Episode 263: A Tribute to Harry Markowitz with Alex Potts & 7 Steps to a Better Portfolio with Edward Goodfellow

With the recent passing of Harry Markowitz, we wanted to take this opportunity to spend some time honoring this giant of financial economics. Joining us on today's episode is our friend Alex Potts, who shares some of his touching memories of Harry, and talks about the unmistakable impact he had on the field. Harry is commonly viewed as the father of modern portfolio theory but also might be considered the grandfather of behavioural finance and a huge proponent of intelligent diversification. Alex graciously shares the nine lessons he learned from Harry, a few 'Harryisms' and some fond and surprising anecdotes from the time he spent with the man. Following this, we welcome Edward Goodfellow to the show to explore his new book, 7 Steps to A Better Portfolio. Edward is a fellow Canadian financial advisor, and we get to hear from him about the motivations for his book, its intended audience, and his insight into a host of central and familiar themes that we deal with on the show, so join us to hear it all. 

Key Points From This Episode:

  • Looking back on the irreplaceable contributions of Harry Markowitz. (0:05:24)

  • Alex talks about reaching out and meeting Harry in 2010. (0:10:00)

  • Harry's amazing work ethic, unusual approach to problem-solving, and the nine lessons that Alex learned from him. (0:14:23)

  • Edward shares his motivations for writing 7 Steps to A Better Portfolio, the questions that gave it structure, and its intended audience. (0:25:53)

  • Understanding math and emotion, the four questions to ask before investing, and dangerous investment personalities and influencers. (0:29:39)

  • Categorizing the different types of risk we encounter as investors, and the role of predictions and expectations. (0:35:41)

  • Charting the evolution of a strategy over time, how to reassess and determine risk tolerance, and evaluating performance. (0:38:06)

  • Edward describes different types of active and passive investing and the seven steps from his book. (0:40:26)

  • Comparing financial science and active management research, and how to manage strategy risk. (0:49:42)

  • How Edward looks at the value of financial advice and his biggest takeaway from writing the book. (0:52:58)

  • The best way to approach figuring out the contradictions in the world of finance. (0:54:24)

  • Today's after-show featuring listener reviews, community updates, and future episode guests. (0:56:20)

Read the Transcript:

Ben Felix: This is the Rational Reminder Podcast, a weekly reality check on sensible investing and financial decision-making from two Canadians. We're hosted by me, Benjamin Felix and Cameron Passmore, portfolio managers at PWL Capital.

Cameron Passmore: Welcome to episode 263. This week, we want to start in the main part of the episode, paying tribute to a giant in the world of financial economics, who recently passed away. Harry Markowitz is a name that I'm sure many listeners will be aware of. It just so happens that a good friend of ours, Alex Potts, was a personal friend of Harry Markowitz. Alex is going to join us to talk about who Harry was as a person and the impact that he had on finance, which is huge, obviously.

Then after that, two of our favourite subjects intersect, which makes planning an episode a little bit easier. This week, you have reading and financial decision-making intersecting in the form of a new book from a fellow Canadian financial advisor and university finance instructor, Edward Goodfellow. The book is called 7 Steps to a Better Portfolio. Edward also joins us to talk about his book and we'll go through the seven steps. Of course, we have the after show for the three people who stick around, which always makes Ben laugh.

Ben Felix: It's funny. I wanted to mention a really interesting pair of posts in the Rational Reminder community from a long-time DIY investor, a do-it-yourself investor and podcast listener. They made a post. They were replying to a topic. Somebody had asked about PWL's AUM requirements or something, but it turned into this whole discussion thread about when people would consider getting financial advice.

The whole discussion was interesting, but this post in particular jumped out at me. They're a long-time DIY investor and podcast listener, who's considering hiring an advisor. They detailed their thought process and their experience. It's just we've done episodes on when can financial advice be useful and stuff like that. But hearing us talk about it, I think, is one thing, hearing somebody who's actually making this decision for themselves and documenting it in the forum, I think, is far more valuable than anything that we can come up with.

The main reasons that they articulated for considering, so they made two posts. They were thinking about hiring an advisor in one post and then somebody followed up three months later and said, “So, what happened?” Then they followed up. I'm going to talk about the first part, the reasons they said that they were hiring an advisor; simplicity. They said that there'd be no more worrying about rebalancing their many accounts. Insurance, and not in a difficult sense. If something happens to them, their wife will likely not continue their current investment strategy. He's a DIY investor. He's set up their low-cost index strategy, but working with an advisor is insurance against his wife in the event of his death, changing it, or making an error.

He also comments that he worries it in that event, his wife could be taken advantage of by a salesman masquerading as an advisor. He's locking in a trust relationship now while he's there to do it. Professional advice, having a trusted third party to bounce ideas off is very appealing. It takes some of the weight off my shoulders and then helping to prepare for decumulation. They say that they're still far away from retirement, but they see value in thinking about it now and having some help making the right decisions to reduce taxes in the long run. That was all interesting.

Then the person asked, so what happened? They follow up and said that they did ultimately hire an advisor. They said that they appreciate the support they've been getting. They'd never done a formal plan before, and doing so with an advisor was helpful to map out their finances more precisely. They noted that they were happy to get advice on things beyond retirement planning. They found it very helpful to have support and an outside educated opinion. That was all interesting.

Then probably, my favourite comment from this post was how it affected the mental overhead of managing their personal finances. They said that they're less eager to do homework on financial topics. They've become a more casual podcast listener and their reading has now become less heavy on the topic of personal finance. It weighs on them less heavily, knowing that their stuff is being handled by people that they know and trust. Then they finished at the end saying, “Sorry if this sounds too much like an ad for PWL. We really do like the service so far.” Yes, full disclosure, it was PWL that they had reached out to, which, of course, we appreciate.

Anyway, I just thought that was cool that the story was documented in the community and lots of people in the community seemed to appreciate it. I thought it was just an interesting thing to share with the podcast audience.

Cameron Passmore: Pretty compelling, though. It just saves time, just relieves stress. You could hear that in their words. Pretty amazing.

Ben Felix: We can say all that stuff, though, but it's like James Choi's research on the paper they call 'From the Horse's Mouth', where it's like, we have all this theory about why stuff works the way it does, but what do people actually say about why they do things? That's how I saw this. I just found that to be really insightful.

Cameron Passmore: Well, that's why it's so hard to communicate in our industry. Most websites have that retired couple with the Labrador Retriever on the dock, and it's all about peace of mind. It's just become such a cliche in our industry and easy words, but it's hard to prove it, right? Hard to validate it. All right. With that, let's go to the episode.

***

Cameron Passmore: Welcome to episode 263. Ben, why don't you take away with the tribute to Harry Markowitz?

Ben Felix: Yeah. A few weeks ago, we learned of the passing of the father of modern portfolio theory, Harry Markowitz. He was 95-years-old, Harry, of course, along with two others was awarded the Nobel Prize in economic sciences in 1990 for his work in financial economics. We've covered his work pretty extensively on the podcast. I think in very simple terms, he's the one that we all have to thank for the knowledge that asset allocation explains investment returns, not security selection. If you appreciate the concepts of asset allocation and diversification and everything that has stemmed from it since, you can thank Harry Markowitz.

