In this episode, Ben, Dan, and Mark tackle another Ask Me Anything (AMA) session, covering a wide range of investing and financial planning topics. They begin with a highly requested debate on factor investing versus market cap-weighted portfolios and unpack the theory, research, and practical considerations behind both strategies. Ben explains why he prefers factor tilts when managing client portfolios, while Dan shares his perspective on why a simple market cap-weighted approach is more practical and sustainable. Then, they delve into the drivers of investor behaviour, common mistakes investors make, and powerful strategies to help investors overcome biases and improve their decision-making abilities. They also discuss the role of bonds in a portfolio, whether international bonds offer additional benefits, key retirement planning strategies, and the impact of sequence-of-returns risk. Join the conversation to discover how large corporations manage cash reserves, unpack the SPIVA Canada 2024 report findings, and explore the continued struggles of active management. Tune in now!
Key Points From This Episode:
(0:01:06) Ben explains why market cap weighting is a valid strategy but prefers factor tilting.
(0:06:58) Dan shares why he prefers market cap weighting approaches over factor tilting.
(0:13:45) Hear how client expectations shape their investment approaches.
(0:18:12) How to overcome the psychological challenges of investing and reframe your mindset.
(0:22:02) The role of bonds and fixed income in a portfolio and sequence of withdrawal risk.
(0:36:19) Recommendations for factor ETFs and the home biases associated with them.
(0:39:48) Unpack the 4% rule for retirement planning and amortization-based withdrawals.
(0:47:47) Expected returns for a “millennial” portfolio and why 10% annualized is unrealistic.
(0:52:38) Find out if PWL would ever open a branch in the US and about their US partnerships.
(0:53:20) Explore how corporate cash management differs from typical household investing.
(0:55:59) Uncover the value of bonds and the common misconceptions surrounding them.
(1:00:40) Learn about the pros and cons of investing in stocks and ETFs.
(1:09:13) Aftershow: the SPIVA Canada 2024 report, activate management struggles, updates, and more.
Read The Transcript:
Ben Felix: This is the Rational Reminder Podcast, a weekly reality check on sensible investing and financial decision-making from three Canadians. We are hosted by me, Benjamin Felix, Chief Investment Officer at PWL Capital, Dan Bortolotti, Portfolio Manager at PWL Capital, and Mark McGrath, Associate Portfolio Manager at PWL Capital.
Mark McGrath: All right. AMA number four today.
Ben Felix: Number four, Episode 349.
Mark McGrath: It's funny, we always think we can get through 20 questions. And I was just going through some of the notes that you guys – we're going to get through three questions in 90 minutes today.
Dan Bortolotti: That's about it. That's why we're going to have an infinite number of AMAs, I think.
Mark McGrath: Totally.
Ben Felix: Yeah, I think they'll keep going. We still have around 80 left in the original bank from the year end ask for questions. And then in the new bank, I think there's about 60 that people have submitted since we reopened it. Yeah, we've got plenty of ammunition to continue these AMAs.
Mark McGrath: Love it.
Ben Felix: Which is good, because I think people like them. All right. Well, should we jump into the first one?
Mark McGrath: Let's do it.
Ben Felix: This is an interesting one. And Dan, you and I both saw this question. It's actually from the Rational Reminder community, not from the AMA form. But we both saw it and I think you suggested we should do this. When I saw the question, I was like, "You know what? That would be fun." We're going to do it. Despite the person asking the question, thinking that we wouldn't do it. I'll read the question, and then there's a second question that's similar. I'll read that one too.
"I'm from the Rational Reminder community. I know it's never going to happen given the personalities involved, but here we are. But I would love to hear Ben and Dan debate factor tilts versus pure market cap-weighted approaches. We've heard the argument many times in the community and elsewhere, but would be interested to hear more of their personal opinions come out in such a format, for example, in a future AMA." And here we are. The second related question that was from the AMA questions forum, "Could you explain in simple terms the difference between and why you would recommend a DFA fund or something like VEQT or VGRO? Thanks for all the great work you do on RR." I've got some short comments that I'll share first, and then I think, Dan, you've got more interesting stuff to say on this.
Dan Bortolotti: I'm not sure what the personalities are that he was referring to. It must be your fiery temper then that I was cowering. But let's give it a shot.
Ben Felix: I don't really understand the personalities comment either. I think if there was an ideal combination of people to discuss this topic calmly and rationally, it's probably us.
Dan Bortolotti: I hope so. Let's give it a try.
Ben Felix: We'll do it. I think market cap-weighting with a globally diversified portfolio, and I do think that's important, like not just a US market cap weight portfolio, for example. I think that's a perfectly fine strategy, and it aligns with theory and evidence, as we talked about in a recent episode. I think factor tilting with market cap weights as a starting point is also a perfectly fine strategy that also aligns with theory and evidence, as we're going to talk about in a future episode, an idea of a YouTube video on DFA versus Vanguard that covers that off.
Just an example, this question is asking for our opinions on this. I would be perfectly comfortable with my parents who are clients of PWL currently, but I'd be perfectly comfortable with them being invested in market cap-weighted index funds or a factor tilted portfolio. If I did not have access to the DFA global portfolios or to PWL to manage the portfolio for me, that keeps my life really simple. If I had the DIY this, I would probably be using a single ticket market cap-weighted ETF. If I had access to the DFA global portfolios like I do now, I would use them. But in a world where I don't have access to PWL and I've got to manage my own portfolio, I would not be doing something like the Rational Reminder model portfolio. I don't want to spend time managing and thinking about it.
I've said this before in the Rational Reminder community, and a lot of people were a little bit shocked. Hopefully, people listening don't find that too shocking. I would favor simplicity over factor tilts, given that choice. Now, we believe and I believe that it makes sense. We, not including Dan, as Dan will talk about in a second, that it makes sense to have some factor tilts because it adds sources of expected return that pay off at different times from the equity risk premium.
