] Victor's thoughts on sustained commitment to active investing, despite the evidence. [0:15:45.6] The framing of information and the impact this has on investor behaviour. [0:19:09.5] A five-factor model for personality; extroversion, agreeableness, conscientiousness, neuroticism, and openness to intellect. [0:22:33.4] Unpacking the emerging profession of financial therapy and Victor's thoughts on its benefits. [0:28:36.3] The relationship between money and happiness; the importance of options. [0:31:42.7] Methods for checking our biases; education, simplicity, rebalancing, and more! [0:33:44.3] Prioritizing trust and ways to ensure that received advice is dependable. [0:35:38.2] The effect of access to free information and weighing the helpfulness of the internet. [0:37:47.2] The application of behavioural bias models to the real estate market. [0:39:38.6] Victor's personal definition of success: Impacting students. [0:41:49.4]

For the first part of today's discussion, we are joined by Don Coletti from The Central Bank of Canada. He is here to talk about their upcoming recommendation for a monetary policy framework for the next five years which is incorporating public feedback into its development through the survey, Lets Talk Inflation. From there, we touch on some favourite books, Starbucks's stored value card liabilities, the benefits of keeping inheritance in a separate account, new standards for financial planners and advisors proposed by the FSRA, and why SoftBank did not pile into call options and cause the rally in tech as the previous headlines suggested. Heading into the meat of the episode next, Ben shares some findings from a model he built inspired by a program written by one of this show's listeners that tests historical safe withdrawal rates for factor loaded portfolios. Ben gets into a series of papers that speak to the diversification benefit of adding factors in this section too. He wraps up the discussion with a spanner in the works though, which looks at this question through the lens of time-series momentum rather than cross-sectional momentum. Here, he considers trend following as another type of diversification that has shown favourable impacts on portfolio returns in the data that exists. As usual, we wrap up with our bad advice of the week, hearing Cameron relate the bizarre 'findings' of a Forbes article claiming that active management beats passive investing in the face of piles of data to the contrary! Key Points From This Episode: Updates: An upcoming guest, great reviews of this show, and the brilliant discussions thread. [0:00:23.0] Introducing Don Coletti to talk about The Bank of Canada's outreach programme. [0:04:52.0] Alternative approaches to monetary policy the Bank of Canada is considering. [0:07:19.0] Thoughts on the US Federal Reserve's change to average inflation targeting. [0:11:43.0] How open the Bank of Canada is to making a change. [0:13:14.0] Why the Bank of Canada is placing more emphasis on engaging with the public as part of their renewal. [0:14:35.0] Why questions about large scale asset purchases and forward guidance were included in the survey. [0:17:00.0] The response rate so far to the Bank of Canada's Let's Talk Inflation survey. [0:18:59.0] Favourite books and series, and Starbucks's stored value card liabilities. [0:21:50.0] The benefits of keeping inheritance in a separate account. [0:26:24.0] Standards for financial planners and advisors the FSRA is proposing. [0:28:20.0] Why SoftBank was not piling into call options and responsible for the rally in tech. [0:31:43.0] Ben's remodelling of a listener's code that tests historical safe withdrawal rates for factor loaded portfolios. [0:34:40.0] Safe withdrawal rates for different stock indexes according to Ben's model. [0:37:15.0] A paper looking at the interaction between factors historically and the results this produced. [0:47:52.0] Findings of a paper looking at the five factors through business cycles. [0:56:57.0] Papers exploring whether a factor can be cheap and therefore have a higher extended premium. [1:00:41.0] The shadow time-series momentum casts on this; the impact of trend following on safe withdrawal rates. [1:02:46.0] Bad advice of the week: Active management beats the stock market. [1:15:51.0]

Joining us on the Rational Reminder today is one of the pioneers in the space of evidence-based investing, and someone who has been a massive inspiration to us, Mark Hebner! His website, Index Fund Advisors, was one of the first to start explaining the ideas of an evidence-based approach and the power of indexing, way back in the 1990s. We get to hear from Mark about his transition from misled active investor to his discovery of indexing and how this led to him founding Index Fund Advisors. One of Mark's mantras is to replace speculation with education, an idea he has held dear since his first forays into passive strategies and a message he delivers to his new clients repeatedly. Mark also tells us about the niche he filled with his business, visually presenting the evidence that was being ignored, in a way that was both easy to understanding and also convincing for investors. Our conversation covers the troubled waters of DIY investing, why Mark believes that an advisor is a necessary part of a good approach, as well as the parts of wealth management that are not actual investing. Mark unpacks his definition of risk and how best to think about it before we get into the topic of taxation. So for all this valuable information from a true authority, be sure to listen in with us and hear what Mark has to say! Key Points From This Episode: The events that led up to Mark founding Index Fund Advisors. [0:03:18.7] Mark's 12 step process for getting out of active investing and the importance of the first one. [0:11:41.3] Advice for avoiding the allure of active management — the idea of the Ulysses Pact. [0:16:12.2] Thoughts on large-cap growth stocks and the lessons we learn from history. [0:18:34.6] You cannot cheat risk; rules that have remained the same since 1720. [0:22:37.3] The folly of market timing and Mark's approach for explaining this. [0:27:55.1] Understanding tax and how it should impact and propel passive strategies. [0:33:10.1] The best way to think about risk — the uncertainty of your expected returns. [0:36:16.6] Important lessons that Mark has learned while educating clients over the years. [0:39:02.4] Aspects of wealth management apart from investing; saving, withdrawal rates, spending, and more. [0:43:28.2] The indispensability of an advisor — why DIY investing is not the way to go. [0:47:08.7] Mark's personal definition of success: Freedom of choice and the opportunity to help. [0:51:04.4] The public company that Mark had and exited before he got into investing. [0:54:23.8]

Our focus for this episode of the Rational Reminder is split into two sections; first, we cycle through our regular features, looking at a number of studies and articles of interest, the market during the pandemic, and our bad advice segment, and then Benjamin is joined by Tim Nash to talk about ethical investing and comment on Wealthsimple's new sustainable portfolio. We start off our weekly round-up talking about the idea of broadening a knowledge-base and how reading widely and diversely on all manner of subjects can influence and benefit your investing. From there, we turn to the topic of quantitive easing before exploring Tim Wu's thesis about information empires and how they cyclically influence economics. We then dive into the Ontario Securities Commission Investor Experience Study and Lubos Pastor's paper, 'Mutual Fund Performance and Flows During the COVID-19 Crisis'. Both of these shed light on investor behaviour and market performance during 2020 and also offer some interesting findings on the strength of some active management. Daniel Crosby has laid out what he calls '22 Behavioral Nudges to Optimize Client Outcomes', which we then run through, touching on each of his ideas and commenting where necessary. Our bad advice of the week comes from TikTok, and we listen in on two, worryingly misleading clips from TikTok personalities — the social platform may not be the best place to find sound financial advice! For the last part of the show we hear from Tim Nash; he shares his thoughts on Ken French's appearance on the show recently and what the pandemic has proven about sustainable funds going forward. So for all of this and a whole more, in a jam-packed episode, be sure to listen in with us! Key Points From This Episode: The importance of a wide range of reading material and looking at Peter Thiel's Zero to One. [0:03:35.2] Quantitative easing and the important work that Frances Coppola has done on the subject. [0:09:22.8] Tim's Wu's economic theory around the cycle of information empires. [00:11:49] Takeaways from the Ontario Securities Commission Investor Experience Study. [00:13:53] Narratives about actively managed funds during the COVID-19 crisis. [0:20:04.1] The performance and flows of mutual funds; looking at Lubos Pastor's paper. [0:28:35.7] Sustainable funds during the crisis — the past research that this now underlines. [0:38:03.3] Looking at the 22 behavioural nudges identified by Daniel Crosby for optimizing client outcomes. [0:43:23.7] Bad advice of the week: A couple of concerning clips of financial of content on TikTok. [0:58:46.2] An introduction to Wealthsimple's new sustainable model portfolio. [1:03:45.5] Tim weighs in on what this progressive portfolio really means. [1:08:32.7] A response to the conversation we had with Ken French about ESG. [1:11:44.1] The increasing prioritization of sustainable companies during the pandemic. [1:16:47.8]

When it comes to your financial life, you can have endless conversations about asset allocation but we often neglect the impact of communication and asking difficult questions. Today we speak with Chief Financial Commentator and awarded media personality, Pattie Lovett-Reid. We start the discussion by COVID silver-linings and the financial lessons that people have been learning due to the pandemic. Pattie explores how people's views of risk have shifted, along with the realization that our portfolios may not be as watertight as we had thought. We dive into financial control and Pattie emphasizes how better family dialogue and managing your emotions are key elements. After talking about how the COVID crisis is different from previous crises, Pattie talks about how stress impacts people's financial decision-making. We ask Pattie for advice on teaching children about finances, and she uses examples from her own life to show how you can instill financial responsibility in your kids. From kids to partnerships, Pattie highlights why you should be on the same financial page as your partner before explaining the concept of financial abuse. We touch on what job-seekers should consider as they apply for jobs, tips for retirees facing the challenge of low-income rates, offering financial advice through Instagram, and how the work-from-home trend is affecting real estate. Our conversation this episode filled with practical advice, and Pattie's approach focuses on the importance of asking difficult questions and communication, be that with your family, partner, or financial advisor. Tune in to hear more about why asking difficult questions is critical to controlling your finances. Key Points From This Episode: Introducing this episode's guest, Pattie Lovett-Reid. [0:00:15] Key financial lessons that people have learned from the COVID-19 pandemic. [0:04:01] How the way that people view their portfolios has changed due to the pandemic. [0:05:08] Pattie's insights into what people can control regarding their finances. [0:06:15] Why Pattie has bought dividend-paying stocks in sectors that have been performing poorly. [0:07:26] Why controlling your emotions is important in making sensible financial decisions. [0:09:06] Pattie's media perspective on the current market, compared to previous crises [0:09:44] How stress has impacted people's financial decisions for the worse. [0:12:07] What people can be doing to make sure that they don't make poor decisions. [0:14:06] Hear how you can begin discussing personal finances with your children. [0:15:29] Planning for future upsets, the importance of balance, and being frugal, not cheap. [0:19:04.4] Being on the same financial page as your partner; it allows you to achieve financial goals. [0:21:40] The idea of financial abuse and the need for transparent conversations. [0:25:15] Thoughts on what job-hunters should do once the market opens up. [0:30:07] Pattie shares her 'big-picture' opinions on COVID market shifts. [0:31:48] Hear Pattie's advice to retirees facing the challenge of low-interest rates. [0:33:27] How Pattie uses Instagram and the types of questions that she's often asked. [0:36:04] The state of the average Canadian's access to financial advice [0:39:22] Tough questions that you need to ask your financial advisor. [0:41:19] Reflecting on her life Pattie gives listeners some final advice on following your passion. [0:42:23]