We unfortunately never had the chance to interview him on the podcast, which would have been incredible, but even still, his work is so critical to the foundation of modern finance, and so many of the things that we talk about builds out from what Harry started.

Cameron Passmore: So true. To shed some light on who he was and what his contributions were, we invited a good friend of ours on the podcast to talk about Harry. Alex Potts is a very interesting person. I say this, because he's a business leader in our space. He's a fellow practitioner and has extensive ties to the financial economic academic community. As listeners, we must thank Alex for making introductions. You've heard us mention Alex a couple of times in the past. For example, he introduced us to Professor Hearst Sheffrin and also to Professor Mayor Statman and a few weeks ago.

Alex is currently President of Buckingham Strategic Partners and was one of the co-founders of Lowering Ward Asset Management. He lives in San Jose, California, which helps explain his connection to academics, like I mentioned, including the great, late Harry Markowitz. It was last week, I noticed on LinkedIn that Alex posted a very kind note about his relationship with Harry, entitled Harry Markowitz was much more than a Nobel laureate. I just thought reading that article, would be cool to have Alex join us to talk about who Harry was and what his accomplishments were. With that, Ben, let's go to our conversation with our friend, Alex Potts.

***

Cameron Passmore: Alex Potts, it's great to have you join us on the Rational Reminder Podcast.

Alex Potts: Thanks for having me. I'm honoured to be here and thanks for all the work you both do for the entire community. Love, love your podcast.

Cameron Passmore: Well, thanks. That means a lot. I know Harry Markowitz meant a lot for you. I'd like to get you to describe, how do you define Harry's contributions to modern finance?

Alex Potts: Yeah. Many of you, or many of the listeners have probably read about the passing of Harry Markowitz, right? Harry is best known for his work and really helping the world change in terms of diversification and doing intelligent diversification, right? I think in the last few episodes, I've been hearing you talk about expected returns, right? Think about expected returns and risk and how do you intelligently design a portfolio?

Well, prior to Harry's work, the world wasn't like that. It was, pick your best stock and try to get the highest expected return. Maybe that word wasn't even used. Try to get the highest return and diversification be damned. It was actually Harry that really made that come to life, right? Not only that, but he mathematically spent time proving that out, and that was huge. Then if you look in 1952, so he writes this paper, a portfolio selection, spectacular, but then he wrote it, the other one called The Utility of Wealth. A fellow friend of the show, Hearst Sheffrin, talks about this. Basically, that he attributes Harry as effectively the grandfather of behavioural finance and thinking of how individuals may hold these diversified, intelligently designed portfolios, and on the other side where buy an insurance and maybe power ball tickets and small stocks. Harry wasn't above that either.

He had an interesting portfolio. Wasn't necessarily a mean variance optimized portfolio. He acknowledged like, he's a human being. His contributions were just massive to the world and I think part of what I wanted to share, Cameron and Ben, is just what an incredible human being he was. We all can see the work that he did and I'm happy to do elaborate more on that. It was actually the behaviours and that really things he did to help people that I think a lot goes unnoticed.

Ben Felix: Why did you reach out to meet him in 2010?

Alex Potts: There's a corollary. I'll correlate this to your podcast. You have some of the top minds in the world sharing information with individual investors and advisors and other professionals, right? For the company I was with, we were intent to try to build the best portfolios we could possibly build for our clients. We're using a lot of his work. I was actually having a conversation with Mayor Statman, who was on our investment committee and chatting with Mayor and he said, “You know, maybe it's worthwhile reaching out to Harry to help you think through some of these problems.” I said, well, this is 2010. Really, it was late 2009. I'm like, “Oh, reach out to Harry Markowitz.” I'm thinking, this is like, “Hey, it's like trying to get a hold of Mick Jagger, or something like that. He's never going to pick up my call.”

Maybe with a little prompting from Mayor, he did pick up the call. I can remember that first phone call. I'm thinking, this is the preeminent expert on the planet around portfolio diversification and he's actually talking to me right now. I mean, that was basically the rationale of why we wanted to get his help. How do we do the best we can for our clients? Kind of in the same way as you all bring these amazing guests on the show, right? It's like, you just want to help people and why not pick up the phone and call the best people you could possibly think of?

Cameron Passmore: Alex, you have to tell us about what it's like going to visit Harry Markowitz.

Alex Potts: In 2010, actually after the phone call, he said, “Hey, why don't you come down and meet me at the office?” It was early 2010. His offices was, or is probably and was in Pacific Beach, California, so near San Diego. It's a quick plane flight for me. I go down there. It's early mid-morning, and going to Harry's office and immediately you notice, it's basically a three-roomed office, right? You walk into the reception desk and you can see Harry's office and he's got a conference table and room, but there are books everywhere. There's information everywhere.

I walk in and as I'm flying down there, I'm thinking like, “Holy cow. Again, this is like meeting our industry's Einstein, right? He's just an absolute giant. He's fundamentally changed the world of investing for tens of millions of people, not hundreds of millions of people, right? What's this guy going to be like?” I meet his assistant, Mitch, Mary McDonald. Super sweetie, right? She’s, “Hey, Alex. Harry's in there. Feel free to make yourself at home in the conference room.” I go in the conference room and then you see he's got the replica of the Nobel Prize. He's got stocks, bills, bonds, and inflation chart that you all have seen, and many of the listeners have probably have seen.

He just has this wall full of information. Pictures from the von Neumann Prize that he had earned in 1989 and the Nobel Prize, other pictures, letters. It was incredible. These are all memories that he had basically put up in his wall in the conference room. I'm sitting there, I'm standing there just looking at this. He walks in and he's just smiling, he's jovial, he's just this really kind person. We sit there for about 20 minutes and he goes, “Would you like a tour?” He gives me a tour of the offices, and he starts explaining what these things were. They're yet other little drawings and graphs and things on his walls, and he would explain those.

After about 20 minutes, he says, “Hey, do you want to go down to Hennessy’s Tavern and grab lunch?” I'm like, “Absolutely. Let's go do that.” I'm thinking, we're going to sit down, we're going to talk portfolio theory, we're going to dive deep. It's really, as much for him, and he actually said this a lot. He said, “I only work with friends, and basically, hey, life's too short not to do that.” He understood what we did, investment-wise. He understood. Again, our methodology is very similar to your all's methodology. There weren't a lot of surprises there.

At Hennessy's, right, he orders a pint of Guinness at Hennessy's. Immediately, I fell in love with the guy. I just kept thinking to myself, like, this is our industry’s Einstein, and this waiter's coming up and he's talking to us. I'm just thinking like, “Hey, do you understand who this guy is, right?” I mean, your 401k might be invested like that. It was so much fun. It was so much fun. Just have that time with him and to meet with him, and just to see how his mind works.

Ben Felix: That's incredible. Can you talk about what Harry's work ethic was like?