Recent history, in the last 15 years, roughly, have been just dominated by the equity risk premium in the US in particular. As I talked about in my Dimensional vs. Vanguard video, outside the US, factor tilts have actually been pretty good in recent history, but the US is such a big part of the market and US large-cap growth has been so dominant that factor tilting doesn't look great in recent history. But we've been in this type of situation before, leading up to the year 2000 and other times throughout history. And while the equity market dominated for a while, and it didn't feel very smart to be tilted toward anything else, eventually that reversed. And when it did, being tilted toward small cap and value looked pretty smart.
Now, it does suck right now when factors are underperforming. It hurts. It also sucks when the market is flat, which has happened in the US many times. I think global diversification can do a lot of work there, too. I mentioned that earlier, when we're talking about market cap-weighting, ideally, you're globally diversified. That definitely helps with avoiding things like lost decades. But I think tilting toward other sources of expected returns just gives you another thing that will pay off at different times. And I think that's pretty attractive.
I think there are a little bit different psychologically from market cap-weighting. Cliff Asness, when he was on Rational Reminder, talked to us about how it's a lot easier to stick with a market cap-weighted portfolio that's underperforming than it is to stick with anything active, which I would include factor tilts in. It's a lot easier to think that, yeah, we're going through a bad period for stocks, but stocks aren't broken. It takes a lot for people to believe that stocks are broken. But factor tilts or any other active strategy, I think it's a lot easier to believe, "Hey, this isn't working. Maybe it's broken." And so it's just harder to stick with. That's also part of our job as advisors to help people through periods like that.
And then one other interesting point that I would make on this is that because we talk about this stuff on this podcast and on my YouTube channel, the people that come to us, if someone contacts me and says, "Hey, Ben, I'm interested in being a PWL client," they're expecting us to use a factor tilted portfolio. They know why we do that. It's what they want. For that clientele, if we were to flip it around and say, "Hey, actually, no, we're going to do market cap weights," they'd be like, "Oh, well, that's not what I want."
And less so in recent history, but probably seven or eight years ago, we would get people contacting us who had found your blog, Dan, and read about indexing. And they'd come talk to me and Cameron and we'd be like, "Yeah, we do this Dimensional thing." And they'd be like, "Oh, I wanted index funds." And so just because that expectation was different, it didn't work as well. But for the type of people who come to us now, it's what they expect, what they want, and I think it works really well. Those are my comments. I think your comments are going to be more exciting, Dan.
Dan Bortolotti: So much of the debate around factor investing versus market cap is about research and about the theory. And the experience I'm going to share with you is just exactly that, is the experience of a dozen years working directly with investors. I'll back up a little bit and I'll say, that all of us, I think at some point in our lives, went through a period where we were just learning about indexing passive investing as a theory because it's not something that comes to us easily. And somebody else brought up in one of the questions, this is not something that takes a couple of hours to get. You really have to delve into it.
And so once I got through the OGs of indexing, Bogle, and Burt Malkiel and all of these books from the '70s, and '80s and '90s, I started to encounter a lot of other authors who were advocates of passive investing and I felt we were all aligned. Larry Swedroe, Rick Ferri, even Scott Burns, who, interestingly, was the guy who created the term "couch-potato portfolio." These guys were writing about their own firms that they worked for, and almost all of them used Dimensional and used factor tilts. And so it seemed to me like the next level of indexing.
I was very much influenced by that early on. If you go on the Wayback Machine and find some of the blogs that I wrote 10, 12 years ago, I was quite enthusiastic about it. So that's the approach that I came into it. When I joined PWL, which was 2013, our team in Toronto was using a mix. We typically had portfolios that were roughly half-dimensional and half-market cap-weighting. It was kind of a way of getting a bit of a tilt but also keeping fees a little bit lower. That's the way we built portfolios.
But I remember very early on, my colleague and my mentor in this business, Justin Bender, was already starting to be a little bit uneasy about it. And we had a lot of conversations about it. And I remember him telling me that clients are very sensitive to tracking errors, especially if you use a passive approach. And he would say during these periods of underperformance, which you're going to always get with a factor tilt portfolio, he was having a lot of meetings with clients who are quite frustrated and said, "Listen, I thought you guys tracked the market. Why did I just underperform five percentage points last year?"
This gets back to, I think, the comment that Cliff Asness shared with you, which I think is very wise, which is active investors expect that there will be some periods of underperformance. I mean, unless they're completely delusional. But if you're going to call yourself an indexing advocate and say that your goal is to track the market, if you don't track the market very closely, clients tend to get frustrated.
And again, a lot of this is self-selection because we did not have droves of people coming to us saying, “I know you guys use factor tilts. That's what we want." We got droves of people coming to us knowing that we had written and talked about market cap-weighting investing for years. Their expectations I think were different.
And I have to say that in terms of consistency of approach, I was really particularly sensitive to this because I had spent years building a reputation telling investors, “Give up on the idea of trying to beat the market. That's extremely hard to do over the long term. No one really needs market-beating returns in order to have a successful plan.” And so I found it personally very difficult to sit with someone and try to make the argument that one of the ways we added value is to build portfolios with expected returns that were higher than broad indexes. It just was inconsistent. And I wasn't comfortable with it. I'm still not.
Your experience, I think, was very different from mine. In fact, in many ways, it was the opposite of mine because the types of prospective clients you attracted were looking for something different. Very early on, very shortly after I joined PWL, we just made the decision, at least on our team here, to just go with straight up, plain vanilla market cap-weighted ETFs. We still do it. I like the clarity of purpose. I like the consistent message. And I always joke that my performance reviews I do with clients now, the portfolio review is the most boring part of the meeting because there is no surprises. There's no excuses. You knew what this was going to be. Here are the specific numbers.