The hype to invest in high-cap tech companies is deafening. In this episode, we share what you need to know before buying FANG company stocks. Although FANG is the popular term, our analysis includes Facebook, Apple, Amazon, Alphabet, Tesla, and Microsoft — so it's closer to the less slick-sounding FAAATM. Before we dive into that, we talk about the show's books of the week and how ETFs and mutual funds have been performing compared to July of 2019. We then set the scene for how FANG businesses fit into the market-place and how we measure their success by their size and relative price. As these are the companies that are changing the fabric of society, we discuss how it is fitting that companies like Apple represent a whopping 6% of the US market. To put this in historical context, we explore AT&T's past and how market-share tends to reflect the level of innovation introduced by businesses. The upshot of this is that the huge market-share that FANG companies have carved out is not as new of a phenomenon as it may seem. We then unpack how stock prices are valued and the impact that expectation has on stock valuation and returns. After talking about why we might be overpaying for growth stocks, we commiserate over the pain of being a value-titled index investor at times when large-cap growth stocks dominate both the discussion and the marketplace. We round this section by touching on the US stocks' performance compared to US treasury bills, whether you should be looking for the next Amazon, and why you need to quantitatively look at a company's business quality. From FANG we jump into our planning topic of the week — a review of the withdrawal rules for the Registered Education Savings Plan (RESP). Near the end of the episode, we share some bad financial advice for the week courtesy of TMZ and the idea that you should start your portfolio with 100% gold. Tune in to hear more from the world of rational investing. Key Points From This Episode: From Blackstone to Bloomberg, hear about the books of the week. [0:01:23] Why success is often driven by luck and not by 'being the best.' [0:06:19] Listener feedback on Assuris — the insurance industry's insurer. [0:07:32] Comparing Canadian ETF and mutual fund performance from July 2019. [0:08:52] Introducing our investment topic; should you add FANG mega-caps to your portfolio? [0:12:37] Measuring the unreal success of the top FANG companies. [0:14:28] Contextualizing Apple's market-share within US history. [0:16:44] Exploring AT&T's history to unpacking flaws behind the 'this time, it's different' line of thinking. [0:18:07] How developing life-changing technology can earn you high market share — until it doesn't. [0:22:19] Understanding mega-cap stock prices and factors to consider before buying. [0:25:25] How high market expectations are linked to low stock returns. [0:27:59] The connection between paying low prices for higher stock returns. [0:31:04] Rational versus irrational views on high-growth stock prices. [0:32:13] The pain of being a value-tilted investor at times when large-cap growth stocks outperform. [0:35:36] How most US stocks trail underperform compared to US treasury bills whether you should be looking for the next Amazon. [0:37:43] Business quality and how the relative expensiveness of growth stocks is bigger than ever. [0:41:01] We dive into your planning topic on the Registered Education Savings Plan withdrawal rules. [0:45:12] What to consider before coming up with an RESP withdrawal strategy. [0:47:57] Our bad advice for the week; become the Wolf of Wall Street by reading TMZ and starting your portfolio with 100% gold. [0:51:01]

Michael Kitces is one of the world's leading experts in financial services but is also a trusted authority in retirement planning research, and today he joins us for a brilliant conversation that covers both topics. Michael is the Head of Planning Strategy at Buckingham Wealth Partners, Co-Founder of XY Planning Network, AdvicePay, and fpPathfinder, and also hosts the much-admired Financial Advisor Success podcast. In the first section of the show, we shoot our questions about retirement planning Michael's way, exploring sequence of returns risk and the implications it presents for spending and portfolio management through retirement. Michael weighs in on three approaches to variable spending, why people can do what they love and still retire well, and his research on the 'rising equity glidepath'. He also speaks about why it's normal to start saving after you hit forty, and why withdrawal policy statements can help you have a better idea of when your portfolio is in the red. This leads us into the financial services segment of the show and we start out hearing Michael compare the assets under management model to the fee for service one, and how XY Planning helps those who can't afford the first by implementing the second. From there, we dive deeper into the limits of more affordable AUM models, Michael's thoughts on which draw on theories of human nature and also function as an advisor underwriting how-to for investors. Toward the end of the show, Michael does an amazing job of contextualizing the merge of the brokerage and advisory sides of the financial system and what this means for investors. For all this and a closing exchange about the incredible work Michael is doing to lift standards for the industry through his podcast and more, be sure to tune in! Key Points From This Episode: Introducing Michael Kitces, a leader in financial services and retirement planning. [0:00:15.7] Market fluctuation and how early retirement affects sequence of returns risk. [0:03:25.1] Different approaches to variable spending to deal with market fluctuation. [0:06:37.6] Lifestyle and banking habits: Why retirement spending rarely increases. [0:17:55.3] The rising equity glidepath: Inverting the conventional retirement portfolio. [0:20:57.2] How withdrawal policy statements help you know when your portfolio is in the red. [0:27:35.1] Why people don't have to endure unhappy jobs for the sake of a good retirement. [0:34.42.7] Beating 'learned helplessness': Start saving in your 40s, you haven't missed the boat. [0:43:41.6] Assets under management versus fee for service financial advisor models. [0:48:43.3] Why cheaper AUM financial advisor models can't meet investor needs. [0:55:57.4] Limits to human sociability and how to vet a financial advisor by asking how many clients they have. [0:59:43.4] How tech has merged the brokerage and financial advice sides of financial systems and the effects of this. [1:04:30.6] Michael's definition of success and his gratitude for the impact his work has. [1:12:02.2]

With the gold price reaching record highs, we revisit the contentious issue of whether you should add gold to your portfolio. Before mining that topic, we talk about Super Pumped: The Battle for Uber and Am I Being Too Subtle? — our book recommendations of the week. We then touch on key news stories including how the recent Apple stock split has affected its position in the Dow index. After fielding a listener question about why central banks care about deflation, we share the reasons for and against investing in gold. We discuss where gold derives its value along with the concept of the 'golden constant' which states that the value of gold will keep pace with inflation in the extreme long-term. Host Benjamin Felix brings in research to show why gold is a bad inflation hedge due to its short-term price volatility. He also brings in data to look at how gold performs under hyper-inflation and then speculates on how supply shock from finding new sources of gold would impact its market value. Often used as a reason to invest in gold, we provide our take on John Bogle's statement that you should invest 5% of your portfolio in gold. Despite seeming to be a middling investment, we then talk about why so many central banks own gold. Near the end of the episode, we briefly explore the life insurance organization Assuris and which account you should draw from when buying a home. Lastly, we draw insights from this episode's bad advice of the week. Tune in to hear more rational reminders from the investment world. Key Points From This Episode: Media recommendations ranging from Too Much and Never Enough to Ray Donovan. [0:01:39] Updates on the model portfolios being written by Ben. [0:02:58] This week's book recommendations: Super Pumped and Am I Being Too Subtle? [0:04:40] Dives into key stories of the week; Apple's share split and Vanguard Investor's trading practices. [0:09:13] Answering a listener question about why central banks care about deflation. [0:11:13] Introducing this episode's portfolio topic; should you invest in gold? [0:13:52] An overview of the arguments for and against investing in gold. [0:15:05] How gold's value derives from its scarcity, malleability, and symbolism. [0:15:46] Gold's value as an industrial and collectible commodity and pricing in the 'emotional dividend'. [0:17:18] Where the demand for gold comes from — it increases with its price. [0:20:00] The concept of the golden constant and how gold maintains its value in real terms. [0:21:23] Drawing conclusions about the value and portfolio benefits of gold from the 2013 paper, 'The Golden Dilemma'. [0:22:31] How gold has performed in periods of hyperinflation. [0:28:19] Further unpacking the idea of a golden constant and the expectation of receiving zero return. [0:32:00] Summarising why investors are attracted to gold; it's tangible and scarce. [0:34:50] Speculation around asteroid and ocean mining in the far future and how this might impact gold prices. [0:36:01] How central banks off-loading their gold reserves will affect the gold price. [0:38:30] Why gold returns look so good at the moment and why this can't be trusted. [0:40:03] The paper, 'The Long-term Returns to Durable Assets', conclusions about the gold's pricing. [0:41:00] Why John C. Bogle invested 5% of his portfolio in gold and why it's not necessarily a good idea. [0:42:01] Answering why central banks hold gold in the first place. [0:43:23] Exploring Assuris — an organization protecting Canadians when their life insurance policies fail. [0:47:40] Which account to draw from when buying a home when you have equal amounts in your TFSA and RSP accounts. [0:52:30] Bad financial advice for the week; PWL Capital versus funds chosen by a big bank. [0:55:02] The importance of understanding the decision-making behind developing your portfolio. [1:04:35]

Often called a 'once in one hundred years event', the COVID-19 pandemic is having a profound impact on the economy. Today's guest is Craig Alexander, Deloitte's Chief Economist, who brings his 29 years of experience analyzing the economy to answer our questions about the marketplace. We start the conversation by exploring how the pandemic is affecting small businesses, with Craig adding insights into what the government should be doing to help. Craig discusses how the pandemic has revealed inadequacies with Canada's employment insurance and why Canada needs to improve both its income support and its skills frameworks. A key theme in the episode, Chris presents the idea that businesses "Shouldn't let a crisis go to waste." As such, Chris thinks that this crisis is a chance for businesses to reassess their models, especially as certain pre-pandemic trends will continue to disrupt business. Chris also highlights the importance of high-quality childcare services to ensure both long and short-term economic recovery. From childcare, we leap to real estate before Chris provides his perspective on the interplay between the stock market and the economy. After the hosts question the value of economic forecasts, Chris makes a strong case for them, showing how they help organizations to develop plans based on several best and worst-case scenarios. Next, we ask Chris about investing in these times of economic uncertainty and if there is a risk of increased inflation in the future. Near the end of the episode, Chris talks about which industries will most likely grow in the future. Tune in to learn more from Chris's incredible economic perspective. Key Points From This Episode: Presenting Craig Alexander's bona fides and the insights gained from this episode. [0:00:39] How the pandemic has impacted the economy, especially small businesses. [0:03:10] Craig talks about inadequacies in the current employment insurance system. [0:05:06] The challenge of repurposing the job market to fit the recovery landscape. [0:06:37] Reassessing business models as a way for businesses to exit the recession stronger than before. [0:07:44] Trends disrupting business that have been accelerated by the pandemic [0:08:55] Why high-quality childcare services are so important to the economy. [0:11:16] How the real estate market is faring and why Ottawa is not a good benchmark. [0:14:31] How bank policies and mortgage deferrals have impacted real estate. [0:18:40] Making a distinction between COVID-19 and post-vaccine trends [0:22:22] Why consumer debt is increasing but that the debt-to-income ratio is a poor metric [0:24:42] How the interaction between the economy and the stock market has played out. [0:28:37] What government and banks did that stabilized the stock market. [0:29:45] How economic recovery hinges on managing health risks. [0:32:04] The case for economic forecasts and their role in simulation analysis. [0:34:23] Craig highlights the level of uncertainty regarding economic futures. [00:39:15] Why uncertainty shouldn't prevent you from making investments. [0:41:19] How the government response is geared towards preventing deflation. [00:42:52] Hear why the government's strategy won't decrease the appetite for Canadian bonds. [0:48:03] How the pandemic is affecting some industries and which markets will see growth. [0:51:12] Chris explains why macroeconomic theories evolve based on circumstance. [0:58:06] Chris shares how he defines success and what brings him [1:03:43]

Quantitative easing is a monetary policy whereby a central bank buys government bonds or other financial assets in order to inject money into the economy to expand economic activity. But what exactly does that mean? In today's episode, Benjamin and Cameron are going to address this topic, avoiding highly politicized aspects, like whether or not central banks should be involved in the economy in the first place, and focusing purely on the operational perspective of quantitative easing – what is it, how it works, and what the intended transmission mechanisms are. Benjamin explains what he has learned through his extensive research, from what money printing and the stock market have to do with one another, where the money for loans comes from, how central banks can influence lending rates, and the difference between regular open market operations and quantitative easing. We also cover how quantitative easing works, the relationship between bank reserves and money in the economy, and what causes inflation, as well as the effect of quantitative easing has on stock prices (if any). We also catch up on recent news stories, and Cameron takes us through five key personal finance lessons we can learn from this crisis. If you're looking to understand quantitative easing, this episode will hopefully become a useful resource! Tune in today. Key Points From This Episode: This week's book of the week is Mindf*ck: Cambridge Analytica and the Plot to Break America by Canadian, Christopher Wylie [0:04:38] A chart showing the ratio of the Nasdaq 100 index divided by the Russell 2000 [0:08:22] University endowment sued for active investing by 94-year-old Clarence Herbst. [0:10:02] This was not the first time Clarence Herbst had an issue with his alma mater. [0:13:05] Multimillion-dollar mismanagement of public pension funds in Maryland, 2014. [0:13:22] Benjamin introduces the main topic, quantitative easing (QE), a central bank action. [0:14:42] What do money printing and the stock market have to do with one another? [0:17:37] You can summarize money as a social construct that facilitates economic activity. [0:20:06] As long as there are credit-worthy borrowers, banks will print money out of thin air. [0:22:28] The distinction between central banks and private banks, which interact with customers and have to monitor their net flow of money. [0:25:27] Open market operations allow a central bank to influence overnight lending rates. [0:28:30] The difference between regular open market operations and QE. [0:33:14] A couple of theories about how QE might work, like the portfolio balance theory. [0:37:42] There is no relationship between reserves and money in the economy. [0:41:11] What causes inflation? It's not reserves! Demand for loans drives demand for loans. [0:43:07] What about the effect of QE on stock prices? We would expect a positive impact. [0:45:14] Money is this medium that facilitates economic activity and that's all it does. [0:47:40] Five key personal finance lessons we can learn from this crisis: Stocks are volatile [0:50:35] Debt is dangerous and emergency funds have a very important purpose. [0:50:35] Don't stop spending, always prepare for the worst – disability insurance is crucial! [0:54:51] Cameron still wants to understand how fee-free trading platforms make money – nothing is for free! [0:50:35]