Alex Potts: Yeah. I had a buddy who gave me a term called information hog. He, my buddy, is an information hog. I would say, I'm a pseudo-information hog, where you see information, and you start to parse through it, and you're curious about things. Well, Harry, I mean, he had a several thousand book library that I would say, he probably read just about every book. He could recite – I mean, so when I met him, he was 82. Let's say, 82-years-old. I mean, he could recite, he could tell you on what page that Cameron Passmore had provided this research from what year, and he would be able to pull out the book. He was constantly working on problems.

He sat on a couple of investment committees, and I remember and actually maybe been a little insight to his thinking. He told us a story, and told me a story, actually, about an investment committee he was on of a very, very, very large, one of the largest food franchises in the United States. He was on the investment committee. This was March of 2009. Markets were just cratering, and the investment committee's talking about, hey, do we rebalance right now, or do we wait it out, and what happens, right? What's happening to markets, and there's all this talk. Are markets going to zero? The typical black swan conversation that really starts to pick up.

This was such an incredible insight of Harry. He said, “You know.” It was that morning, it was the morning where we're talking about the rebalancing, he said, “Hey, I need 10 minutes.” The whole investment committee, basically, is just on the line, and he goes, “What I do is,” he goes, “I grab my cup of coffee, and I walked into the other room, and I just started meditating on this problem,” and said like, “Okay, we're going to rebalance for one of the largest, for the 401k holders, and basically, for the portfolio that we're building,” and he goes, “We have tens of thousands of lives that we're affecting. We're going to do a rebalancing. We're going to be selling these fixed incomes.” He goes, “We're going to be buying into the equity markets.”

He started thinking about something, because what happens if the equity markets go to zero? He goes, “I realized, if I'm the last buyer when markets go to zero, I own the market. Why not buy right now?” He goes, “Imagine owning the entire market for $1, or whatever that money was.” He goes, “Immediately, once that came to mind,” and he goes, “I got back on the line with the investment committee,” he goes, “We have to rebalance right now. We have to rebalance.”

Again, his thought was that markets are going to zero. His thought was markets are never going to zero. There will always be another buyer, right? It was just such a massive concept. Just this extremely, extremely sophisticated concept wrapped within a very simplistic explanation. That was Harry. Again, he's a polymath, right? His ability to read mathematics is like my ability to read literature. It was incredible in how he could prove out a theorem. He was a Renaissance guy, right? He knew philosophy. Hume was a favourite of his. He would recite. It was really incredible. It was fun to witness. He didn't just keep it to himself. He was so giving and willing to share that information, with the purpose of helping other people.

Cameron Passmore: Last week, you shared a note, Alex, on LinkedIn that I think it was the letter you sent around your company, talking about who Harry was and what he meant to you. In it, you highlighted nine lessons you learned from him. I thought it'd be fun for you to go through those nine lessons quickly, with perhaps some colour commentary around them.

Alex Potts: Yeah, absolutely. The first one, I have behind me, right? Diversification's your buddy. Harry would say that a lot. It's truly one of the only free lunches really in investing. Again, when I was compiling this list, my thought was, what's a gift I could bring to people? I used to keep notes. When Harry would say something, something just different, or something that would just catch my eye, I would just jot down on what he said.

I captured, we had these Harryisms, we would call it. But diversification was a big deal. Well, I take idiosyncratic risk, like why take bets on one, or two individual securities when you can really diversify it out and still provide yourself potentially a great retirement, or something. The other thing that Harry was incredible, but the way he thought about like, “Hey, bad things do happen. How do you think about those bad things?” Diversification was an unbelievable way to inoculate those bad things. That was my number two.

The number three thing was this idea of challenge yourself mentally. When I was thinking about it, number really three and four on the list were challenging yourself. Actually, the behaviours that Harry – that he did, right? This idea that we're walking to Hennessy's. Hennessy's was a mile away from Harry's office. Instead of hopping in the car and driving, we would walk there. Harry had a really bad sciatica. He would have this little stool with him. Sometimes we would have to sit for just a couple minutes and say, “Hey, I just need to rest my leg.” He was very physical. He walked every day. He did this up until the 90s and the last time that we had met.

Intellectually, he kept himself busy. He took on this four-volume set of his portfolio theory, an incredible body of work. He started at 88-years-old. I share a story in there when he came to one of our investment committee’s meetings in San Jose. There's a violin shop called Calviolands in Campbell, California. Harry goes, “Hey, could you drive me over there? I want to go in there. But I'll have a ride. You don't need to drive me back. If you could just drop me out there, that'd be great.”

We hop in my car and I drive him over to Cal. He goes in there. The next day I caught up with him. I said, “Harry, so what were you doing?” He goes, “Well, I went and bought a new violin. This is the place I really wanted to go to get my violin.” I go, “Do you know how to play?” He goes, “I played in high school. I played a little bit in college, but I just stopped. I wanted to start playing again.” I was like, “Holy cow,” right? At that time, I think he was 88-years-old. Taking up violin, right?

One of the sweet things, one of the anecdotes I give in the letter that, again, maybe just share this with your listeners. Harry's wife, Barbara, had pretty severe Louis body dementia. It got progressively worse and worse. Harry was, I mean, an incredible guy, right? One of the things he talks about, he said, “Hey, every night, when Barbara was winding down,” Harry being a night owl, he goes, “I would just practice the violin.” He goes, “It would put Barbara to sleep. She loved it.” He goes, “It forced me to get better, because I wanted to perform for her. I wanted her to just have this peaceful sleep.” I'm thinking, who does that? It was just amazing.

Actually, one of the times meeting with Barbara, she talked about it, right? She goes, “Oh, I love when Harry plays the violin.” Just really cool. That idea, that intellectual capability, that just, “Hey, I'm going to try it. I'm going to solve this problem.” Ben, actually, I’ll circle back to another story, thinking about Harry's thinking. So what, was a question he would ask himself a lot.

One of the musings that I had when I was watching Harry write a formula, I asked him and said, “Hey, would you be willing to put that work on canvas?” I thought like, how cool would that be? We started talking. A long story short, he said, “Hey, I’m going to put my whole body of work on there.” Something he was most proud of is his work on sim script, and this programming language that's still in use today. It's really incredible what he did. On that painting, and I have a picture in the LinkedIn on there, but he has this big, “So what?”

That mindset, when he would hear an answer, or hear a question, he would not just listen to it and take it at face value. He would ask that question. Like, so what? How is this going to help? Or, what's this going to do? Or, is that hypothesis right? Is that theory right? It was a neat cue. It was something that those two words were really meaningful for him, which led me, Cameron, to that number five. He would ask a lot of questions and he would dig in on questions. His probing was amazing. It was spectacular.

Another quick anecdote I'll share with you was he gave us a quote, which is now number nine on there, which ties back to this inquisitive nature, in this pushing on when he came up with a theory, or came up with an idea, do you have the chops behind it, right? Are you really thinking through your problem? He would do this great inquiry. One of the quotes that I heard that is actually shared by Gene Fama as well. I heard Gene say this and Harry say. This is coming out of the University of Chicago. He said, “Hey, it's okay to argue, but it's not okay to fight.” Harry would argue with you. I heard Harry and Mayor Statman, they would argue a lot, right?