And I think that there's a lot to say about that, that I think that it really improves the relationship that a client has with an advisor if they're not talking about performance too frequently and not expressing whether it's frustration with underperformance or even trying to explain outperformance. Obviously, people are happy to get outperformance if it's there. But I just prefer to talk about investment returns as little as possible during the meetings because that's the one part of the plan that we have no control over.
The last thing I would say is, and I really have to give a nod to Justin here because he was really the person who showed this, is that I think there are ways to improve returns in a market cap-weighted portfolio at the margins. And when I say improve them, I don't mean beating the market, but I mean keeping fees and taxes to a minimum because those are the things that are under our control. We can do some things on the margins to scrape a few basis points here and there.
We use GICs as well as bonds for fixed income in our clients’ portfolios. There's no MER. There's less volatility. These are things that can slightly improve the situation. We use tax-efficient discount bond ETFs and taxable accounts. We use some asset location strategies and things like this. It's about reducing friction. It's not about market-beating.
But I would rather try to eke out a few basis points that way rather than striving for market-beating returns that frankly might not materialize. Reducing fees and taxes is something that always works, whereas tilting the portfolio sometimes works and sometimes works against you. I think we all agree. I don't have any objection at all to using factor tilts over market cap as long as everything else is equal. You've got to get everything else right with your personal finances in your plan. That's as simple as paying down debt, saving regularly, and building a portfolio that's diversified, and low-cost. Stick to it with discipline over the long term. And if you're doing all of those things, the impact of the factor tilt versus market cap-weighting is likely to be so small, it's really not even worth worrying about.
Ben Felix: Well, that makes sense. I think so much of it is about the client's expectations. If they come in expecting one thing and they get something else, it's really hard in either direction. I think if we flip-flopped and said we're switching to market cap weights, a lot of our clients will be pretty upset.
Dan Bortolotti: Because it's an inconsistent message.
Mark McGrath: I think a lot of people come to us and don't know what to expect either. It's incredible for me to listen to the two of you have this conversation because many listeners will know my journey to where I am today was first stumbling upon Dan's blog about index funds and having like a full-blown epiphany moment. And then in 2017, when the Rational Reminder launched and listening to that, a second sort of epiphany with factor investing. It's just really cool as an aside to hear you guys talk about it because you were both so influential in my own thoughts about how to design portfolios.
Dan, I think you made an interesting point is that I think you can kind of grasp index funds in a couple of hours. It's relatively simple. And there's a couple of very compelling narratives that just make a lot of sense and resonate with people about why something like this might work. Market efficiency, low fees, and the statistics back it up. I think it's a lot more difficult to understand factor investing to the point that you can actually tolerate the tracking error that you mentioned.
It's one thing to get it and to listen to the podcast. But to really, really understand factors and to have the tolerance to sit through that tracking error for a long time, to your point, it's very, very difficult. And so I think, and Ben, you've said this before, this isn't like the hill that any of us would probably die on. There's so many more valuable things that you can do, not only as an advisor but as a DIY investor or planner, to move the needle that is more important. And I think this is about optimizing the last mile. If you're at the point where you're deciding between global market cap weights at a low cost or a simple, elegant, factor-tilted portfolio at a low cost, you're probably 98% of the way they're already, or hopefully you are.
Dan Bortolotti: And the fact that you can get access to the factor-tilted portfolio now without a lot of complexity. You made the argument, Ben. If you had to get it by building a portfolio on your own with seven ETFs, then there's a real argument for not doing it. Whereas if you can buy a Dimensional balanced fund and not have the complexity or if you're working with an advisor and you're not the one managing the complexity, obviously the argument is much stronger.
Ben Felix: I bet you, Dan, there's still people out there investing in the Uber Tuber successfully or some modification of it.
Dan Bortolotti: Or unsuccessful, yeah.
Ben Felix: Yeah, maybe. And then there are probably people – I know there are people using the Rational Reminder portfolios successfully with a bunch of ETFs in there. And there are tools out there now that I could probably give more credence to or more weight to in my thinking about this that make it easier to manage a portfolio of ETFs on your own. Still, I mean, just tax reporting and stuff like that.
I really like simplicity. It wasn't a very exciting debate, as we expected. You can take any of this so much further than either of us do. What we do is so close to market cap-weighted indexing. It's a bit of a tweak, and it'll have some tracking error, which does matter for sure. Even Gerard O 'Reilly from Dimensional talks about that. The biggest risk in factor investing is probably tracking error and not being able to stick with it when it doesn't perform well.
But there are people that take the concept of evidence-based investing and push it so much further than we do. You could be levered long-short in a factor portfolio. And there are products that do that. There are products in Canada that do that. I think what we do is relatively tame.
Dan Bortolotti: The differences are smaller than I think people might think.
Ben Felix: Totally. I do like the fact that, particularly right now with the US stock market, I'm not advocating market timing or making a prediction, but being underweight, those massive high-priced companies in the US market. And I'm totally biased right now. I'm working on notes for a future topic, I guess. I've got to send it out to a bunch of people whose research I've based it on to make sure that I'm representing it properly. I've been writing about the potential effects of index funds on markets. There's a bunch of quite interesting papers on that. After going through all that, I'm like, "You know what? It feels kind of good to be a little bit underweight just in case some of these effects that models suggest may be affecting prices or actually affecting prices." But global diversification also helps with that. It's not the only way to – I don't know what the right phrase is. Cut the cake? Make the cake?
Mark McGrath: Skin the cat?
Dan Bortolotti: Better than skinning your cat.