In keeping with our recent tide of incredible guests, today's one is no exception. Dr. William Bernstein, a financial theorist, advisor, and neurologist, joins us to share some of his incredible insights. As the author of several seminal books such as The Intelligent Asset Allocator and The Four Pillars of Investing, Dr. Bernstein has made his mark applying his medical evidence-based approach to investing. These works have had a particularly strong influence on Cameron when he made the transition from active mutual funds earlier in his career, so it was an incredible honour to have him on the show. In this episode, we dive into a range of topics. We kick off with the importance of understanding investment theories and market history along with why Dr. Bernstein believes young investors should cross their fingers and hope for a bear market. We then take a look at how overconfidence and ill-discipline affect investment decisions and how investors can test their risk appetite in real-time. From there, we turn our attention to small-cap and value stocks and Dr. Bernstein's take on them and the role they should play in your portfolio. We round the show off by discussing the real economic issue that Dr. Bernstein thinks the pandemic is bringing to the fore in the US, the parallels he has seen between his medical and his financial advisory career, and some of his frustrations in communicating financial advice. Be sure to tune into this phenomenal episode. Key Points From This Episode: Learn more about today's guest, Dr. William Bernstein, and his background. [0:01:06.0] An overview of value averaging and how it's different from dollar-cost averaging. [0:02:37.0] Why Dr. Bernstein believes it's so important for investors to understand investing theory. [0:05:14.0] What it means to understand the several facets of market history. [0:06:28.0] Insights into return sequence and why young investors should hope for bear markets. [0:08:11.0] Why generational underperformance is arguably a bigger risk than volatility. [0:09:39.0] Why people are so bad at evaluating their risk tolerance and how they should assess it. [0:11:54.0] Bernstein's take on whether young investors should be using leverage. [0:15:15.0] Insights on premiums for small-cap and value stocks and the reason to not build an entire portfolio of them. [0:15:49.0] Dollar-cost averaging vs value cost averaging: Dr. Bernstein's position. [0:19:37.0] Factors that influence the shift from an equity biased portfolio to a fixed-income one. [0:21:08.0] How to reconcile the idea that stocks can be less risky than bonds over time. [0:23:58.0] When Dr. Bernstein would make the rare recommendation of an annuity. [0:25:33.0] The difference between financial systems and airfoils and electric circuits. [0:27:29.0] Why Dr. Bernstein calls mean-variance optimizer an error maximizer. [0:29:28.0] Bernstein's opinions on gold and some of the problems he sees with it. [0:30:34.0] What Dr. Bernstein is really worried about with the securities market in the COVID crisis. [0:31:49.0] The similarities between neurology and financial advisory and what motivated Dr. Bernstein's transition. [0:35:04.0] The impact that the current crisis is likely to have on global trade. [0:38:01.0] Find out what Dr. Bernstein thinks about the US Central Bank's crisis response. [0:39:24.0] The lessons that Dr. Bernstein has learned about communicating financial topics. [0:40:46.0]

As the expression goes, another day, another dollar. Today's episode is a roundup of news and analysis with deeper dives into behavioural and risk-based market explanations, active management, and endowment investing models. We open with a book review of Essentialism: The Disciplined Pursuit of Less by Greg McKeown, a book that's getting a lot of attention at the moment. Another topic that's getting a lot of attention, we discuss how Tesla's huge market cap growth makes it feel like it's 1999. We also offer our opinions on why Tesla has been so highly valued despite increasing competition in the electric car market. Answering a listener question, we explore how Robinhood makes money through 'payment for order flow' and the debate about if this is in the retail client's best interest. Following another listener question, we answer if the podcast suffers from confirmation bias and how you can never know the 'why' behind stock returns. We talk about risk versus behaviour market explanations and use sound clips from previous episodes to present views on this subject. We then discuss Yale and David Swensen's endowment investment model, focusing on his strategy of finding uncorrelated asset classes and then hiring active managers to meet target allocations. We look at the model's benefits and its similarities to Canada's CCP before examining how Norway invests based on oppositional ideas of the marketplace. Near the end of the episode, we continue our conversation on spousal loans by listing more family income splitting strategies. Tune in to hear more from the financial world. Key Points From This Episode: A quick book review of Essentialism: The Disciplined Pursuit of Less by Greg McKeown. [0:03:25] Key ideas of this book; being busy isn't always a positive, and if you don't prioritize your life then someone else will. [0:06:02] Why Tesla surpassing General Motors' market cap makes it feel like it's 1999. [0:07:32] Opinions on why Tesla has experienced such incredible growth. [0:09:06] How Robinhood makes money if they don't charge any trade fees. [0:12:15] Discussion on whether Robinhood's service benefits the end-user. [0:13:19] Dave Nadig's take on Robinhood and why it's a "tempest in a teapot." [0:15:46] Answering the question; "does the podcast suffer from confirmation bias?" [0:17:30] How the podcast's stance on behavioural versus risk-based explanations have softened. [0:18:38] Sound clips from previous episodes on the reasons for different stock returns. [0:21:00] Examining a paper arguing that active management can create value for investors. [0:23:10] Deep dive into our portfolio topic; Yale and the endowment investment model. [0:27:30] Why it's so difficult to replicate David Swensen's endowment investment success. [0:32:00] The correlation between endowment size and allocation to alternative asset classes. [0:34:30] How many endowment investment portfolios have performed poorly. [0:36:35] Differences between the Yale and Canadian endowment investment models. [0:40:15] How Norway operates the biggest wealth fund in the world. [0:45:40] How Norway's model is completely at odds with the Yale endowment model. [0:48:20] Family income splitting opportunities in Canada that attract less tax. [0:52:00] [0:52:00] Why you should seek legal counsel when setting up family trusts and using family income splitting strategies. [1:00:05] Hear the crazy, bad financial advice of the week; Ponzi schemes are still selling. [1:06:15]

Today's guest is Dr. Jim Stanford, Economist and Director of the Centre for Future Work and author of Economics for Everyone. We kick things off with Jim hearing his perspectives on what makes this recession unprecedented before he argues that a traditional approach to macroeconomic policy won't be enough to augment more than a crippled and unstable recovery. This situation might hold a silver lining though and Jim sketches out the opportunity it provides for rethinking employment ethics. After weighing in on why the deficits caused by a much-needed post-war style economic reconstruction might not such a bad thing, Jim does an amazing job of explaining the connections and differences between quantitative easing and government deficit. On this topic, he talks about why fears around credit creation are centered on an outdated concept of banking, and the potential quantitative easing has for facilitating investment and economic activity in this recession rather than buying corporate assets in the secondary market. From there, we talk about wealth distribution, the inevitability of an economic system that supersedes capitalism, and the concept of the political economy. Jim gets into how issues about history, norms, culture, and power – things that don't show up in your usual supply and demand graphs – are actually crucial inputs for understanding the economy and understanding economics. Don't miss this incredible conversation about ethics and capitalism with today's guest. Key Points From This Episode: Introducing Jim Stanford and his work on economics and quantitative easing. [0:00:05.3] What makes this recession unprecedented; the 'Loch Ness Monster' recovery. [0:03:16.2] How many of the most vulnerable groups are experiencing more job losses. 0:06:27.3] Challenges of remote work and implications that only 25-30% of jobs can be done remotely. [0:09:32.3] Impacts of social distancing on the economy, a socially constructed phenomenon. [0:12:07.7] Avoiding the Loch Ness recovery by implementing a post-war style recovery plan. [0:14:53.3] The silver lining of this crisis: putting an end to inhumane work arrangements. [0:18:38.4] Why large deficits that could come with a reconstruction might not be a problem. [0:21:02.0] Connections and differences between quantitative easing and government deficit. [0:24:30.3] Dispelling fears of credit creation inflation; how banking actually works. [0:28:14.7] The dangers of quantitative easing and how it can be better used in the recovery. [0:32:44.3] Why GDP might not be the best measure of how well an economy is doing. [0:35:49.1] Metrics that make skew wealth distribution seem less harsh than it is. [0:38:58.2] The precariousness of the bank and mining-based Canadian economy. [0:41:49.9] How Capitalism is not perpetual and examples of seeds of change. [0:46:17.3] Why the capitalist economy is political and gross inequality contradicts it. [0:50:21.8] Jim's education, early activistic goals, and definition of success. [0:53:28.5]

With private equity investments increasing in popularity, you may feel the pressure to expand your portfolio. Today's episode, we look at the data behind private equity returns to see if these investments add something to your portfolio that you couldn't get elsewhere. But first, we discuss some big news — that slow-moving Dimensional Fund Advisors are entering the ETF marketplace. After looking at the implications of this move, we use a Harvard paper as our springboard into the topic of private equity. By exploring the shift in demand for private equity, the paper establishes the context for why investors, especially institutions, are seeking higher returns. Looking at research from AQR, we talk about their finding that private equity returns are overvalued, despite them being historically good investments. You'll hear how the risks underlying private equity are obscured by a 'return smoothing effect' and why people are willing to overpay to get smooth returns. We examine how the gap between private and public equity returns has narrowed along with AQR's argument that market changes have caused private equity investments to perform poorly. After AQR, we move onto a paper by Erik Stafford which shows that small-cap investing yields similar returns to private equity — with the advantage that you don't have to pay high private equity fees. We round off the episode with a discussion on the benefits of spousal loans before talking about this week's bad financial advice. This is a valuable episode for those wondering about adding private equity to their portfolios. Listen to find out why that might not be in your best interest. Key Points From This Episode: Updates on our brilliant future guests — Jim Stanford and William Bernstein. [0:01:50] That Jim Stanford's book provides an excellent view of money and banking in capitalism. [0:02:49] The big news; Dimensional Fund Advisors are entering the ETF marketplace. [0:04:50] The similarity between Avantis Investments and Dimensional Fund's offerings. [0:06:05] Speculation on why Dimensional Fund Advisors are moving into the ETF space. [0:09:06] The benefit of ETFs — if you want out, then you have to pick up the spread [0:13:12] How ETFs might affect investor discipline and what ETF demand might look like. [0:14:06] Other Dimension news; 16 Canadian funds will get a management fee reduction. [0:15:39] Corrections to a chart on Twitter showing investors selling their equity holdings. [0:16:16] Hear about Capital and Ideology, Benjamin's book of the week. [0:17:38] How private equity is becoming increasingly popular. [0:19:26] Why, generally, you shouldn't include U.S ETFs in your portfolio. [0:21:20] The massive shift towards private equity investment from numerous entities. [0:24:08] How the timing has caused large institutions to look for higher returns. [0:25:33] Why expected returns from private equity were historically good and why this is no longer the case. [0:27:50] How private equity trading results in an artificial 'return smoothing effect'. [0:29:10] That the valuation gap between private and public equity has narrowed. [0:31:40] What other mechanisms lead to an overvaluation of private equity. [0:32:28] Why IRRs, as opposed to PMEs, can be easily gamed, rendering them unreliable. [0:37:00] The historical conditions that led to high returns from private equity. [0:40:50] Comparing the expected return for public and private equity. [0:43:25] How Erik Stafford's paper agrees that public equity risk is under-stated. [0:47:06] The difference in dispersion between private and public mutual equity funds. [0:49:30] Why private equity past performance isn't a predictor of future returns. [0:50:55] How spousal loans allow your partner to make investments with your money. [0:54:24] The potential tax savings that result from spousal loans. [01:01:20] Why you should probably include spousal loan debt forgiveness in your will. [01:03:45] Hear the show's bad advice of the week; the return of 90s investment ideas. [01:06:16]