Mayor would have this incredible behavioural finance, hey, what's practical for somebody? Harry would have this really quantitative, and sometimes they would be at odds with each other. Again, Harry understood the behavioural, but he'd be like, “No, this makes no sense. Come on, Mayor.” Mayor would be like, “No, this absolutely makes sense.” But they would never, ever fight. For me, and again, trying to apply this for our individual investors, some answers just aren't black and white, right? We don't know the perfect portfolio, but we could build good portfolios.

One of the other, Cameron, one of the other was just the kindness to others is really a strength. I think of the great quote by a musician, Tony Allen, “Don't take my kindness for weakness.” Harry had incredible kindness for other people. He was as gracious to the waiters and waitresses and hosts at Hennessy's restaurant, as he was to some of the giants in the industry. In 2000, I think it was 2016, or 2017, I went to the University of San Diego, or sorry, UC San Diego, and they honoured Harry. They did a lifetime achievement for him, and seeing these luminaries in there and hearing everybody say that same thing. He was the same guy off stage as he was on stage. Just a really timed person.

That leaves me to like, celebrate your accomplishments now. Life's short. Harry was great about that. He would have a sparé every year, where he would invite a handful of friends. There would be 50 to 75 of us. He had that, the head of the symphony in San Diego that he and Barbara were benefactors for. He would bring a piano player and the head of the symphony, and sometimes he'd bring someone else. He would just do a little show for people. We would have great conversation and eat. Well, he would feed us and just, it was really amazing. It was just joyful. He made that time to do that. Those were a few of the learnings that I was just incredibly fortunate to pick up from Harry and hopefully, for those listening, it’s helpful.

Cameron Passmore: Alex, that was a sensational tribute. Thanks for sharing these stories and adding some life to an incredible life was well lived. Thanks for joining us.

Alex Potts: Yeah, thanks again. Thanks for all you two do, too. We are all lucky in the community to have you two and helping curate just this amazing learning. Thank you for that. Thanks for the opportunity.

Ben Felix: Thanks, Alex.

***

Ben Felix: This week, we're going to focus on the book 7 Steps to a Better Portfolio, written by a fellow Canadian financial advisor, Edward Goodfellow. This is an excellent book. Completely jammed with great information, resources, links to other information. It's also full of all the best quotes from giants in our industry, many of whom we've had the chance to interview on this podcast.

Edward is a financial advisor based in Victoria, BC. Is a CFA charter holder. He’s also a CFP and holds the CPA designation Edward’s also an associate faculty member at Royal Roads University where he teaches corporate finance and investment management. I actually had a chance to have lunch with Edward earlier this spring in Victoria. He told me about his book and that it was coming out this summer. As soon as it came out, I downloaded it, gave it a read and invited him on. With that, let's go to a conversation with the author of 7 Steps to a Better Portfolio, Edward Goodfellow.

Cameron Passmore: Edward Goodfellow, welcome to the Rational Reminder Podcast.

Edward Goodfellow: Ben and Cameron, it's an honour to be here.

Cameron Passmore: Well, it's great to have you, and congratulations on the release of your new book.

Edward Goodfellow: Thank you very much. Labour of love.

Cameron Passmore: No doubt. I can't imagine how much time and effort you put into it. Why did you write the book?

Edward Goodfellow: Part of it is therapy and part of it is, I think, being in the retail investment industry for 30 years, being a teacher for 20 years, we're aware there's enormous amount of information. There's an enormous amount of people giving you advice, endless people giving advice. There's endless investment products. I thought, well, we need a process and structure to manage all that. Then I built the book around the idea of several questions, which is, we're all trying to make a decision in everything. We're trying to make the best decision to improve the odds of an outcome. Investing really comes down to a few decisions. What is our decision around return? What is our decision around odds? What is our decision around time? What is our decision around cash flow?

Risk and return, we'll discuss throughout this podcast. I thought I'd just focus on a few of them for a second. Time. Time is constant for everyone watching this podcast. Five years from now, we'll all be five years older. That's a definite absolute barring death. 10 years from now, we'll be 10-years-old. What decisions can you make today to improve the odds of an outcome? Because time is constant. The next thing is odds. Everything we do is related to odds. Driving to work is odds. Crossing the street, you look both ways. You're trying to improve the odds of a successful outcome. Then cash flow. In investing, we can make it very complicated. I like to think of every portfolio as a 100, and there's three stages in your life.

Stage one, you're saving money. You're saving $5 a year. That's cash flow in. Then there's the period in the middle where you're not saving any money. You're not spending any money. That's period two. Then number three is you're spending money. Now you're spending $5 a year. Your decisions have to relate around those different phases of when you need cash flow.

Ben Felix: Who did you have in mind? Who was the target audience when you wrote this book?

Edward Goodfellow: I think, again, I'm same age as Cameron, we grew up in a very interesting time where there was a lot of information and it changed. It changed from Lewis Rukeyser to Jim Cramer to things yelling at us on YouTube. When I wrote the book, I thought, what if I just gave people a framework? I'm not saying it's perfect. I'm saying, this is a great starting point. The average investor needs a framework to hold on to, a guideline, a decision-making guideline to deal with all this, as I talked about earlier, this endless information, this endless advice, and this endless investor products. How do you decipher and make a better decision?

Ben Felix: Edward, you mentioned in the book that portfolio management is math and emotion. Can you elaborate on what you mean by that?

Edward Goodfellow: Basically, when you think about managing your money and you're building a portfolio, math is how you should build your portfolio. Emotion is why you don't. Emotion is where you get steered over off the direction. Math will improve the odds of a successful outcome. That's in everything we do. Math will improve the odds of a successful outcome. Emotion will give you more randomness and excitement. That's part of the problem. Because you're investing this $100 and you've got to make sure you got it right. In that $100, you allocate, and every time you take something out, or put something in, you've changed the structure of the portfolio. Did you do that because of math, or did you do that because of emotion? Always focus on that your ultimate goal is to give yourself the best odds of an outcome, which is why math would be the best way to look at managing your portfolio.

Cameron Passmore: What are the four questions that people should consider prior to investing?

Edward Goodfellow: Question one, why are you investing? You're investing because you want a return. Okay, so this is a great question. Question number two is, where do returns come from? People say, well, stock market, buying, selling, trading, profitable companies. Now, the origin of return is risk. Risk is what you take. I'll explain that in just a second with the Uncle Bob and Uncle Steve story. Third question is, what is risk? Risk is the variability, or the degree of uncertainty of an outcome. It's in everything we do.

Now, the fourth question is, how do you capture the return, whatever it may be in this ever-evolving landscape? I use the word evolving, because markets are just a pricing mechanism, reacting to news. It's an ever-evolving landscape based on new information. Manage the risk in an ever-changing landscape, economic landscape, because the economic landscape is changing. We didn't know COVID would hit. We didn't know that Russia would invade Ukraine and we didn't know inflation would be this rapid. How do you do that? That's the essence of the book is how do you capture return, manage risk to improve the odds of an outcome?