Ben Felix: Skin the cat, yeah.
Mark McGrath: Nice, guys. Well, 22 minutes in and we got through one question. Congratulations.
Dan Bortolotti: But it was a big question.
Mark McGrath: It was a big answer. Okay, on to the next one? “Previously, I made some stupid investments which caused permanent losses mainly because I kept holding and wished they would come back to recover the loss. But in fact, they got worse and worse. Those equities clearly have no potential. The longer you wait, the harder it is to stop the losses. How do we handle this situation and overcome it psychologically? I know it's optimal to take the loss ASAP and invest in better opportunities like index funds, but it would take a very long time to recover the loss and heal the pain. I guess this may be a common question for retail investors, so I hope we could discuss this topic and benefit everyone.”
Ben Felix: That is a good question. I've got two tools for this. One of them I've used for years and one of them a client that I was working with actually came up with the idea. One is to just ask yourself, "If you had the equivalent amount in cash, would you buy the asset?" You bought $100,000 worth of ARKK at the peak and took a 70% loss as many investors actually did in real life. And so now you've got $30,000 in that position. Big loss. The question to ask yourself is, "If you had $30,000 in cash, would you go and buy ARKK?" And I think a lot of people reframe it that way and are like, "Yeah. No, there's no way I would buy it." Well, then okay, you should sell it. That doesn't always work though.
And then the other one that the client actually came up with is to dollar-cost average out of the position. If you go through the endowment effect one where it's like, "Okay, if you had the cash, you wouldn't necessarily buy it." But you're still nervous about it, but you know you want to sell. You can put a system in place to sell out of it in the same kind of way that you would dollar-cost average into a position. You just do whatever, 10 chunks over the course of 10 months or something like that, sell it off in pieces, and then that helps to minimize the regret of selling all at once before it recovers. Those are the two ways that I would frame that decision. Do you guys have any thoughts?
Mark McGrath: The first one is the same one I use all the time, is reframing it. And the interesting thing about that, I've never done this, but it just came to me, is thinking about that question theoretically, it's hard. It's like going through a risk tolerance questionnaire. It's like pick the fund that you would have actually invested in and they show you four funds and one's more volatile with higher returns and one's a straight line. And most people just pick the one with the highest returns because, with hindsight bias, it's just so easy to say I want the one with the highest returns. If you had to actually live through that volatility, it would have been very, very difficult to do.
And so this theoretical question of if you had the cash, would you buy it today? I think it's easy to trick yourself into saying yes, but you could just sell it and buy it back tomorrow. Okay, go do it then. There's very little friction these days, especially if you've got an account, one of the discount brokerages, there's very low commissions. Okay, sell it and buy it back tomorrow. My guess is that if you did sell it, you probably wouldn't actually buy it back tomorrow. Once you've made it real and now you actually have the cash, I think you might often come to a different decision.
Dan Bortolotti: I use the first one all the time as well like you guys and usually it works. I will say that was one time I remember having this discussion with a client who owned a stock that had lost a ton of money and he was doing this sort of, "I'm going to wait until it comes back before I sell it." And so I used this framing with him. I said, "Look, if you think it's worth holding, then it's probably worth buying more." Expecting that he would say, "Yeah, you're right. I'm going to sell it." So he bought more.
Ben Felix: Oh, no.
Mark McGrath: Did it go up?
Dan Bortolotti: I don't even remember. But I guess I will give him credit. At least he had the conviction to follow through on that framing. But that's the only time that's ever backfired
Mark McGrath: That's interesting. It's funny. Just reading through that question. How many biases are at play? Ben, you mentioned the endowment effect. You've also got loss aversion. You've got anchoring bias. You've got mental accounting. There's probably others that I'm just not identifying. But that's like one of the primary cases for prospect theories, this issue of like, "I bought it. It went down. Now what?" You have to overcome so many biases to make a smart decision, not necessarily an optimal one, but just a good decision. It's very difficult for people.
Dan Bortolotti: Let me take the next one?
Mark McGrath: Sure.
Dan Bortolotti: All right. The question is, "What are your thoughts on the role of bonds and fixed income in a portfolio? Scott Cederburg's research really suggests that there is no reason to hold bonds except for behavioural concerns. But I just can't seem to make the leap to get into a 100% equity portfolio.”
Mark McGrath: There's going to be another Ben and Dan debate, isn't it?
Ben Felix: Not really a debate, I don't think. I don't know. I love Scott's research. He did a great job. Mark and I recorded an episode with him that's coming up I think the week after this one gets released because he's got an updated version of his paper that we're going to talk through. But I think it's worth keeping a few things in mind. One is that stock markets are more integrated now than through some parts of Scott's sample period, and that could limit the effect of international diversification going forward relative to their sample. Because that's really their finding, is that international stocks are better diversifiers than bonds in a portfolio.
They do look at this though, figure C1 panel D of the new paper, studies the strategy performance conditional on the realized correlation between domestic and international stocks because they got this feedback as they were kind of going through the conference circuit. People were saying, "Well, this is probably all driven by historical correlations being low. But now that markets are more integrated, you shouldn't expect the same diversification benefit."
The interesting thing is they find that the ruin probability of the optimal 100% equity strategy is stable across the correlation quintiles. But the other strategies actually have much more dependence on correlations. The other strategies, they do the 60/40 and the target date fund, those have higher probabilities when realized domestic-international correlation is low, which is interesting. They say in the paper, whatever the underlying causes may be, the results and penalty assuage concerns that a high correlation between domestic and international stocks will invalidate the optimal all-equity strategy.