Today, we get into a masterclass on retirement planning with a true expert in the field whose perspectives are distinctly evidence-based, Fred Vettese. Fred is a Partner and former Actuary at Morneau Shepell and author of three retirement books including Retirement Income For Life. We hear Fred's thoughts on what people should be spending in retirement, why there is not a retirement crisis in Canada, and how Canadians can live on far less than they have been told. Fred talks about how to prepare for a bad investment outcome, as well as the problem of underspending early on and ending up with too many assets. He is a big proponent of people deferring their CPP until after 70 and buying an annuity with a portion of their money in most cases. Our guest weighs in on annuities, talking about how to buy them, which types to buy, and why ALDAs exacerbate the problem of early underspending. We query Fred about when people should start their CPP and OAS government benefits, and then move to hear his thoughts about different bear markets, how to invest during them, and what the current massive government interventions mean for the future of taxpayers. Fred gets into the risk of getting a retirement age date wrong, why he doesn't endorse the 4% spending rule, and how retirement planning is affected by owning versus renting a home next. He also makes a case for when reverse mortgages are a good option, why long-term care insurance makes no sense, and why interest rates are so low right now. Wrapping up, we hear Fred's thoughts on what this all means for early retirees, people still in the workforce, and those just entering it. Tune in for Fred's brilliant perspectives on all this and a lot more in what should be an evergreen resource for any Canadian looking for solid retirement instructions. Key Points From This Episode: Introducing Fred Vettese and his evidence-based work on retirement planning. [0:00:16.3] How Fred and Bill Morneau dispelled notions of a Canadian financial crisis. [0:02:45.3] Rethinking the rule that Canadians spend 70% of their income in retirement. [0:04:55.3] Fred's conclusion about how spending tracks inflation during retirement. [0:09:27.3] Strategies for how retirees can take on less risk but still have enough money. [0:12:00.3] Avoiding underspending and ending up with too many assets later. [0:15:08.3] The benefits of annuities and why they might not be that safe anymore. [0:16:55.3] The pitfalls of annuities indexed to inflation over combining all income sources. [0:20:00.3] Why ALDAs exacerbate Canadians underspending at younger ages. [0:22:47.3] When to start CPP and OAS government benefits, and tips for exceptional cases. [0:25:59.3] Whether this bear market is vanilla or not and how it affects investment decisions. [0:30:25.3] The effects that massive government stimulus could have on taxpayers. [0:32:28.3] Drawbacks of saving for an over and underestimated retirement age. [0:35:12.3] Thoughts on the 4% spending rule now that bond returns are 0%. [0:37:20.3] How people owning versus renting a home affects retirement planning. [0:39:09.3] When it's a good idea to take out a reverse mortgage. [0:41:36.3] Why long-term care insurance makes no sense; poor coverage for the price. [0:44:10.3] The link between aging populations and low interest rates/inflation. [0:47:40.3] The impacts of this low interest rate environment on early retirees. [0:52:10.3] Whether Monte Carlo simulation is a useful tool and what success rates to aim for. [0:53:49.3] Why early retirees can withstand a lower Monte Carlo success rate. [0:56:11.3] The reason people who are not retired yet should be saving 20% of their income. [0:56:59.3] Fred's advice for people entering the workforce to live within their means. [0:58:52.3] How Fred defines success: having a minimal amount of regrets when it's all over. [0:59:55.3]

Welcome to another episode of the Rational Reminder Podcast! Today's main topic is how to pick an actively managed fund to invest in despite funds of this type producing lower returns than passive ones! Before getting into that, we hear a few updates on Ben's research into dollar-cost averaging versus lump-sum investing, discuss the factors that influence choice making found in an amazing new book by Sheena Iyengar, and touch on an OSC report on QuadrigaCX being a big Ponzi scheme! We get into our main topic next, introduced by the point that while Peter Lynch managed the Magellan Fund so well, none of its investors made any money out of it. We talk about the decrease in popularity of actively managed funds and Ben attempts to find out if it would be possible to sketch out a framework for picking one despite this. He does this by firstly defining active and passive investing and then tracing the evolution of the definition of Alpha (excess risk-adjusted returns) found in different key papers, where at each new contribution to the definition, the window for actually achieving Alpha gets smaller. Finally, we end with a framework but you'll find out how it falls short of being able to narrow the definition of a sensible actively managed fund to invest in down beyond a certain point. From there, we get into some amazing OAS clawback retirement hacks that could earn you a lot of extra income and wrap up with a glance at the bizarre upsurge in Robinhood investors in now-bankrupt Hertz since the pandemic! Key Points From This Episode: Updates about Ben's work, fans of RRP, and brilliant upcoming guests! [0:00:40.1] Discussing The Art of Choosing and its meditations on factors that impact choice. [0:05:11.3] Findings of an OSC report about QuadrigaCX being a Ponzi scheme. [0:11:00.6] An article on Peter Lynch and why Active Fund Management doesn't work. [0:14:53.4] A framework for picking an active fund; defining active/passive investing and Alpha. [0:20:40.9] An evolving definition of Alpha showing active fund management doesn't often produce it. [0:24:11.3] Findings of a 2017 Vanguard paper that help identify Alpha in actively managed funds. [0:36:20.3] When an active fund is less bad: it is low fee, low turnover, and invested in small-cap value stocks. [0:43:43.3] Adding a criterion to active funds to invest in: those that aren't that big. [0:44:46.3] The last piece to consider when finding an active fund: active share concerning your belief in the manager. [0:46:29.3] How Ben's point about active share ties back to investors not doing well under Peter Lynch despite him being a great active fund manager. [0:48:57.3] This week's planning topic: OAS secrets for the high net worth. [0:52:11.3] Bad advice of the week: the Robinhood investors buying bankrupt Hertz shares. [0:58:08.3]

Even though we learn that money is merely a means of exchange, a store of value, or a unit of account, it's so much more than this. Money captures so much of what we grapple with like hope, joy, fear, regret, and envy, yet it's widely surveyed as being the least spoken-about issue when compared to religion, mortality, and marriage. Dr. Brian Portnoy, the author of The Geometry of Wealth, joins us today to share his view on wealth, which moves past the conventional understanding of accumulation. We kick off the show by discussing some of Brian's research findings around the way people avoid talking about money. From there, we move onto his idea of funded contentment, which he hopes will get people to think about the different facets that go into a contented, joyful, and meaningful life. While this is a purposely loaded concept, Brian conveys the message in a simple, clear way to show that building wealth requires an assessment of many aspects of life. Then, we move onto how Brian believes financial crises affect people's financial wellness. Although there are certainly immediate devastating effects of these crises, Brian takes it a step further, sharing a conceptual view of how these shifts intersect with people's financial plans. After this, we turn our attention to adaptive simplicity and how it relates to goal-setting. We round the show off by discussing how the financial management industry is changing, and what Brian hopes the role of the advisor will increasingly become. Be sure to tune in today! Key Points From This Episode: Learn more about Brian's rationale for comparing money to Lord Voldemort. [0:03:31.0] Why money — contrary to what we've learned — is a qualitative, not quantitative. [0:05:58.0] What Brian hopes to get people to think about with his 'funded contentment' idea. [0:06:44.0] How the shapes Brian uses in Geometry of Wealth relate to the journey of achieving wealth. [0:08:36.0] The three-step process to achieve funded contentment. [0:09:22.0] Unpacking priorities and decisions and how they intersect with building wealth. [0:10:54.0] The importance of calibrating planning with purpose and where people fall short. [0:13:50.0] Where people in America are in their financial wellness journey. [0:15:43.0] The four corners of the square: Exploring investment expectations and how people view this. [0:17:37.0] Brian's practical and conceptual takes on how financial crises' impact on financial wellness.[0:21:12.0] Why Brian disagrees that volatility is not a great measure of risk for a long-term investor. [0:29:13.0] 'Adaptive simplicity:' What this is and why it's key in financial planning. [0:32:15.0] How to set financial goals, which are static, when being flexible is key. [0:35:17.0] Why Brian believes — despite his hedge fund experience — that investors can't plan for mark-beating returns. [0:38:47.0] The role that hedge funds could play in investors' retirement strategies. [0:42:47.0] What investors can do to understand if they can manage their own retirement. [0:45:34.0] How reframing the financial advisor relationship to a coaching one helps. [0:49:15.0] What the future of holistic financial advice should look like, according to Brian. [0:54:53.0] Insights into Brian's firm, Shaping Wealth, and the work that they do. [0:55:37.0] Brian's definition of success in his own life. [0:58:02.0]

We kick off today's episode of the Rational Reminder by discussing when Ben will be publishing his new model portfolios and a quick look at some of our upcoming guests and resources you might want to take a look at. We have been on a roll with our guests lately, and we are certainly not slowing down anytime soon. From there, we look at some of the headlines, such as CDIC developments and the myths around inflation. Next, we move onto to listener rapid-fire questions. Some of the topics include the difference between leveraged ETFs and traditional ones as well as a small-cap investment strategy for an investor with a 30-year plus investment timeline. We then turn our attention to the core topic of the show, dollar-cost averaging versus lump-sum investing. Ben presents an overview of dollar-cost averaging along with some of the perceived benefits. We dive into his analysis of dollar-cost averaging versus lump sum investing in equity portfolios over select 10-year periods across various countries. We discuss the results based on a range of factors and variables. The crux of the argument is that dollar-cost averaging is not as compelling as it's often sold to be. While there are psychological benefits, the empirical evidence shows that there are not real ones. We wrap the show up with a look at how the pandemic is likely to shape the annuities industry and retirement planning. Tune in today! Key Points From This Episode: Find out when the new model portfolios will be up. [03:10] Some books to look at ahead of upcoming guests. [05:04] Ben and Cameron's takeaways from Tobi Lutke's appearance on Invest Like the Best. [05:43] Current affairs, including CDIC changes, Michael Kitces recent publication, and inflation. [09:07] Rapid fire questions: Leveraged ETFs versus traditional ETFs and size as a risk factor. [13:47] How a small cap value investment strategy could work for an investor with a long horizon. [23:07] Why Ben and Cameron don't talk about implementing the profitability factor with a dedicated ETF. [25:05] A brief explanation of dollar-cost averaging and the rationale behind it. [29:54] Find out more about Ben's dollar-cost averaging versus lump sum investing analysis. [31:49] The results of Ben's analysis and some key takeaways. [36:44] The worst 10% of lump sum outcomes versus dollar-cost averaging – the results. [41:26] Two things people look at to try to predict positive outcomes and its influence on lump sum investing.[50:36] How high stock prices influence lump sum versus dollar-cost averaging outcomes. [53:36] Japan vs the US: How Ben determined if the Japanese market is expensive. [56:37] Three key outcomes of the pandemic on retirement planning. [1:00:03] How the annuity industry can encourage its products with decreasing life expectancy. [1:02:05] Bad advice of the week. [1:06:16]