I just wanted to say, there's another little bit I want to touch about is Uncle Bob and Uncle Steve. The best way I'd explain to my students about risk is this. Let's assume Cameron, your Uncle Bob says, “I want to borrow $10,000.” You say, “Okay, Uncle Bob. I like you. I'll lend it to you at 10%.” Uncle Steve comes to you and you say, “Hey, I want to borrow $10,000.” “Uncle Steve, I'm going to lend it to you at 15%.” You have defined risk and required return. You have made a decision. This is fundamental to everything in the book and in finance is that risk is what your perception is. Because people always say, “Edward, when you do these models, where did you get K? Where did you get risk return from?” I said, I didn't. It came from us as a market. The market prices in risk based on expected outcomes. The word expected is critical, because we don't know if Uncle Steve, or Uncle Bob will pay us back. We have made an estimate that they will.

Ben Felix: Can you talk about the investment personalities that people should watch out for on their investing journeys?

Edward Goodfellow: The best way to look at personalities, or look at the risk of personalities is ego. Because people will be fearful, will be confident, they'll be crying wolf, they're always worried, they follow memes, they follow Jim Cramer. I think the real risk for everyone is confidence. if you listen to a really confident person predicting the future, you realize that they're not good at that. I can tell you what I'm going to do next weekend, or I can predict what I'm going to do next fall when I have a trip, or something like that. Let's try to predict the stock market. Let's try to predict an economic event in a way that we can benefit from it and do this consistently.

The problem with personalities is sometimes the confidence creates a big problem. The confidence you want is the confidence in process and structure. You go to a doctor, he's not confident that he's going to work magic. He's confident that the tools he has and the education he has and the science he has will improve the odds of an outcome. Not the other.

Cameron Passmore: How should investors respond to what they hear from, and you refer to them as influencers? What should they do?

Edward Goodfellow: Well, the investing world is reality TV. Do you take advice from Selling Sunset? That's the problem. I would say, that now, influence is one thing. If your Aunt Mary says you should go to school, that's a different story. That's an influence. Influencers are trying to push upon you their views. You have to ask yourself, are their views valid? In the mountain of information, how material is what they say. The number one thing is to say, “Well, I'm not going to let this bother me. I'm not going to let this influence me.” In fact, just to remember that most of the investment media is reality TV.

Ben Felix: I would say that in a lot of cases, they're not even trying to sell you their views. They're trying to buy your attention with whatever they're saying. The substance of what a lot of, I think, YouTube influencers say is not even the point. The substance of what they're saying isn't even the point. They just want your attention.

What do you think investors can do to deal with all of the media noise and extreme views that get expressed by financial market commentators?

Edward Goodfellow: That's why I wrote the book. The book basically gives you a framework. Again, I'm not saying the book's perfect, but it's a great starting point. If you follow the steps, it gives you something to hold onto. When someone says to you, when we were kids, Cameron, it was Bigfoot and elves, right? Now, it's much more scarier items. When someone says something, you have to put it to a framework. Does that make any sense? Is it possible and probable? It is possible that these terrible things may happen, but is it probable, right? You have to filter it out, is what I'm saying.

Cameron Passmore: How do you categorize the different types of risks that investors need to deal with?

Edward Goodfellow: Okay. In the book, I went through all these different types of risk. Active management risk, valuation risk, speculation risk, and so on. I think the key is to understand, what is risk in investing? The whole idea that in investing, we're trying to predict the future, or we're trying to accept the market. Passive is accepting the market. Active is predicting the future. You've got to say, when they're active, what risks now do we face, right? Do we face valuation risk? What do you do? Because in active, all you're doing is guessing the future. Can anyone predictably guess the future better than anyone else? The answers are clearly no. We are the market. We are the group, right?

The key to all the different risks is be aware they exist, determine how much they impact you, and how much you can manage them. Because it's all about managing those risks. You see them, you know they're there. How did you benefit from it, or manage it?

Ben Felix: Can you talk about the risks specific to the choices made by investors?

Edward Goodfellow: The question is, what did you base your decision on? Was there substance behind that decision? Was it a practical, logical, well thought out decision? Or did you just make it? That the risk really is you made the wrong decision. The risk is how material is that error in that decision making? I keep referring back to the seven steps. If you said, “I'm going to allocate. I'm going to diversify. I'm going to use dimensions of returns. I'm going to follow financial science. I'm going to manage my emotions. I'm going to manage my choices. I'm going to manage my costs and taxes.” That actually eliminates many of these risks. The big issue is, you can better manage your decisions by focusing back on that framework.

Cameron Passmore: You alluded to this already, but what role should expectations and predictions play in investment plan?

Edward Goodfellow: Well, the key word there is investment plan. You can predict what you're going to do next summer, or anticipate what you're going to do. No, when you think about it logically, can you out predict somebody else? No. You're not investing, because you're just basically picking who's going to win the baseball games this weekend, and you can do it with great confidence. Why don't you just rather think of it, I'll just bet that capitalism works. I'll just bet that markets work, and I'll be passive and semi-passive. On the active side, you're taking tremendous amount of risk guessing the future.

Ben Felix: Can you talk about how investment strategy changes over the lifecycle?

Edward Goodfellow: Well, this goes back to cash flow and the ability to tolerate risk, is that when you are at the stage where you're saving, it would be prudent to accept more risk, because you're seeking out higher return and you can accept the volatility in that lifecycle. Say, from age 20 to say, 50, you've got some opportunity there to accept risk. Then at a point where you want to take risk off the table, you've got to increase your fixed income as a risk reductor. As you enter the phase where you're drawing down, it becomes a liability stream, like in pensions. You're trying to manage this need for $5 a year for infinite periods of time.

Cameron Passmore: What should people consider in determining their risk tolerance?

Edward Goodfellow: Well, it's willingness, ability, and need. This is one of the interesting things about investing. Let's say, someone walks into their local bank and they're having a bad day and they decide, “I'm having a bad day and I don't trust the news.” They come in and the person writes down, “Oh, they're really worried about the market.” They put down this low risk. The person's 30-years-old. They're probably going to stop and think, “Wait a minute. It's not how I'm feeling that day.” When it comes to risk tolerance and I'm thinking about cash flows and returns, I've got to say, what is my willingness to take the risk? Which I need to understand the bigger picture. What is my ability to take the risk, and do I have a need to take the risk? Because obviously, with higher GICs, I've had many clients come to me, they buy GICs for half their portfolio. Why? Because they don't need to take the risk.

Ben Felix: How do you think investors should evaluate the performance of their strategy once it's in place?

Edward Goodfellow: Well, I'm obviously a passive, semi-passive person. I would always use the standardized benchmarks. However, you have to understand why you're going to have tracking error. Tracking error is a result of when markets perform, let's say, the premiums don't show up and I'll explain that later. The idea is that you created this portfolio on day one and on year five, you look at it and say, “Well, what's happening?” You should try to at least track what the benchmarks are doing. These would be the standardized benchmarks. We can get off any software program as a risk and return proxy. Then the idea, of course, is to, can you slightly outperform it? We'll discuss that later.