And then the other thing to think about is that stock valuations are high. Like I mentioned a minute ago in the US, they're quite high, although they've come down quite a bit recently. Markets have been a little rocky. But I think because investing has become easier and safer, and we talked about this in a previous AMA episode, it's possible that stock valuations are just higher than normal, whatever that means. The level of valuation is higher and expected returns are a bit lower than history. If that is the case, it could be another argument against stocks research supporting 100% stocks.
They do look at this though in the new paper. They condition the optimal strategy on the domestic stock price to dividend ratio. And they find in that specification that in the bottom four quintiles of the price dividend ratio, their hypothetical couple does maintain an all-equity strategy. But in the highest price quintile for domestic equities, their household does allocate to bonds with a 9% weight. That optimal portfolio in that scenario does give a bit of a utility gain. The way that they do the analysis in the papers, their base case, the couple saves 10% of their income and then they kind of model that through the life cycle.
And then to compare alternative strategies, they ask how much equivalently would the couple have had to save with this alternative strategy to match the optimal strategy. And conditioning on valuations, they would have had to save 9.7% of their income instead of 10. It's a little bit nice.
But then I think the other big thing to keep in mind is that we had this long discussion in episode 343 on how to choose an asset allocation. And behaviour matters a lot. Being like, "Yeah, the data says I should be 100% in stock. So I'm going to go 100% in stock." That's probably not the right decision for most people. I think Scott's research is interesting because it shows things like, "Hey, international diversification is really important. Hey, bonds maybe are not super safe over very long horizons in real terms." Neither of those things do anything to mitigate the behavioural effects of volatility on investor behaviour. I would probably argue more important than what is statistically optimal.
Dan Bortolotti: It's interesting how often we hear questions with that premise. What I mean by that is it seems that a fair number of people, I think, people believe bonds are in a portfolio to somehow enhance returns. And it's just that's not the case, never has been. You had said, Ben, for example, that bonds don't reduce whether it's volatility over the long term. But bonds are not in there for the long term. Bonds are in there to control short-term. My joke here was to say there's no reason to hold bonds except for behavioural concerns. It's like saying the only reason to add cold water to your bathtub is so you don't get scalded and jump out. Yes, that is correct. Let's not just wave our hands and say, "Oh, it's only behavioural concerns," because behavioural concerns, it's the single biggest reason why people fail in investing is bad behaviour. If you can have an ingredient that improves your long-term behaviour, then what's that worth? It's worth a lot.
If you want to focus specifically on the short term, we're talking about here, or at least I'm talking about people who are in the drawdown stage. And if you're taking money actively out of your portfolio, yeah, I really think you should keep a few years' worth of cash flow in not necessarily short-term bonds. They have their own issue with volatility, but cash GICs. And simply because believe me, I've had these conversations with people many times when they're drawing down their portfolio as markets fall, it's extremely reassuring to be able to say to someone, "You don't need to worry about equity volatility right now because we've got two or three years or more of cash flow in safe investments that are not going to be affected by that volatility." And then it's enormously comforting to people. It's not a research question. It's just a question that you get the answer to after you work with enough people.
Mark McGrath: I agree with that. I think managing behaviour is so important to total outcomes. It's easy to look at what's the optimal portfolio historically, and mathematically and statistically, but actually tolerating that portfolio over a 60-year time horizon and not making mistakes with it is the tough part. To the degree that bonds can help you prevent a mistake, you can end up with a better outcome by using them.
I'm 100% equity. I expect to always be 100% equity because I'm a perfect investor. I'm robotic in my approach. My son is a different story, but I am absolutely infallible with my approach to my portfolio. But it's interesting because I know I absolutely respect that as I get older, I might completely change how I view that. I expect to be 100% equity myself, but absolutely leave room for I just might not need the stress of it when I get older and have to make those drawdown decisions too.
Dan Bortolotti: Mark, do you mind if I ask you roughly what percentage of your clients are 100% equities?
Mark McGrath: I have a smaller number of clients than the typical PWL advisor because they wear a couple of hats, but I don't push toward 100% equity. We've talked about kind of a risk profiling process before, I think, on the podcast where we use a combination of psychometric results from their own experiences and perception about risk and answer a questionnaire, and then we combine that with a more quantitative view of their capacity for risk.
Very few people come out with an acceptable score that would allow us to put 100% equity in their portfolio. Twenty percent maybe. We also have to remember, my clients typically err on the younger side, I would say, in the 30 to 45 range. There might be more capacity and tolerance for risk there. But I don't know that I've met a lot of people over my lifetime that can sit through the kind of volatility we've experienced even in the past 10 years with things like 2018 and COVID and not make a mistake.
Dan Bortolotti: I'd agree with that. The number I have is extremely low.
Mark McGrath: It doesn't surprise me.
Ben Felix: I'd have to look at our data, but it's material, the number of clients that have a 100% equity portfolio. And there's definitely advisor-fixed effects there. There's a paper on this. Advisors have a big influence on their client's portfolios based on what that advisor's fixed effects are. What that advisor thinks basically has a big influence on what their client's portfolios look like. That one paper I'm thinking about, it shows that there's much less variation based on client circumstances, but a lot of variation based on advisor-fixed effects, advisor preferences, I guess, and perceptions.
Dan Bortolotti: I mean, obviously, all advisors have some biases, but it shouldn't be the biggest factor. It could be a factor, but client circumstances should obviously be the biggest effect there.
Ben Felix: Yeah, that's why that paper was kind of a bombshell paper. It's in the Journal of Finance. Pretty interesting.
Mark McGrath: Ben, that's a separate paper than the one that shows that advisors invest in the same products that they use for clients even if those products are not great. Is that right? It's a totally different paper?
Ben Felix: Same group of co-authors. That it is a different paper.
Mark McGrath: But you can see the influence just from that paper alone on what ends up in client portfolios is largely based on a lot of that individual advisor bias.