Who better to have on the Rational Reminder Podcast than Professor Ken French? Ken has been a massive inspiration to us and has remained a guiding light for sensible, evidence-based investors over the last few decades! His work with Eugene Fama stands as the seminal work on the subject of passive investment portfolios and we are so delighted to have him on the show today as we talk through some of his thoughts on a variety of subjects. This conversation was recorded near the beginning of the coronavirus outbreak on this side of the world and although Ken does mention the crisis, the situation has developed considerably since then. We start with the basics, with Ken giving us some helpful definitions and perspectives on asset pricing models and active management before we dive into the current market volatility and familiar topics such as risk tolerance and equity premiums. We also get the chance to hear Ken's reflections on a number of his papers, home-country bias, and the value of a good advisor. Some listeners may be surprised to learn that Ken still relies heavily on a financial advisor of his own and he explains exactly what functions this person performs for him and why he values their help so highly! We also discuss better strategies for long-term portfolio allocation, sustainable investing options and more, so be sure to join us for this very special episode, it is not to be missed! Key Points From This Episode: Ken's description of asset pricing models and their importance to investments. [0:02:37.2] Reasons why most people should ignore and avoid actively managed options. [0:04:50.7] Why the same rules that apply to mutual funds apply to hedge funds too. [0:08:36.3] Reasonable approaches to the market volatility we are currently experiencing. [0:11:01.7] The potential impacts of the move away from active into passive investments. [0:18:22.2] Realistic expectations for collecting a positive equity premium. [0:21:12.8] The probability of negative premiums and the most helpful time horizons. [0:25:25.5] Findings from the Fama and French paper, Value Premium. [0:28:47.4] Better and worse ways of measuring value and Ken's personal preference. [0:34:06.7] Factoring in the 'momentum effect' and keeping it in perspective. [0:37:36.1] Defining and evaluating home-country bias. [0:41:06.5] Ken's view of buybacks and the possible penalization of companies administering them. [0:43:50.4] Environmental and sustainable investing and how this can play into a strategy. [0:46:02.7] Who should business management work for? Shareholders or corporate stakeholders? [0:49:25.5] Ken's valuable relationship with his own financial advisor! [0:52:41.8] The most important factor that Ken considers in his investments: the unexpected. [0:54:27.2]

We often talk about better planning, reduced spending and a consistent long-term strategy on the show and today we have a guest who not only gives that advice himself but clearly lives it too! Andrew Hallam is the author of the new book Millionaire Expat in which he details some strategies for what has been called geographic arbitrage, or moving to another part of the world in order to maximize your financial independence! His earlier book, Millionaire Teacher took a similar approach to education abroad and he has built out his philosophy from there. We hear from Andrew about his definition of wealth and why so many people who earn a relatively large amount of money can never be called wealthy. Andrew lays out the researched correlations between happiness and money and more clearly between debt and misery. He also shares how he has approached spending, saving and budgeting in his own life and relationships before we get into some more technical investing topics such as the benefits of index funds and why many advisors try to persuade clients away from them. Andrew weighs in on finding the right advisor for your needs and when to seek out help with your portfolio. The last part of the show is spent on the topics of education and expatriation. Andrew is a strong believer in leading by example for your children to learn about money matters and he explains his reasons for moving abroad and the gains he has accrued. For all this from a wonderful guest, tune in today! Key Points From This Episode: How Andrew defines the term 'wealthy' and why it does not depend on income. [03:43] Links between spending and happiness, and debt and misery. [06:51] How Andrew and his wife have managed their own values around spending. [11:55] Benefits and costs of borrowing; could you handle it if interest rates doubled? [13:32] Andrew's thoughts on index investing and why it is a good idea. [19:06] Common tactics that financial advisors use to steer clients away from index funds. [22:40] Advice for staying steady for the long term, through market volatility. [25:45] Considering the place of investing in gold and the 60/40 portfolio model. [27:46] Ignoring all the false information that gets broadcasted and sticking to the data. [35:05] Why to only consider certified financial planners and how much this cuts the options down. [39:53] Going it alone versus using professional advice; average reactions to volatility. [41:22] Education for the younger generation and Andrew's advice for parents. [45:18] Who could benefit from moving abroad and the idea of geographical arbitrage? [49:56] How Andrew defines success in his own life! The importance of relationships. [54:01]

We spend the bulk of today's episode considering whether Wealthsimple's use of long bonds and low volatility stocks is really protecting their clients' downside, and summing up recent arguments by Cliff Asness and AQR leveled against critiques on value investing. Before that, we kick things off with thoughts on why Elon Musk aims to have no possessions, before looking at the links between empathy and the theory of relativity as well as some productivity secrets in recent books by Charles Duhigg and Shane Parrish. Next up, we briefly address a bunch of listener questions on factor tilting, and ETFs concerning COVID-19, the Smith Maneuver, and more! A final listener question about Wealthsimple's claim mentioned above leads our hosts to wonder whether volatility and drawdown are good measures of risk. Ben made a few models to help answer this question which tested consumption models as another possible measure and brings up an interesting point about the significance of considering long bonds from an expected return or a risk parity perspective. From there, we move to the investment topic of the week – the historic state of value investing. This is a contentious topic with recent papers by Cliff Asness and AQR both weighing in and you'll hear Ben and Cameron distill the main points from both. We hear about medium-term odds being on the side of value, and some great arguments showing common critiques leveled at value investing to be premature. Finally, Cameron takes us through the psychometric profiling side of measuring risk tolerance before telling listeners why they shouldn't make investment decisions based on reckless critiques. Tune in to get it all! Key Points From This Episode: A reminder to comment on the new comments section on the RRP website. [0:00:44.2] Why Elon Musk ways he intends throw away his possessions. [0:04:36.1] New books about productivity and the links between science and empathy. [0:07:08.2] Factor tilting: being aggressive versus non-aggressive. [0:12:43.6] Is there a benefit in capturing size premium using a combination of ETFs? [0:16:54.2] How to adjust RESP asset allocation as kids get closer to school age. [0:18:46.2] What ETFs are best to use while implementing the Smith Maneuver. [0:22:36.2] Has the role of bonds ETFs changed in light of COVID-19? [0:24:12.2] Thoughts on Wealthsimple's claim to have protected their clients in this downturn. [0:28:34.2] Critiquing long term bonds: is volatility/drawdown a good measure of risk? [0:33:28.2] Ben's model testing consumption objectives as a measure of risk. [0:36:28.2] Portfolio topic of the week: the historic state of value investing. [0:42:22.2] Considering Cliff Asness's paper about whether value investing is dead. [0:46:05.2] Considering AQR's paper addressing critiques levelled at value investing. [0:54:04.2] Planning topic: the psychometric approach to measuring risk tolerance. [1:05:50.2] Bad advice of the week: don't make investment decisions based on predictions! [1:10:14.2]

Today on the Rational Reminder Podcast we interview a seasoned journalist from The Wall Street Journal, Greg Zuckerman. With 23 years of experience with the media outlet, Greg has written extensively about the most prominent figures in the world of investing, including Jim Simons, John Paulson and Carl Icahn, generally focusing his attention on significant trades, traders and fund managers. In this episode, Greg shares how covering the stories of renowned investors and fund managers have influenced his investment philosophy. Specifically, we get into his book about John Paulson, The Greatest Trade Ever, and why Greg reckons Paulson never managed to achieve the same level of success following this famous trade. His work on the founder of Renaissance Technologies, Jim Simons, also produces fascinating points of discussion, including why their Medallion Fund became so successful and how capping the size of the fund contributed to its outstanding performance. Greg also talks about the idiosyncratic character of Simons, the role of luck, why taking an algorithmic approach to investing is likely to produce good outcomes in the long run, and why people should not always pay attention to the advice of "smart money" sources like hedge funds. Key Points From This Episode: How covering the stories of prominent fund managers has affected Greg's investment philosophy. [0:03:27.1] Thoughts on the likelihood of fund managers outperforming the market. [0:05:54.1] Hear about John Paulson's big trade and why he has failed to outperform since. [0:07:24.1] Find out what made Renaissance Technologies' Medallion Fund so successful. [0:11:25.1] The role that capping the size of their fund has played in their ongoing success. [0:13:30.1] More about Jim Simons: the mathematician with outstanding people skills. [0:14:46.1] The influence that Simons personally had on the outcome of the Medallion Fund. [0:17:02.1] The unpredictability of luck and intuition Simon's relied upon in his early days of trading. [0:22:22.5] George's biggest surprise in writing the story and his general thoughts on market efficiency. [0:24:27.1] Advice about investors making decisions based on the opinions of people like Buffett and Dalio. [0:28:06:7] Algorithmic thinking and other lessons from working with Renaissance Technologies. [0:31:26.1] Why the so-called "smart money" sources like hedge funds are not so smart. [0:34:28.6] Learn how Greg became interested in Wall Street characters and how he gets access to their stories. [0:36:36.6]

The economic effects of the coronavirus pandemic have been unprecedented and the seismic shifts have caused numerous unforeseen challenges. While no-one could have predicted the enormity and speed of the current crash before it happened, several signs indicated that an economic contraction was on the horizon. Today's guest, Ben Rabidoux, President of North Cove Advisors, a boutique research firm, is here to share some macroeconomic trends and what they tell us about the state of the Canadian economy. His research expertise includes Canadian housing, macroeconomic trends, and household credit. We kick off the episode with some listener feedback as well as a listener question, where we discuss how to incorporate unvested stock options into your personal financial planning. There are several ways to go about this and numerous factors to consider, so it's important account for them all. Ben then dives straight in, giving us an overview of the economic landscape before the sudden upheaval. He sheds some light on population growth and its relationship to economic growth. As a great deal of the economic gains was coming from non-resident growth, the crisis is likely to change this. We also talk about personal debt and HELOC loans. Coming into the recession, the household debt service ratio was incredibly high, with interest rates at an all-time low. Ben walks us through how these vulnerabilities might pan out and what could happen with HELOC debt. Along with this, we also discuss the relationship between housing and economic growth, with some truly astonishing data from Canada, the changes that are likely to happen with rental supply, and Ben's take on some personal finance topics. This show was an incredible overview of some of the larger forces at play, and it went a long way to paint a clearer overall picture. Be sure to tune in today! Key Points From This Episode: Useful listener feedback and personal updates from Cameron and Benjamin. [0:01:50.0] Data points about the increase in value of the top five S&P 500 stocks. [0:03:46.0] A listener question about factoring company stock options into financial planning. [0:06:04.0] Learn more about Ben, the work he does, his research focus, and his clients. [0:10:22.0] Find out Ben's take on active management vs index investing. [0:11:20.0] The state of the Canadian economy prior to the COVID-19 pandemic. [0:12:05.0] Canada's recent explosive population growth and where that's headed. [0:14:09.0] Consumer and corporate debt-level, the source, and important takeaways. [0:16:13.0] Why it's difficult to draw parallels between the situation today and Japan in 1990. [0:03:43.2] How different Canadian regions' employment has responded to the crisis. [0:22:59.0] Housing trends and the state of housing in Canada before coronavirus. [0:24:20] The direct and indirect way that housing affects economic growth. [0:27:48.0] Housing supply, construction activity, and rental market changes in Canada. [0:31:06.0] What the data is saying about real estate prices across all market segments. [0:36:57.0] Some of the economic shocks are temporary and will snap back quickly. [0:39:34.0] The economic conditions in Canada's previous housing downturns. [0:41:16.0] Ben's take on the Bank of Canada's QE programme and how he thinks it'll work. [0:44:07.0] Renting vs buying: Why Ben thinks there's no generic answer. [0:47:53.0] Why landlords are often willing to charge rent that makes them a loss. [0:51:29.0] Ben's advice for building resilience to economic shocks. [0:52:47.0]