Cameron Passmore: How do you describe the difference between active, passive, you also say semi-passive and also, asset class investing?

Edward Goodfellow: Okay. Active is just like it sounds. I'm guessing tomorrow's baseball games. I'm guessing an outcome. It's active. I'm going to do a lot of research. I’m going to think about it a lot. It's basically, actively trying to outperform a market. I’ll guess. Passive, on the other hand, is I'm just going to buy the market. I trust the market. It's less expensive, because you don't have to put all the research in. There's less trading and there's less taxes.

Now, semi-passive is what I call, and I use the term thinking index. The idea is that you start with a passive benchmark and you say, well, given how we viewed Uncle Bob and Uncle Steve. Would I be rewarded to have a few more Uncle Steves in there, paying me 15%? Maybe I can tilt my portfolio to higher expected returns based on how we price assets. It's how we interpret risk. It’s how we price assets. Pricing assets will help us determine what should we take off the table and what should we put on the table. I'm talking about slightly altering that passive benchmark, it's why I call it a thinking index.

Ben Felix: All right. We've been talking about this book that's called the 7 Steps to a Better Portfolio. We haven't actually gotten to the seven steps yet, so let's go there. Can you take us through the seven steps?

Edward Goodfellow: Okay. The seven steps go this way. This book came out of a course I taught at Royal Roads University, and we would study pension plans. In BC and Alberta, certainly BC, we're very lucky. We have BC Pension Corp. We have BCI, which manage pension plans for us. We have a lot of information to start with. The first thing you do when you look at the seven steps, and I learned this obviously from the pensions is allocate around the world.

It's a very large world, ever-changing world. It's an ever-changing economic landscape. The first step is allocate. I call it the seven buckets. The first bucket is global fixed income. The second bucket is Canada. The third bucket is the United States. The fourth bucket is international developed. The fifth bucket is emerging markets. The sixth bucket is the special other bucket, should someone want to go that way, other – meaning other types of investments. The seventh bucket is global real estate. Allocate around the world. It's a good way to start. I'm not sure what's wrong with it. I like it. It's going to work. The odds are it's going to work.

Step number two, diversify. You decide to invest in Canada. The best way to do that is use a market, or an index as the primary approach. Diversification means that you've taken the 11 sectors. Now, we'll call it 10, because we'll remove real estate. Put that separately. You want to be allocated across those, or diversified within those 10 sectors to remove stock specific risk. The third one is dimensions of returns. This is one of my favourite discussions, because it flows well with accounts, because we understand cost of capital.

When I talked about Uncle Bob and Uncle Steve, Uncle Bob, you said, I'll lend it to you at 10%. Uncle Steve said, “No.” I said, “Uncle Steve, I'll lend it to you at 15%.” You've defined their cost of money, or their cost of capital. You've defined your expected required return. What's interesting though is that you know in theory higher risk assets should produce higher returns, but it only works in the law of large numbers. Otherwise, it's too difficult. The third of the three steps, the third of the seven steps, sorry, is diversify, or focus on higher expected returns. They're in the appendix of the book and they're discussed at great length in the book. Focus on small stocks, have higher risk. They should in theory, have higher expected return.

There's a caveat to that. You've got to understand, you've got to own thousands of them, or hundreds of them. Value outperforms growth. I call it the irony of growth in appendix four. You would think that growth would outperform value, but the problem is the price you pay for growth. The price you pay determines future expected return. The third one is profitability. I'll explain that later.

Step four is my favourite. It's about financial science, or academia. It gives us a vast body of knowledge to make better decisions. It tells us how things work. It makes planes work. It makes medicine better. It makes school better. It makes our lives better. In financial science, it binds one, two, and three, steps one, two, and three, which is the financial mathematical science with five, six, and seven, which is the behavioural finance. Step four is all about the science.

Step five is strategy risk. Strategy risk is you. You're the one who's going to make that decision as you go through life. You're going to make those decisions based on information. You've got to manage yourself. You've got to manage the people who are telling you to do something different. Strategy risk is basically making sure you don't have a poor strategy to begin with. Because don't forget, you're going to wake up in five and 10 years, what decisions did you make today to improve that strategy?

Then six is investment choice risk. That's just trying to narrow in on some of the things that people do that they shouldn't do, that they don't necessarily alter the strategy, but they start making decisions they shouldn't make, like active management, or crypto, or something like that. You've got to manage that little craziness they might have. The seventh step is cost and taxes.

Cameron Passmore: Let's maybe talk about a few of them. Why is global diversification so important?

Edward Goodfellow: Well, it's an ever-changing global market in terms of, you look where consumption is and savings is. Now, obviously, United States is the dominant place, obviously, because of the legal and accounting system, but it's an ever-evolving market. If you look at India and China, and so and so. Now, you're sitting here today in 2023 saying, “Well, where is the market going to be in three, five, 10 years?” You don't know. If you allocate around the world, you're going to be there if it happens. It rotates. You can see, in the year, the 2000s, it was international and emerging. Then for the next decade, it was the United States. We don't know what the next decade will be. You want to allocate around the world. It's the best way to manage risk and capture future return.

Ben Felix: Can you talk about why diversification within markets is important?

Edward Goodfellow: Well, you want to manage stock specific risk, or even sector specific risks. You want to diversify across investments and across sectors to manage risk. Again, to capture higher expected returns.

Cameron Passmore: Edward, how do you explain to clients why you think it’s important to focus on higher expected returns?

Edward Goodfellow: Well, as the Uncle Bob and Uncle Steve story, they're there. Let's just start with the market portfolio. You have a market portfolio, which is cap-weighted. The large cap is the top and the small cap is at the very bottom. There, it's market cap-weighted. If you know that small stocks produce higher returns, why wouldn't you overweight small stocks? You know that overpriced growth stocks don't actually produce outperformance relative to value, so you should tilt towards value.

Ben Felix: How did you deal with client conversations on higher expected returns for the long stretch that we’re still in, depending on how you measure it, where higher expected returns did not translate to higher realized returns?

Edward Goodfellow: Well, the math didn't change. The academia didn't change. Uncle Steve is still paying you 15%, let's say. A 1,000 Uncle Steves. We get anomalies in the market and anomalies occur because something happens we didn't expect. In the '90s, it was the Internet and that drove up technology stocks. In the last five years, it was cloud computing. Cloud computing and gaming transformed the technology industry. Out of the blue came these incredibly unexpected returns for these companies, the Fang stocks, which then drove up growth stocks. That was an anomaly. That's what markets are. They're random.

Over time, I still think it's like, over time, we'll see that higher risk stocks, cheaper stocks, value stocks will outperform over the long run. Because that's how we as humans price assets. We made an anomaly, because we had a higher expected thing. Let me explain what it is. The price of the stock is expected cashflow, and expected cashflow has growth in it. The bottom is expected risk. You price a stock, something happens. They have astronomically high growth rates. You thought they'd grow at five and they grow at 15. They go, “Wait a minute. The cashflow went up.” At the same time, you love the stock. You love the Fang stocks, so the risk went down. As risk goes down, asset prices went up. That produced these outsized returns, which distorted cap market indexes, which distorted returns.