Ben Felix: Yeah, definitely. I just wrote a video and recorded on sequence of returns risk based on the conversation we just had. You guys are going to rip me part for it.
Mark McGrath: What? It doesn't exist?
Ben Felix: It talks about the Cederburg paper, but there's also a couple of other papers that look at optimal retirement portfolios. And they all find that being equity-heavy is generally quite favourable. There's one that looks specifically at the cash bucketing strategy. Author of the paper kind of acknowledges like, "Yeah, this probably feels good for people," but shows that it's suboptimal relative to having a static asset allocation and drawing it down. Not addressing the behavioural components.
In the most recent version of Scott Cederberg's paper, they do one optimization where instead of finding the optimal fixed lifetime asset allocation, they find in each year of the simulation, they find the optimal asset allocation. And in that one, they end up with 100% equity up until retirement and then they shift into 27% bills. I don't know, it's like for seven or eight years and that slowly draws down and they end up back at 100% equity. But that was interesting because they had this big allocation of bills at retirement and that was based on a 4% withdrawal rate, 4% spending rule, but then they switched the spending rule to a proportional 4%. So you're spending 4% each year, which means your spending is changing in dollar terms.
Mark McGrath: Of the remaining balance?
Ben Felix: Of the remaining balance, yeah. A 4% rule. The Bill Bengen 4% rule is you spend 4% of the portfolio in the first year and then increase that by inflation each year thereafter. And the proportional 4% is you spend 4% of the remaining portfolio value every year. And so, if your portfolio drops, your spending drops proportionally. When they switch to that proportional spending rule, the allocation to cash goes away completely. My comment in the video is that the sequence of returns risk is better described as sequence of withdrawals risk because you're not forced to take the same withdrawal every single year.
Mark McGrath: There's a couple of things there. One, obviously, if you have a fixed percentage of a remaining balance, it can only ever approach zero and never run out theoretically. It's not a surprise. But the variance in spending can be absolutely massive. Your tolerance spans. Going from spending 60 grand a year to 40 grand a year might be absolutely intolerable for you. I think it's kind of a combination. The sequence of returns risk absolutely exists and a variable withdrawal rule is a great solution to it or a great part of a solution kit to it.
And you've talked about this and modeled this, Ben, having floors, and ceilings, and guard rails and that type of thing. There's a lot of ways to kind of tackle that problem. But sequence of withdrawal risk I think is a good way to frame it to the degree that you can actually tolerate massively changing withdrawals.
Ben Felix: I did model that actually using the Dimson, Marsh, and Staunton data, I did a safe withdrawal rate using 100% stocks. It was 3.2%. 32,000 a year on a million. And then I did an amortization base withdrawal rate, which Ben Matthew talked about when he was on. It was able to sustain, I think it was a 3.65% average withdrawal. The lowest year was $17,000 in spending. You're taking almost a 50% haircut. You're spending relative to the 32,000.
It's one tool like you said, Mark, and there are definitely guardrails. There's one that's actually called guardrails, but there are different systems that you can put in place so that your spending is not actually that volatile. But I do think it's interesting that there are two ways to solve the sequence of returns problem. One is by trying to do stuff in the portfolio. One is adjusting your spending. The optimal answer is probably somewhere in the middle for any individual.
I did think that the fact that the Cederburg paper with a fixed withdrawal found that optimal cash allocation was pretty interesting. And the other thing about that, it was optimal by 10 basis points of savings. Remember, the base case saves 10% of their income. In that optimal cash allocation case, the required savings drops to 9.9%. It doesn't make that big of a difference either way. I say in the video that if holding cash makes you feel better, it's probably not that big of a deal.
Dan Bortolotti: I think in retirement too. This is another place, I think, where the theory and practice can differ a little bit, in that in my experience working with clients who are retired and drawing down their portfolio according to the plan that we've come up with for them, they don't want to be in a position where they are checking their portfolio value relatively frequently and then adjusting their lifestyle based on market returns.
And in fact, I have often as a planner tried to insulate them from that by saying things, again, going back to that cash wedge that you put in a portfolio to provide a few years’ worth of cash flow. Because sometimes clients will bring it up. I think it's a natural tendency. They read the news. They know their portfolio is down. They say, "Maybe I shouldn't go on vacation this year." And I say, "Well, listen. Remember, when we did that plan for you, we did not assume that returns were going to be the same every year. That's why we did the Monte Carlo. And so, no, you don't have to adjust your spending this year because the markets were down based on our average expectation." And I think that offers a lot of comfort to people in their retirement. It improves their mental health and their lifestyle as well.
You still have to revisit it. You still have to go back and redo those Monte Carlo's once a year and do little course corrections. But you want to keep those course corrections, I think, as infrequent as possible. Because if a client sort of think, "Well, market's up this year. I can spend a lot of money, market's down this year. I better stay home," that's not a recipe for happiness in retirement. It's really not. I think we have to be careful with that. I don't think a lot of people will find that palatable.
Ben Felix: Yeah, no, they don't. We've explained this to people, too. There's not a lot of interest in big variable spending plans. Even if it's like, "Hey, you can spend more throughout your lifetime," it's not very palatable.
This one's a quick one. Is there any factor ETF you recommend in Canada like AVUV or AVDV? Is there a reason you didn't include AVES in your factory-tilted portfolio? Manulife does have some factory ETFs. I think BlackRock does too. The Manulife ones are sub-advised by Dimensional. I think actually Vanguard has some stuff too. I'm not recommending any of those. We don't use them at PWL. I've not done proper due diligence on any of them. I just know that they exist. There are products out there.
On AVES, we decided at the time – I mean, that model portfolio is many years old now and we have not updated it. But at the time, emerging markets are a relatively small portion of the portfolio. And one of the objectives in building that thing was to keep it as simple as possible, as few holdings as possible, and as few US dollar funds as possible just to keep things simple for Canadians. And so we just decided it didn't make sense to include it. That's it. Not very exciting.