The recent film, Playing with FIRE details the particulars of the FIRE Movement in a way that is accessible, informative, and impactful. Both Cameron and Ben were hugely impressed with the film and the argument it makes for the framework of FIRE. Today we are joined by the producer and star of the film, Scott Rieckens, to discuss the movie and his own journey to reach financial independence. In much the same way that the film does, Scott makes a compelling and inspiring argument for the central philosophy of the movement, emphasizing what many of us will agree are the most important part of our lives and the way we can think about these to maximize our health and happiness. We discuss values and decision making, and how the FIRE perspective accounts for psychological and emotional changes to what is meaningful in your life. Scott explains the reframing that occurs with the system and the important aspects of it, especially those that matter in an introductory setting. We talk about communication and upkeep, the 4% rule, and the individual nature of your own financial strategy. Ultimately the ideas of FIRE are just ways to think about what is really important to you and your family and they provide a way to focus and enhance these. For this truly inspiring and potentially life-changing discussion, be sure to listen in with on the Rational Reminder! Key Points From This Episode: Scott's own understanding of FIRE and what it comes to mean in his life. [0:04:25.4] The initial connection that Scott had with the FIRE movement before making the film. [0:05:23.2] Shared values and finding common financial ground in a life-partnership. [0:08:50.8] Mental changes that Scott and his wife, Taylor, made in response to the ideas of FIRE. [0:11:57.5] Reframing your decisions and the necessary information to do this. [0:18:01.9] Social changes and the impacts of the philosophical alterations Scott made. [0:22:48.1] How Scott has communicated these ideas to his daughter as she has grown older. [0:29:51.4] Scott's complete gratefulness for his new relationship with money. [0:33:23.8] First steps to take in the process toward financial independence. [0:37:27.4] Getting a grip on the '4% Rule and how it can guide your decisions. [0:41:39.6] Increasing income versus decreasing spending and adjusting accordingly. [0:46:41.2] Applying these ideas to something beyond our selfish needs. [0:51:05.4] The multitude of things we can all do with more time in retirement! [0:56:05.4] Comparing the changing definition of success for Scott. [0:58:11.4] The information that is now available for a framework for happiness. [1:01:55.4]

When it comes to the question of whether the economy affects the stock market, it's not about whether the former is in a good or bad state, but how that relates to what the market was expecting. In today's episode we get into predictions about labour economics during COVID-19, the relationship between the market and the economy, and how to make decisions that suit your risk tolerance. We kick things off by reviewing insights Edward Lazear and Gerard O'Reilly gave in a recent webinar. They spoke about how the current crisis relates to past events from the perspective of labour economics, and what empirical data is saying about stock returns and the economy. A talking point here is the idea that recessions are defined by committees, and always long after they have either begun or ended. This leads to the topic of whether there is a relationship between economic data and stock market performance. We find many examples of cases in the short and long term where no correlation can be found between the two, and cases where the market starts to recover before the economy. We discuss how this speaks of a fundamental difference in the analytical methods of economists versus investors, not a rigged market. The first group assesses past information while the second invests based on where they think things will go. We talk about what happens when GDP is good but not as high as expectations were, and how per-share earnings growth can only keep up with GDP if no new shares were issued. We then switch to the concept of risk aversion and discuss the differences between system one and system two thinking, before moving into a comparison between two methods of analyzing risk. Tune in for your weekly reality check! Key Points From This Episode: Having a baby and getting a drone license; updates from Ben and Cameron. [0:00:18.2] Great new Netflix shows and books Cameron has been getting into. [0:03:44.6] Predictions about labour economics during COVID in Lazear's webinar. [0:06:28.3] Implications around recessions being defined by committees after the fact. [0:10:35.2] Predicting future growth based on great performance in financial markets recently. [0:13:45.8] Pent up demand post-crisis; why the government should keep businesses afloat. [0:16:25.0] Gerard O'Reilly's observations about financial markets in recessions. [0:21:51.2] Lazear's stabilization predictions, and why inflation isn't a threat in slack markets. [0:26:09.1] State Street's ETF rebalance and failed hedge fund rebalancing bets. [0:28:40.6] Is the market rigged? Forward-thinking markets vs backward thinking economies. [0:33:30.7] Market expectations and the effect economic news has on future stock prices. [0:38:21.8] Lead vs lag in when recessions get defined compared to when they begin. [0:38:46.2] How component-based vs automatically rebalanced portfolios are faring. [0:43:44.1] Why yield curve inversions forecast economic activity but not equity premiums. [0:44:25.7] Research that compares GDP growth and stock returns long term. [0:48:01.9] Slippage: per-share earnings growth can only keep up with GDP if no new shares get re-issued [0:54:00.0] How efficient the market is in pricing new information, not the other way round. [1:01:50.3] Determining risk tolerance; unintended consequences to risk avoidance. [1:02:41.2] Why using a GMO point is more effective than psychometric risk profiling. [1:06:18.5] The dollar terms and percentage terms shown on the Riskalyze risk slider. [1:09:15.7] Five methods of appraising one's risk tolerance. [1:13:02.2] Bad advice of the week! Rebalancing your portfolios. [1:15:36.2]

No one credible ever said that investing was a simple endeavour. It might have some simple guidelines, that if followed are more likely to yield positive results, but the ins and outs of the markets, decisions and their impacts, movements and crashes are never straightforward one-dimensional cases. Our guest today, Cliff Asness, really brings this point to bear, showing the nuance and multiplicity of all the topics we discuss. As the experienced owner of AQR and a wealth of knowledge and insight, Cliff shares a host of ideas and thoughts on as many topics as we have time for. We start off the chat talking about market efficiency before moving into the murky waters of value. We hold value investing to be sound, as does Cliff, yet the last few years have stretched even our commitment to this philosophy a little. The perspective that Cliff is able to share, drawing from his formative years in the investing world in the '90s is invaluable and a lot of what we talk about gets contrasted to the tech bubble of that period. The conversation also covers the size of stocks and portfolio allocation. Although Cliff has strong opinions on most of these issues he does a great job of showing the lack of definitive answers to any one of them, allowing space for new knowledge and outlying evidence to make its mark. We also get into finding the right kind of investor for your own style and goals, the role of good communication in finance and the influential article that Cliff wrote about 'pulling the goalie'. In it, Cliff lays out what the data tells us about certain late-stage situations in which it is statistically wise to make more risky choices. For all of this and a fabulously entertaining conversation, listen in with us today! Key Points From This Episode: Cliff's perspective on market efficiency and the impact on his portfolios. [0:03:48.5] Value investing in today's climate where value has taken such a knock. [0:08:30.8] Stories and behavioural effects on value; how we understand ups and downs. [0:13:36.2] Conversations Cliff has had with clients in the tougher times. [0:21:04.5] Comparing the companies driving growth now with those in the '90s. [0:23:46.2] The size effect and why Cliff does not subscribe to this philosophy. [0:25:17.1] 60/40 portfolios; are they still alive? Why Cliff thinks you can do better! [0:33:07.7] Cliff's experiences with institutions and advisors and contrasting the two. [0:36:31.5] Informed decisions on who to invest with; thoughts on finding the right advisor. [0:38:28.7] Pulling the goalie and why risky behaviour can work in certain circumstances. [0:40:42.5] The value of communication skills in the game of financial advising. [0:47:29.7] How Cliff defines success for his own life! [0:50:07.9]

In today's episode, we take a less analytical position on the current situation to focus more on the behavioral side of things. Joining us are two returning guests, Dr. Moira Somers and Dave Goetsch, who share their unique perspectives in a very real and at times refreshingly comical conversation about how people could most beneficially respond to this moment in time. Dave speaks of his personal experience going from panicky investor to getting a feel for the broad concept of index investing, and the idea that learning not to worry about the market on a day to day basis can be applied to life more generally. Dr. Somers provides some psychological background to these different strategies for tolerating stress. She shares her insights about a typical response to crises called amygdala hijack and how two main personality types called 'the monitor' and 'the blunter' deal with stress. We speak about some more healthy strategies for coping, with banding together and communicating featuring as strong solutions that allow us to clear our heads and problem solve more creatively. The conversation also covers the idea that this moment can be taken as a time to reflect, and even to double down on skills that aren't necessarily investment-related but which can help ensure financial stability in the future. Toward the end of the episode, we look at how financial advisors could be the most useful to their clients right now and hear a strong argument for a strategy that combines experience-based advice with a more important trait: a high EQ. Tune into today's episode to find out how you can gain more of a bird's eye view of your version of the current situation. Key Points From This Episode: Amygdala hijack: Moira's thoughts on psychological responses to COVID-19. [0:03:33.8] Dave's thoughts on mitigating valid worry using his understanding of markets. [0:05:54.4] Learning not to be emotionally connected to the minutiae of the crisis. [0:13:25.0] Non-investment related skills that can strengthen our financial lives. [0:14:56.1] Adjusting models and using them to gain insights rather than predict the future. [0:17:04.9] Tools Dave has acquired to deal with market fluctuation since 2008. [0:20:40.2] Beating myopic loss aversion by planning your response to situations ahead. [0:24:00.3] Ways of toggling between contrasting feelings about the present and future. [0:29:30.5] Being reflective about one's current experience rather than reactive. [0:33:07.1] The best predictor of getting through stress: social support. [0:33:59.2] A four-step process to effective decision-making defined by the Heath brothers. [0:37:07.2] Banding together and speaking about our difficulties to find creative solutions. [0:41:04.2] Buffering emotions through shopping and how shoppers are coping now. [0:43:30.2] Changes in workplace customs and industry trajectories sped up by the crisis. [0:44:32.2] The contours of a healthy response to inner and outer turbulence. [0:48:24.2] What financial advisors can do to help their clients right now: listen to them. [0:53:45.2] High EQs and which Big Bang Theory character would be good to talk to now. [0:58:33.2] Where folks who have no financial advisor might turn for help. [1:02:45.2] How spouses in charge of finances could communicate with their partner. [1:04:10.2] Financial advisors as punching bags or mediators between couples. [1:07:09.2] How to deal with communicating realites to kids as a single parent. [1:08:40.2]

The Smith Maneuver was developed by Fraser Smith as a smart way for Canadians to convert a traditional, non-deductible mortgage into a deductible mortgage by systematically re-borrowing to invest. Today we are joined by Fraser's son, Robinson, to talk about the maneuver, his father's legacy and explain how you can use it to your financial advantage. In his book, The Smith Maneuver, Fraser laid out a plan for working the mortgage and debt system to your advantage, by deducting the interest on a mortgage, while still being able to claim exemptions on the sale of a house. Robinson does a great job of explaining the procedure for implementing the strategy and all the possible ways to use it. He talks about risk, different kinds of debt and investor diligence, giving everything you need on the subject! Robinson believes in his father's vision of bringing the practices of the wealthy to the average Canadian and allowing wealth creation through leveraging possibilities instead of the inertia and fear that most people choose. For the last part of our conversation, Robinson gives us some examples from the Smithman Calculator, illustrating just how effective the system can be! Join us on the Rational Reminder Podcast today, to get it all! Key Points From This Episode: An explanation of the Smith Maneuver and its usefulness to Canadians. [0:03:40.6] A step by step walk-through of the implementation of the Smith Maneuver. [0:07:15.1] The possibility of refinancing a credit line for lower mortgage rates. [0:10:18.0] How to think about maintaining more leverage with mortgage payments. [0:13:04.9] The risks of debt, minimizing withdrawal amounts and reversing the maneuver. [0:16:48.6] Robinson and his father's investor experiences around the 2008 market crash. [0:18:35.3] Why leveraging smart debt is so much better than gambling on a startup! [0:20:24.2] The regulatory risk that is present when performing a Smith Maneuver. [0:22:04.1] Risks that accompany not applying these strategies that Robinson is espousing. [0:24:47.6] The influence of your tax rate on the efficacy of the Smith Maneuver. [0:27:23.2] The diligence that is needed in the implementation of the Smith Maneuver. [0:29:15.0] How the Smith Maneuver can address poverty issues that plague Canada. [0:33:39.8] Running through the input process and rewards on the Smithman Calculator! [0:34:51.8] Net-worth improvements and cash-flow dams from re-borrowing. [0:38:41.7] How Robinson defines success in his mission to help Canadians. [0:41:26.3]

In our second special release episode during the 2020 COVID-19 bear market we discussed a broad history of US bear markets from 1900 to 2020, the recent volatility in the bond market, bond ETF NAV spreads, a nuance in the legislation on tax-loss harvesting, and some of the tax-related changes that Canada has rolled out in light of the current situation.