People then say to you, “Edward, there's a problem. Why this isn't working?” I say, no, it's working fine. Just let it work itself out, because as I say in appendix three, growth is not infinite. Unless, you're selling to another planet, you can't keep growing at that rate. Something's going to happen. In the book, I talk about Netflix and Meta, or Facebook and they had their day of reckoning. They can't grow, because competition shows up, or they have employees leave, or consumers change their patterns.

Cameron Passmore: You've been in this industry a long time. How is financial science different from the type of research that an active manager would do?

Edward Goodfellow: Well, financial science is where you study how something works and you learn to benefit from that. Active investors are guessing the future. They're going to use what they think is science to guess the future. They're going to use technical and fundamental analysis and they're going to say, “We can predict something.” But they can't. On an aggregate level, nobody can out predict someone else over the long term.

Active management is what we want, because it sounds good and people are predicting the future. Passive management is saying, no, we are going to use academia and we're going to capture what the market bears and we're going to use that to our advantage.

Ben Felix: You mentioned strategy risk earlier. Can you talk about how investors should manage strategy risk?

Edward Goodfellow: Well, I always like to say in the book, you are the risk. You've decided to carry out a strategy. If the strategy is well structured, well designed, easy to execute, the risk really is someone's going to tell you, it doesn't work, which actually just answers your last question, which is, okay, guys, the premiums didn't show up. What are you going to do about it? Well, no. The strategy is to design a diversified market-based portfolio, tilted towards higher expected returns. That's the strategy.

The strategy risk then is, well, I don't believe that anymore. You should believe that. That's how markets actually work. Over time, this all falls through, because markets are just us. We are pricing the risk just so we can do the Uncle Bob and Uncle Steve. The key to strategy risk is if you really believe and understand why your strategy should work, don't deviate from it. All these people are going to tell you, you shouldn't do this, you should do that. Just follow your strategy.

Ben Felix: What do people need to be aware of to minimize costs in taxes?

Edward Goodfellow: Let's look at costs. In the book, I talk about you’re managing an apartment building. Why do you have costs? Cost, because you have to hire somebody, or use different vehicles. You should always try to minimize your costs. Obviously, if you're passive and semi-passive, you have a huge advantage. Now you've got to get advice. Then the same thing about advice, is the advice is going to give you better odds of an outcome? You always look at costs as, am I going to put the puck in the net? Is this person going to give me an odds advantage? Then I'm willing to pay them.

From a tax point of view, the beauty of a semi-passive approach, or the seven steps is as you grow your portfolio, you're not making big changes. You're not changing the asset mix a lot, or the allocation a lot. You're not triggering capital gains. Let's hypothetically say you invested a million dollars. In 10 years, the rule of 72, you doubled your money, you earned 7.2%. The market value is now 2 million. Along the way, the cost base, the ACB of this portfolio might have gone up to 1.2, because you did some rebalancing. You have this 800,000 lower embedded gain, and you haven't paid it. Because if you pay those taxes, that reduces the value of your portfolio, so you didn't.

Now you turn around at the end of 10 years and you draw out $5,000. The same time, now you're slowly recognizing these capital gains over this timeframe. You actually have more money to deal with, which gives you a higher compounded return.

Cameron Passmore: The three of us are advisors in this business, and you mentioned minimizing costs. How do you articulate the value of financial advice?

Edward Goodfellow: It's odd. Does a person provide better odds of an outcome? When you decide to do something, is the cost that you're paying going to improve the odds of your outcome? When I look at advice from my doctor, or from my mechanic, what are the odds? What am I paying for? I'm paying for them to improve the odds of an outcome. The problem in the financial world is people play on the game of, “I can predict the future.” That's a terrible way to look at it, because I don't know what that is. The odds are actually not very good. We overpay for people we believe are the Wizard of Oz. You've got to be careful of that and manage that.

Ben Felix: What was your biggest takeaway from sitting down and putting all these thoughts into a structured format?

Edward Goodfellow: I personally thrive in a rules-based systematic process and structure. I do that. I raise my daughters. I teach part-time university. I got through the UFE, the Uniform Final Exam. I like processes and structures. They make me accountable. They give me assurance. As long as I have a really, really good plan in place, I have a better odds of A, completing the CFA, or the CA, or raising my children. It's not a perfectly formatted approach, but it gives me a guideline and a process and a structure to deal with issues as they arise.

Cameron Passmore: The three of us, and I'm guessing most of our listeners, pretty much agree that learning about this stuff is important. However, a ton of information is conflicting that is out there. What is your advice to people that are just trying to figure this stuff out and have a good experience?

Edward Goodfellow: We are very stressed as a society. Basically, I'd say that investors are probably more stressed now than they've ever been because of this overwhelming amount of information. If you’ve hold on to and if you look at the seven steps, the middle core is academia. Every time you're not sure of something, go back to saying, “Well, what does science say? Science says allocation works. Science says diversification works.” Science has identified the dimensions of returns. This is beneficial. Science has told me from a behavioural point of view, I have to manage myself. I can eat potato chips. I shouldn't ride a motorbike.

Science has told me I've got to be careful with investment choice risk. I shouldn't go down the black moguls. I shouldn't do that, because that's going to get me in trouble. Then science has also told us that costs and taxes matter. It's good to have this framework to build upon and to fall back on when you're faced with all this information and all these questions.

Ben Felix: Final question for you, Edward. Any final thoughts for our listeners?

Edward Goodfellow: Odds are everything. Managing the variables to better control the odds is everything else. The idea is that you're about to invest your money, or are investing your money, trying to make an investment decision. Do you understand the odds? Most importantly, do you understand the variables you control and the seven steps are seven variables you control. They're actionable, tangible tasks that you control. If you focus on what you can control, you can better manage what you don't control, to improve the odds with a successful outcome.

Cameron Passmore: Awesome. Edward, thanks for coming on. Congratulations again in your book.

Edward Goodfellow: Thank you very much for having me.

***

Cameron Passmore: All right, let's go to the after-show, Ben. Thanks to Edward for joining us. Great to have him on. Also, great to have Alex. Great friend of the show and someone I've got to know over the past few years. Just a great guy. Always a helpful ear when I've got questions about stuff in the business. He's so connected and he's so gracious with his time. Can you imagine having that kind of experience with Harry Markowitz, though?

Ben Felix: Harry and everyone else. When we were talking to Alex and he's not name-dropping for the sake of name-dropping, but just as he's telling stories, the names that are included, it's just like, man, he hangs out with some pretty cool people.

Cameron Passmore: Yeah, pretty cool story. Why don't you give us some of the reviews we got?

Ben Felix: Yup. We got two new reviews. Our review numbers, remember, we had an arbitrary goal of hitting a 1,000 reviews, which we've now surpassed? I don't know what it's, or what it's at now, but it's well above that. We always appreciate them.

Cameron Passmore: A 1,067. But who's counting?

Ben Felix: Oh, 67. Okay.