Mark McGrath: Have you looked at FEQT in any great detail? Because, I mean, they have some factor exposure and they tilt to things like low volatility, and momentum and stuff, which I know is maybe more controversial. And there's some Bitcoin in there and stuff as well. But I mean, as far as like a one-fund solution that might give you some factor exposure, it's Canadian, it's low fee. You don't have to stitch together some US ETFs and some higher-fee ETFs. I'm curious if you've taken a look at it.
Ben Felix: For me, the Bitcoin is a turnoff. I have looked at their factor products. They are much more concentrated than something like Dimensional. They're also much higher turnover. They're much more active. They've performed quite well and they are targeting real factors. It's not like traditional active management with a factor label. It's quite quantitative. I probably wouldn't use it personally, but I don't think it's terrible.
Mark McGrath: Because of the Bitcoin?
Ben Felix: The Bitcoin, and the concentration, and the high turnover. There's a lot of things I don't love about it. The fact that it's targeting factors that probably should exist is good, and it seems to have been able to capture them so far. That's all positive, but it's not an implementation that I would prefer to use. And then add the Bitcoin on top of that, it's another reason for me to stay away.
Mark McGrath: Have fun staying poor, Ben. You've mentioned before, Ben, that in Canada, it's tough to get exposure to factors, but a high-yield dividend ETF might be a reasonable proxy for that, right? I know you mentioned the Manulife multi-factor ETFs, but this particular question they were asking about US-listed ETFs that are generally world ETFs. And part of the problem there is if you do want to influence some home bias, those Avantis ETFs wouldn't have it if you're a Canadian investor. I'm just curious if you have thoughts about taking something like AVGE, which I think is global equity markets from Avantis, and then adding some home buyers via VDY or like a high-yield dividend ETF in Canada.
Ben Felix: I guess. I don't know. You could.
Mark McGrath: Yeah.
Ben Felix: The trade-offs with dividends are just – you've got the tax inefficiency. If it's in a non-taxable account, I guess, whatever. But then you've got the reduction and diversification for no reason other than companies are not paying dividends. Similar-ish concerns with the Fidelity stuff. It's going to be a more concentrated implementation.
When you've got low fees and you're using a fund that's not tracking super speculative stuff and you're going to stick with it and you're not going to sell out of it when it does poorly or if it does poorly, it's probably fine. Someone that does it, are they really going to stick with it and be disciplined and so on and so forth? I'd be a little bit skeptical.
There are so many ways to invest successfully. Yeah, index funds make sense. And, yeah, some factor tilts can make sense. If someone buys and holds a dividend fund for 40 years, they're probably going to be fine. It's not how I would do it. It's not how I would recommend doing it, but they're probably going to be fine if they stick with it.
Mark McGrath: Good stuff. Next one. When planning for retirement, people often mention the 4% rule. Ben and the RR crew have had multiple discussions laying out why the 4% rule is flawed and have offered alternatives such as a variable withdrawal rate, which we kind of just talked about. How would someone who is early in their career plan for retirement with this in mind? Is it acceptable to use a 4% withdrawal rate for long-term planning with the understanding that actual withdrawals will vary?
Ben Felix: I think why the 4% rule became so popular, at least one of the reasons, is it's kind of easy to do the math in your head about how much you need to save for retirement. We had someone from the FIRE movement, his name is escaping me right now. They made a documentary. Oh, that's brutal. He was on the podcast and talked about FIRE. And that was like a big thrust of it was that, well, the 4% rule just makes it so easy for us to think about our financial goals and that makes it really easy to save. And that makes it really easy to invest and stay invested. That's all pretty compelling.
I think 4% is probably high, even if you're using variable withdrawals. But if you recognize that, it's probably not the end of the world. I looked at the DMS historical data for a 70/30 portfolio this time and global stocks in US bonds going back to 1900 and found a safe withdrawal rate of 3.5% for 30 years. I was sitting down a different time doing this analysis. That's why the numbers are different from the ones that I mentioned earlier. And the safe withdrawal rate drops to around 3.1% if you're looking at a 40-year period. That's both with about a 4% failure rate.
If I switch to amortization-based withdrawals for spending, the failure rate mechanically goes to zero. You can’t run out of money doing amortization-based withdrawals.
Mark McGrath: Do you want to just explain that quickly, Ben? Because I don't know that everyone knows what amortization-based withdrawals means. But I think we did talk about it with Ben Matthew, but I don't know that everyone listening to this will understand that.
Ben Felix: It's basically using the Excel payment function to calculate how much you can sustainably spend in each year of retirement based on the expected return, remaining periods of retirement, and the remaining portfolio value with an ending portfolio value objective of zero. Mechanically, it'll change it. Spending amount will change every year, which as we just talked about can be problematic. In practice, you will not run out of money in that case.
Dan Bortolotti: More properly speaking, you will run out of money, but you will run out of money at the end of the period that you've chosen.
Ben Felix: That is likely correct yet, yeah. You will run out of money when you expect to. Getting there, getting to that certainty about when you're going to run out of money or when the portfolio will be depleted, which itself is problematic, by the way, because you don't know when you need to run out of money. You don't know when you're going to die. If we assume that's no one, you can mechanically get there. But the trade-off is you can have more variability in your spending.