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

It's not unreasonable to assume that a desirable retirement equates to having the financial freedom to meet one's lifestyle and personal goals. The more efficient a person is with their assets, the higher the likelihood of this, which is why sensible retirement income planning is so necessary. Today's guest is Wade Pfau and he is arguably one of the main thinkers in the retirement income space at present – a more readable Moshe Milevsky if you will. This podcast is usually devoted to high-level discussions about portfolio investment so it was an honour to have Wade join us and have a similar kind of conversation but rather about retirement income planning. Retirees face some unique risks when it comes to strategies for asset management, insurance, and investments, which means they require tailored strategies, and today Wade weighs in on some of the different approaches we see out there. The topic of probability versus safety-first approaches, and the potential wisdom in amalgamating the two as a means of preparing for retirement, crops up a lot in this discussion. Wade talks about the four L's of the safety-first strategy, how it recommends building up a base of savings that act as an income to reach higher legacy in the long term. He suggests that people need to account for longevity risk more and argues for the efficiency of assuming that you will live until the average oldest age. That way you don't end up throttling your lifestyle by saving unnecessarily during retirement. In our discussion, Wade also shares valuable insight into low interest rates versus expected returns, the ineffectiveness of the 4% rule, annuities and deferred annuities concerning mortality credits, and different types of buffer assets. Tune in for all this and much more on the topic of retirement planning from one of the greats in the field today! Key Points From This Episode: Notes on Wade Pfau, a leader in retirement income planning research. [0:00:43.0] Unique risks faced by retirees: longevity risk, sequence of returns risk, etc. [0:04:03.0] Retirement now vs 20 years ago: low interest rates and retirement length growth. [0:05:16] Safety-first retirement: build a floor and then spend more over the years. [0:06:31] Contractual protections (annuities) and probability vs safety-first approaches. [0:08:25] The four Ls of the safety-first method: longevity, lifestyle, legacy goals, liquidity. [0:12:18.0] Why to go for stocks/equities rather than stocks/bonds. [0:12:18.0] What the low interest rate environment means for expected returns. [0:16:57.0] The ineffectiveness of the 4% rule when applied internationally. [0:18:47] How people don't properly account for longevity risk in retirement planning. [0:23:27] A way of covering basic needs so that higher legacy can be gained later on. [0:25:05.0] Strategies for buying annuities and deferred annuities at retirement. [0:28:57] How mortality credits from an annuity allow you to spend more in early retirement. [0:30:43] Mortality credits in relation to immediate and deferred annuities. [0:33:25] Better net incomes at the end of retirement through reverse mortgages. [0:34:36] Buffer assets such as reverse mortgages and permanent life insurance. [0:37:12] Safe savings rates in relation to historical data, bull markets, and mean reversion. [0:44:39] Asset accumulation conceptualised separately from the retirement plan. [0:44:39] Wade's idea of a successful retirement: meeting safety-first goals. [0:48:39] And much more!

Welcome back to the Rational Reminder Podcast everybody. Today we are using the opportunity to have a bit of a philosophical discussion about a bunch of things related to your retirement and the financial planning that goes into it. We touch on the all too obvious topics of the coronavirus and last week's market fluctuations before we scan the last ten years for any notable data points on fluctuations and the years with the biggest dips. We look at life expectancy and how this affects a retirement planning strategy. In British Columbia, drug use among younger generations has brought down life expectancy estimates, while improved health care has extended them in some regards. This leads to a few comments on biological age and how knowledge of yours should play a big role in your personal strategy for the end of your life. The last part of the episode is spent considering the current state of the discourse around the FIRE movement and what has grown out of it. We can see that it is not uncommon for large portions of the aging population to be happy to carry on working, and that the idea of getting out of the workforce as soon as possible may only be attractive to certain kinds of professions. For all this and a whole more from Cameron and Ben, be sure to tune in! Key Points From This Episode: The amazing new documentary on Herbalife called Betting on Zero. [0:02:54.5] Market drops last week and the story that accompanied the volatility. [0:06:14.9] Biggest and average drawdowns in recent calendar years. [0:10:03.3] Coronavirus impacts and questions about buying stocks now when they are low. [0:14:20.2] Conversations about the market drop and aggressive response strategies. [0:20:06.8] Data findings for historic cases of market timing from the last century. [0:25:12.3] Historic relations between the market and health pandemics. [0:30:22.1] Life expectancy's huge role in long term financial plans and retirement. [0:32:31.8] Changes in average life expectancies in British Columbia due to drug use. [0:37:40.7] The importance of biological age when making sound financial decisions! [0:41:02.5] Working longer into old age as a means to make retirement easier. [0:44:31.5] The five-factor model for happiness and what it means for your retirement. [0:49:50.5] Bad advice of the week! The last time we will talk about deferred sales charges! [0:54:57.5]

You can't get anything good out of life without taking a risk, and this holds true in the world of investing too. Depending on the situation, people are willing to either pay more for high-risk or risk-free, and matters become more complex because the term 'risk-free' means a different thing to everybody. Today's guest is economist Allison Schrager, Senior Fellow at the Manhattan Institute, author of An Economist Walks into a Brothel, and long time collaborator with Nobel laureate, Bob Merton. Allison is an expert on risk and she joins us in this episode to speak about this topic in relation to retirement and retirement finance. We talk about the idea that while risk has been given conventionally bad associations, it can be more accurately understood as a probability distribution between the future occurrence of both potentially good and potentially bad things. Allison shares her opinions about how both young and old people should approach risk, and stresses the importance of having clearly defined goals and a good financial advisor. She shares her thoughts on managing systemic vs idiosyncratic risk, why the retirement crisis is not all doom and gloom, and the laddered bond portfolio she developed with Bob Merton. Joining this episode, you'll also hear Allison speak about how misinformation causes people to be hesitant about annuities, the connection between risk management in surfing and investing, and why investing in education is smarter than investing in a house. Allison covers a whole lot more risk-related topics in this episode too, so don't miss out on it. Key Points From This Episode: Allison's definition of risk: as a probability distribution. [0:02:54.0] The idea that the word risk pertains to both good and bad things. [0:03:57.2] Relativity of the term 'risk-free' and its fundamental connection to price. [0:04:20.0] Probability of, and skill in, taking risks depending on how they are presented. [0:05:11.0] The value of having a clear goal in mind as far as managing risk. [0:07:19.0] Strategies for managing systematic vs idiosyncratic risk. [0:09:20.0] Value adds advisors can give for managing systematic risk. [0:10:01.0] Retirement goals in the current crisis and Allison's work with Bob Merton. [0:11:51.0] The retirement problem as a problem of income, not wealth. [0:12:17.0] A duration matching laddered bond portfolio as a risk-free retirement plan. [0:13:18.0] Why 401(k)s are wealth focused compared to defined benefit plans. [0:14:43.0] Statistics around retirement age casting the retirement crisis in less of a bad light. [0:15:19.0] Why people are scared of putting their retirements into annuities. [0:17:08.0] Misinformation that people are given that make them bad at retirement planning. [0:17:53.0] Similarities between risk and mitigation in surfing and market investing. [0:19:39.0] Idiosyncratic and systemic risks faced upon purchasing a house. [0:21:26.0] An argument for investing in education over homeownership. [0:22:24.0] Why time diversification is a fallacy in Allison's opinion. [0:24:00.0] Pros and cons of investing in mostly bonds or mostly equities. [0:24:52.0] The ultimate riskiness of 60/40 portfolios and other products too. [0:27:04.0] Thoughts on the new trend of adding private equity to portfolios. [0:28:40.0] How the global shortage of safe assets could have an economic impact. [0:30:31.0] Advice for pre-retirees: have goals, have a good financial advisor, and plan. [0:32:12.0]

Let's say you make a choice that had you chosen differently, things would ostensibly have turned out more favourably. Later on, a similar situation comes up and you make the choice you think you should have made previously in the hope that the result you wanted before will come true this time around. This is called counterfactual thinking and it forms the main topic of our discussion in today's episode. First publicized in a fascinating paper called The Psychology of Preferences, Daniel Kahneman and Amos Tversky explore the abundance of instances where humans employ irrational 'what if' thinking in their processing of recently made decisions that resulted in an undesirable outcome. People tend to think back and wish that they had made a different choice, irrationally thinking that if they had, things would have worked out better. This idea, of course, has applications to investing in stocks with particular implications due to the utter randomness of the market. This is a mind-blowing discussion about human irrationality with links to many leading papers that research this principle in relation to different situations. Outside of our main discussion, we also touch on why you should think twice before buying a condo, the utter absurdity of the Robo-Advisor business model, monthly posted DVD accounts and the surprising birth of Netflix, and finally, the ambiguity of Vanguard's partnering with HarbourVest. Key Points From This Episode: The story of Netflix's origin starting by renting DVDs out by post. [0:02:30.0] Life expectancy, annuities, and Wade Pfau's ideas on Safety-First retirement planning. [0:04:56] Investor/insurer reluctance and why you shouldn't buy a condo. [0:07:23] The Robo-Advisor financing crisis and eventual merge of software and humans. [0:11:28] Counterfactual thinking and how it affects investment patterns. [0:17:40] The central role closeness of a related incident plays in 'what if' thinking. [0:21:21] Contrast effects: winning $50 feels good unless you could have won $100. [0:24:42] Causal inference effects: rectifying a past problem by acting its solution in the future. [0:27:37] Investor preferences reflecting counterfactual thinking and attachment to stocks. [0:31:27] The effect the end of WW1 had on people to blind them to the coming depression. [0:36:00] How there is no proof that if we acted differently a desired set of realities would result. [0:40:22] The randomness of the stock market and how mastering it is thus impossible. [0:41:34] Tools for beating counterfactual thinking: document your original rationale, etc. [0:43:19] Jason Zweig's tips: lightning rarely strikes twice, and only gamble 10% of your money. [0:44:17] Bad or good advice? Vanguard's partnering with HarbourVest. [0:47:32] How private equity valuations used to be low, resulting in high expected returns. [0:50:09] And much more!