Cameron Passmore: A 1,067. Yeah.

Ben Felix: It's at 71 now. I just remember it was 1,171, or 1,071. Barteda, Barteda from Canada, titled their review, shared and re-listened. They said, “The highest praise I can give a podcast is that this is the only podcast that I've shared with friends. It is also the only podcast that I have gone back to listen to from the beginning.” Wow. That's a lot at this point. “I do not listen as soon as it hits my phone, as I wait for a time when I can pay attention. This podcast has influenced my investing more than any other.” Very, very kind words. Then Joseon Daimo from the United States says, “Erudite podcast.” Their review is, “I learned.” It's great.

Cameron Passmore: It’s awesome.

Ben Felix: It's a great review. As much as we can ask for.

Cameron Passmore: I love when people reach out on LinkedIn the past couple of weeks. I'm just going to go through these quickly. Well, both of us heard from Rowley in the UK, who enjoys listening to the pod very much. Joshua from Taiwan expressed his appreciation for the RR, and thanks us for transforming people's lives. Herb from Stephen, Toronto, who will be at the live CFA event this fall in Toronto. Kevin from New York City has been a loyal follower for years and thanks us for the exceptional educational and insightful content.

Reese from Charleston says, he gets a lot out of it. From Alix in New York City says, “I really appreciate the mix of theoretical, academic and practical topics. My background is in organizational change management. The recent episode with James Choi really resonated with me. I really appreciate the view on how real behaviour diverges from academic advice, even with economists. I enjoyed some of the recent foundations episodes, as well as the deep dives on advanced topics, which remind me how broad the space is and push to continue learning.” Pretty kind.

Also, a nice post on LinkedIn from Andrea in Brussels, who reposted our upcoming live event on finding and funding a good life, which will be hosted by our colleagues, Jacqueline Cessaro and Nicholas Donovan. He stated, “In the last two years, nothing has been a bigger personal impact on my life, both personal and financial than the Rational Reminder.” He also considers the work on finding and funding a good life, the very best of the work done here.

Just a heads up, we'll be having live events like that event every two weeks for the rest of the year. You can follow us. We retweet this. Or you can follow the company on LinkedIn, Twitter, Instagram. You can follow Rational Reminder. It's all reposted all through the different communities.

Ben Felix: Yeah. People should check those out though. The last one that I checked in on, they had, I think, over 90 attendees in the webinar. More than that?

Cameron Passmore: We had over a 100 registered, I think, 60, or 60 attended.

Ben Felix: Okay, okay. That must have been an outdated number then. Yeah, so lots of people came though, and people seemed to get a lot of value out of it. Other PWL employees attended, and the feedback that I heard from them was that the presenters, the PWL people that presented just absolutely crushed it. That's cool to see that people on our team are killing and doing that presentation.

Cameron Passmore: There's also a Women in Wealth Series that's running, too, which people might want to check out. Anything you want to mention from the community?

Ben Felix: Well, I mentioned it in the introduction that that story of the DIY investor that decides to look for advice, and I thought that was just absolutely fascinating. Other than that, the community has been more active recently. There's a couple of thread on housing really picked up, and a thread on what people have changed their minds about with respect to factor investing. One of the moderators started that thread, and it's become quite a lively discussion. I posted a bit in there, asking people their thoughts on low volatility, because our upcoming episode with Pim Van Fleet, I posted some of his stuff and said, “Is my buy-in being changed, or have I just been swayed by a good conversation with Pim?” There's lots of good stuff in that thread.

Cameron Passmore: Awesome. Speaking of the community, we have meet-up and events coming up. In September, we're at the Future Proof Conference, and we're hosting a breakfast on the morning of September 11th. If you're interested, reach out to us at info@rationalreminder.ca. We're also doing a live recording at Future Proof on Tuesday morning, the 12th at 9 a.m. on the Social Audio Experiment stage. Hal Hershfield will be joining us. If you're going to that conference, come on by.

On September 21st in Toronto, we're also recording another live episode at the CFA Society Toronto Annual Wealth Conference. Did you know, Ben, that I know I told you this earlier, but the CFA Society Toronto is the largest CFA society in the world with over 11,000 members?

Ben Felix: I'm surprised by that, though. I would imagine, like NYC would be the largest.

Cameron Passmore: Maybe there's different societies. I don't know enough about it. Those are your peeps. Anyways, we're recording at event that day at the event and we'll be hosting listeners at a meet-up in Toronto afterwards. That's on September 21st. From there, I'm heading to Salt Lake City. If anyone's around the night of the 22nd,or 23rd that might want to organize a meet-up, I'm happy to show up if there's any interest in Salt Lake City. Again, dropping out to info@rationalreminder.ca.

In the store, there's still a few Talking Sense Cards available. If you're a teacher and you teach those kind of material and would like a deck, reach out. We'll be happy to send you a complimentary deck. Also, super excited to announce that James Grubman has agreed to come on the podcast later this fall. His book, which I think we've alluded to, we haven't done a review on yet, A Stranger in Paradise was fantastic. I invited him on earlier this spring for that and he said, “Well, wait for my new book that came out called Wealth 3.0.” It came out, I think Thursday or Friday last week. I went through it on the weekend. It's fantastic book. I dropped him a note and he's agreed to come on. That's awesome.

Ben Felix: For sure.

Cameron Passmore: Anything else, Ben, you want to talk about? I know you've got a new bike. I don't think we talked about your bike yet, have we?

Ben Felix: Maybe not. Yeah, I got a bike. It wasn't so easy to find, because I'm tall. Taller than most people.

Cameron Passmore: What's the frame size? Do you remember?

Ben Felix: I don't know. It's not a size, because I had to get it made to my measurements.

Cameron Passmore: Made to order, okay.

Ben Felix: Yeah. Not a standard size, but a large.

Cameron Passmore: Where do you go and how often do you go? Do you road ride, or are you in the woods?

Ben Felix: No, it's not a road bike. It's a mountain bike. I live close to the mountain biking trails, so I just bike on over the trails and yeah, lots of fun. I've fallen off a few times though, so I've got to be careful.

Cameron Passmore: No way.

Ben Felix: The trails I go on are pretty hardcore and I haven't –

Cameron Passmore: Impressive.

Ben Felix: - been into this biking in probably 20 years. Yeah, I should probably pace myself.

Cameron Passmore: Are any kids into it yet?

Ben Felix: They can all ride bikes, but they're not doing mountain biking yet.

Cameron Passmore: You're not going out with one of them yet?

Ben Felix: Not yet.

Cameron Passmore: Not yet. All right.

Ben Felix: It's super fun, though. I find that anything that exercises your leg muscles for me personally, anyway, if I do squats, or if I go for a real aggressive bike ride, I sleep so much better. I don't get them with anything else. If I do upper body weights, or light cardio, or heavy cardio, I don't get that. If I do heavy leg muscle, just destruction, I knock right out.

Cameron Passmore: Anything with good sleep is worth being aware of. That’s for sure.

Ben Felix: I think so.

Cameron Passmore: Awesome. All right. Well, everybody, thanks for listening. Have a great week.

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