The financial advice industry has always been a place of change, and yet certain old practices hang around for decades. Our guest today, Dennis Moseley-Williams, is all about moving things forward for the good of the client and the advisor. The basis of his understanding is the characterization of the economy as one fundamentally built around experiences. Applying this lens to the financial sector means that advisors need to think about how to provide more than just a service to their clients, they need to stage an experience and a process of curated growth and learning. In our conversation, Dennis unpacks the evolution up to this point, showing how each step requires adjustments and progress from providers and the space that opens up due to technological advances must be filled with something of value. We discuss communication, fulfillment and happiness and Dennis makes a strong argument for the role of the financial advisor reaching beyond the bank; he believes it should include all important areas of life. The last part of the episode is spent thinking about ways that willing advisors can offer the most to their clients and how to pitch and scale these businesses in the smartest ways. For this fascinating chat with a truly innovative thinker and gifted speaker, be sure to join us! Key Points From This Episode: Dennis' explanation of the experience economy and trends in the financial services industry. [0:04:04.4] How Dennis found himself in the world of finance and investments. [0:07:07.7] The evolution of the skillset needed for good financial advice. [0:09:38.2] The five stages of experience and the lasting impact of a meaningful experience. [0:14:40.7] What the experience economy means in terms of finding good financial advice. [0:18:52.9] The space created by new tech advances and what will fill it. [0:23:35.6] Better communication in today's economy; physical and virtual experiences. [0:31:41.5] Differences between big and small business; pitching your offer for those who care. [0:33:29.3] Red flags and green lights for investors in the search for the right advisor. [0:38:12.2] The place of technical financial know-how and its decreasing value. [0:42:31.7] How an advisor can fill the space left by the church. [0:48:31.3] Happiness and fulfillment; putting funded contentment at the top of the list. [0:54:47.8] Dennis' hopes and predictions for the future of financial advice. [0:59:00.2] A highly differentiated and relevant offer — the recipe for success. [1:01:35.5] Connecting clients and allowing relationships to grow out of advice. [1:04:02.6] The question of scale; the care and caution that goes into growth. [1:08:39.9] Dennis' own definition of success in his life! [1:10:54.6]

On today's episode of The Rational Reminder, we once again cover a host of topics. We begin with Cameron sharing his thoughts on a book he recently finished, The Ride of a Lifetime, and some of the lessons he took away from it. We then tackle three listener questions, where we cover Mawer and index funds hypothetically driving prices. Then, in the portfolio portion of the show, we turn our attention to value premiums. Fama and French recently released a paper on the topic, and Ben is naturally very excited to share his assessment on it. We unpack how value has performed in the US, unexpected big value findings, and other takeaways from the paper. After that, we explore the total cost of ownership in our planning section. These are expenses that you incur when you begin investing. We shed light on some of them and the effect they have on your investments. Finally, we end the show with Tim Nash's take on our assessment of sustainable investing in episode 82. His insights offer an interesting perspective on the topic. While we can't say we're fully on board with his active position, it's certainly a fascinating viewpoint. Don't miss out on today's jam-packed show! Key Points From This Episode: Takeaways from the audience's reception to episode 83 on cryptocurrency. [0:00:52.0] Insights and lessons from The Ride of a Lifetime, which Cameron recently finished. [0:04:13.0] More about Mawer: Data about and insights on how the company has fared. [0:08:48.0] What would happen if index funds could hypothetically drive prices? [0:22:34.0] What's interesting about the timing of Fama and French's new paper, The Value Premium. [0:25:46.0] The thesis of Fama and French's paper and what they found over measured periods. [0:26:49.0] Why Fama and French used how value did relative to the market. [0:29:17.0] How value performed between 1992-2019 and a surprising finding about big value. [0:31:04.0] Ben's takeaways from the Fama and French study. [0:33:18.0] Conclusions from Fama and French's 2019 paper, Volatility Lessons. [0:36:37.0] How other countries performed on market-wide value versus the market. [0:38:30.0] Clarifying the confusion around the management expense ratio and some empirical data. [0:40:00.0] The conflict of interest inherent in commission-based products. [0:42:39.0] What the trading expense ratio is and how it works. [0:43:47.0] Things similar to fees: Cash drags, large cap against distribution, and withholding tax. [0:47:50.0] 'Bad advice of the week': Globe and Mail [0:48:48.0] An overview of Tim Nash's services and his take on Ben's ESG presentation. [0:54:00.0] Tim's critique of the assumption of lower returns when it comes to equity. [0:57:07.0] Why externalities are so important with ESG even though they are glossed over. [0:58:12.0] There is so much that we don't know about ESG because it's all so new. [1:01:45.0] Why Tim believes we should invest in the green companies even with the current market structure. [1:06:08.0] Ben and Cameron's take on Tim's insights. [1:09:32.0]

The last ten years have seen so much said and done in the cryptocurrency space, and yet the future of bitcoin is still somewhat unclear. For Michael Sonnenshein however, bitcoin and the crypto market still offer the freedom and possibilities that have long been espoused as their greatest values. He joins us today to talk about his role at Grayscale Investments, how Grayscale fits into the larger Digital Currency Group family and how he envisions the wide-open future possibilities for bitcoin. We discuss some basics for the bitcoin conversation and Michael does a sterling job of setting out the lay of the land at present. From there, we turn to the role of Grayscale in dealing with bitcoin which can also be bought directly. Michael then takes the opportunity to compare bitcoin and gold; showing how they overlap and then bitcoin improves on the benefits that gold investments have historically provided. The last part of the conversation is spent addressing the safety of bitcoin and how time is showing its resistance to shocks and is earning bitcoin its place among other highly trusted assets. For all this and more fascinating insights into a big part of the future, join us on the Rational Reminder today! Key Points From This Episode: Michael's description of Digital Currency Group. [0:03:28.4] A basic explanation of bitcoin and what defines a digital currency. [0:08:09.2] What will happen when the maximum amount of bitcoin has been mined? [0:11:29.0] Affecting the value of bitcoin through the altering of its decimal places. [0:14:04.2] The usefulness of Grayscale when it is possible to buy bitcoin directly. [0:15:21.4] How bitcoin differs from and improves on gold investments. [0:19:11.7] How digital currency fits in portfolio management and who it really suits. [0:21:30.0] Thinking about the expected returns question in regards to digital currencies. [0:23:30.3] The high amount of institutional investments through Grayscale and deciding on allocation. [0:29:00.5] Bitcoin's response to shocks and its rising reputation as a place of safety. [0:33:36.7] Why Michael is worried by impatience in regards to digital currencies. [0:34:42.5] How bitcoin can impact under-resourced populations through it non-reliance on infrastructure. [0:36:49.3] How Michael defines success for Grayscale and himself moving forward. [0:39:07.0] And much more!

Welcome to this week's episode of the Rational Reminder! Today, we get stuck into a commonly asked about investment topic – socially responsible or sustainable investing. The show kicks off with Cameron sharing some fantastic insights he gained from a book he recently finished, The Undoing Project. We then delve into the CalPERS story that was in the spotlight at the end of 2019. After that, we move the planning portion of our show, where we tackle the topic of sustainable investing. Many prominent Canadian pension funds have said that sustainability will be a core part of their investing going forward. We explore why sustainable investing has to mean lower returns, how this kind of investing effects social change, and what the amount you need to give up to feel good about your investments is. We also look at the subjectivity of ESG ratings and how this relates to your values. Ultimately, sustainable investing is about balancing the continuum of views and values, how closely they can be matched, and how you can do that in a diversified way. The sustainable label may not meet your expectations of sustainability which is why finding the balance can prove to be challenging. We round off the show by sharing our thoughts on how to restructure your portfolio when it comes time to live off of it. You don't want to miss out on this interesting show, so tune in today! Key Points From This Episode: A book Cameron recently finished and how he applies these lessons to his work. [0:01:08.0] More about the CalPERS story that broke in December 2019. [0:05:50.0] Insights into active managers and actively managed funds. [0:07:40.0] Vanguard is the first asset manager to surpass the six trillion-dollar mark and other stats. [0:10:30.0] Portfolio topic: The growth of socially responsible investing in North America. [0:12:10.0] The main considerations to account for when looking at socially responsible investing. [0:14:09.0] Two main sustainable investing strategies: negative screening and ESG integration. [0:15:01.0] The relationship between ESG and expected returns when controlling for common risk factors. [0:17:13.0] The importance of ESG risk factor – where does the negative premium come from? [0:19:45.0] Differences between exclusion and investor tastes and their influence on expected returns. [0:21:40.0] Why the dispersion of preferences in the ESG industry is so important. [0:25:14.0] Does sustainable investing lead to positive social returns? [0:27:05.0] Two ways the lack of diversification of ESG investing hurts investors. [0:30:25.0] Understanding the trade-off between values: do all companies use the same ESG filters? [0:31:42.0] The two major problems of not having consistent ESG rating metrics. [0:33:54.0] Two things to consider when the time comes to live off of your portfolio. [0:36:47.0] Deciding how to change your asset allocation and figuring your safe spending rate. [0:39:05.0] Why selling shares rather than receiving dividends does not make you worse off. [0:42:23.0] Final thoughts on spending income and dividends. [0:45:06.0] 'Bad advice of the week'. [0:46:03.0]

On today's show, we are joined by Kim Melanson who is a local lawyer in Ottawa. The bulk of the conversation is spent on the particulars of drafting a will and the considerations that have to go into this process. Kim also reminds just how important it is to have an up to date will, something many of us have heard but many of us do not act on! She talks about good times to update your documents and the ins and outs of naming guardians and executors before discussing inheritances, donations, and probate. We then turn to a few different types of wills, namely mutual will, mirror wills, and dual wills. Kim weighs in on the topic of 'will kits' and services that make the writing of a will appear a little easier. We also talk about some common errors that are made in the realm of estate planning before turning our attention to family law. Kim answers our questions common-law relationships, domestic contracts, divisions of assets and more, so for all of this from a true expert on Ontario legal matters, be sure to listen in with us today on the Rational Reminder Podcast! Key Points From This Episode: An important legal disclaimer about today's show. [0:02:21.9] What happens if you die in Ontario without a will? [0:03:13.6] Reasons that every adult needs to have a will. [0:05:34.7] How often to update a will throughout the course a lifetime. [0:07:32.7] Best practices for the naming guardians and executors. [0:08:34.6] Kim's recommendations for allocation of inheritances, donations, and probate. [0:14:14.4] Understanding dual wills, how they work and when they make sense. [0:19:14.3] Considering the use of 'will kits' and where these services might fall short. [0:21:39.6] Mutual and mirror wills; managing and policing of these documents. [0:23:19.1] Common and important errors made in estate planning. [0:25:19.4] The definition of a common-law relationship in Ontario. [0:26:50.6] Approaching the conversation and weighing the utility of domestic contracts. [0:30:48.6] The Family Law Act ruling on the division of assets; exclusions and subtractions. [0:34:54.4] Kim's own definition of success and her hopes for a positive impact. [0:36:36.2]

For our very first episode of 2020, we kick things off with some quick updates before sharing Cameron's ten best financial planning strategies for the new year. After laying out some statistics about the great asset class returns that 2019 saw, we get into the wonderful listener questions we have been receiving over the break. Our first topic is about buying versus leasing cars, and Ben shares his thoughts on some of the reasons he recently converted to leasing. Our second question is about using credit to invest in a TFSA and acts as a great segue into our main topic for today's show: implementing leverage in an investment portfolio. We discover some fascinating outputs given by a Monte Carlo simulation that compares the reliability of expected returns between diversified and concentrated investment portfolios. Surprisingly, the concentrated portfolio, while unpredictable, actually produces higher returns, even in its worst iterations. We start to think of concentrated portfolios as just another form of leveraging after comparing IUSV to VLUE ETFs, and then move on to the idea of time diversification as it relates to implementing leveraging in Lifecycle investing. As always, we end off with our bad advice of the week, with the 60/40 stocks and bonds model taking centre stage, so hop on and join us for the ride! Key Points From This Episode: Different corporate cultures and the value of instilling one in your workplace. [0:05:55.0] A top ten list of strategies for financial planning in 2020. [0:08:48.0] Asset class returns from 2019 which were very high across the board. [0:15:34.0] Market unpredictability and why to buy a second-hand car but lease a new one. [0:19:18.0] When to use your unsecured line of credit to invest in a tax-free savings account. [0:22:49.0] Three things that structure a belief: values, biases, and models. [0:24:51.0] Ben's model and expected returns of diversified vs concentrated portfolios. [0:27:49.0] When concentrated portfolios work well: if high performing stocks are chosen. [0:34:01.0] Ways to achieve higher factor exposure with IUSV vs VLUE ETFs. [0:35:47.0] How unexplained portions of returns are the costs of leveraging via concentration. [0:40:40.0] Why investing using leverage creates 'time diversification' and higher yields. [0:42:47.0] Ways for young people to leverage their savings: concentration, derivatives, etc. [0:42:47.0] Time decay on leveraged ETFs and other reasons for leveraging not being a joke. [0:50:52.0] Why ditching a 60/40 portfolio denies market efficiency by increasing risk. [0:55:36.0] And much more!