In this case where we had 3.1% for 40 years, 3.5% for 30 years, if I ran amortization-based spending, I think, for 30 years, the worst-case spending is 3.7% of the starting portfolio on average, but there's a bunch of variability around that. The lowest spending year was 17,000. I guess similar to the previous example, in real terms, and that's compared to $35,000 in the safe withdrawal rate case. But then there are also higher years of spending, which kind of makeup for it, but kind of not because it's kind of hard to change your lifestyle materially every year. But at least, financially, that's how it works. And then the other thing is that you don't run out of money. The safe withdrawal rate case has a 4% failure rate. So in that worst case, you are actually running out of money because I allowed for an above-zero failure rate. But in the amortization-based withdrawals case, the portfolio is depleted exactly when you expect it to be depleted like we talked about earlier.
All that to say, if you allow some form of variable spending, amortization-based withdrawals being one of them, you can have a higher average spending amount, but it's still below 4%. It's simple math. And I think if it helps people save and invest and stay invested, that's great, but I think you do have to be a little bit careful.
Mark McGrath: The question was specifically for someone who's earlier in their career. If you need some kind of real simple rule of thumb that you can keep in your back pocket as a target, I think it's fine. You're talking about withdrawal rates of 3.7%. You're within spitting distance of it. Yeah, it's materially different than 4%, the 4% rule doesn't tell you what your after-tax spending is because is it 4% from an RSP or 4% from a TFSA? And you're going to have materially different outcomes in terms of your after-tax spending. But if I'm 30 and I've got 30, 35 years before retirement and I just need to throw a target out there, I think it's fine as a shortcut, as a heuristic. I would never base an actual retirement spending and withdrawal plan on the 4% rule. But if I'm on the other side of retirement with a long-time horizon until I get there and I just want something to aim for, I think it's as good a rule as we can make.
Dan Bortolotti: I like it too. Like you said, you're not going to base a financial plan on it, but if you're just sort of looking ahead. And how many people have you spoken to or younger people who are a fairly long way from retirement? They literally have absolutely no clue how much they will need to retire. And there have been surveys about this and people are wildly off the mark, both high and low.
If you're just sort of saying, "Well, how much do you spend this year?" "Well, I spend $50,000 a year." "Well, okay, if you had a million bucks at 5%, that's $50,000." Just a starting point for the discussion. It might be able to identify people who are saving not nearly enough. If you just kind of look at what you're spending or what you want to withdraw from your portfolio, it's 12% of your portfolio. Then like, "Okay, you need to do some math now and figure it out." Not a financial plan, but it is not the worst rule of thumb I've ever heard. I will say that. I feel like it's a bit maligned unfairly. I don't think Bengen, when he invented it, expected it to be a law. It was just a guideline.
Mark McGrath: I mean, he never called it the 4% rule either. That was kind of bastardized after the original paper came out.
Ben Felix: We did an episode with him, episode 135. We talked with that.
Mark McGrath: How do you remember that? I was going to ask this. Sometimes when you guys talk about a previous episode, and Cameron, you see this all the time. It's just like Episode 241 at minute 17 for those who are listening. How did you know that so fast?
Ben Felix: I'm not that smart. It's because I just did that video on sequence of returns risk. And in the video, I mentioned Bengen and the episode number. So I had it fresh in my head.
Mark McGrath: Okay, good. Makes me feel better. Anything else on the 4% rule?
Dan Bortolotti: It did come up with the whole variable withdrawal idea.
Ben Felix: The variable withdrawal stuff is so interesting. Bengen, a financial planner, comes up with a 4% rule. And if you ask an economist, it's like the worst rule ever. And Robert Merton came up with amortization-based withdrawals in like 1969, I think. And nobody uses amortization-based withdrawals. Even though if you ask an economist, that's what they should be doing.
Mark McGrath: In practice, nobody uses it.
Ben Felix: Correct. Ben Matthew, we've had that great episode with him talking about amortization-based withdrawals and why it makes sense. You tell it to a client. You tell it to most people, like, "Yeah, I don't want to do that." There are probably ways to make it more palatable, though. I don't know if we talked about this in the episode or if Ben and I talked about it offline. You can smooth it, so you're not making big dramatic adjustments. You could probably adjust less frequently, but it could still be big, big adjustments.
I agree with you, Dan. If you've done a really good retirement plan and the person's not wanting to optimize as much as possible, optimize their utility because most people don't know what that means. And doing the normal way of financial planning with a Monte Carlo simulation, maybe making some adjustments along the way, but planning for more constant spending, it seems to be a lot more palatable to most people.
Mark McGrath: Buy an annuity and be done with that.
Ben Felix: Buy an annuity.
Mark McGrath: Sold.
Ben Felix: In amortization-based withdrawals, in that life cycle approach to financial planning, the way that you would fix spending is by building a TIPS or a real return bond ladder. Okay, I don't want that much variable in my spending. Okay, the way you solve for that is by building a bond letter that's going to pay you exactly what you want as a floor throughout your retirement. But that also can pretty materially reduce the amount that you can spend throughout retirement.
Mark McGrath: Heard this nastiest problem in finance, I think Bill Sharpe said.
Ben Felix: That's right. He did say that.
Mark McGrath: Something along those lines. Next one? Dan, you want to read it out? I feel like you haven't read any.
Dan Bortolotti: This one says, "Assuming you were starting in 2025, what would your average CAGR compound annual growth rate expectation be for a millennial portfolio that is okay taking on slightly more risk for higher returns given a longer time horizon? Average millennial portfolio return over the next 5 to 10 years, do you think a 10% total return compounded is realistic?" I think we should clarify. Is the question here just saying he or she is a millennial? Because otherwise, what is a millennial portfolio?
Mark McGrath: I would guess so, yeah.
Dan Bortolotti: The return's going to be the same no matter – whether you're a millennial or not. But I guess what the person is asking is if you were a millennial and you were investing in an aggressive portfolio, what would you expect? I mean, five to ten years is not a long time horizon. Let's start from there. But, Ben, I'll let you take that one.
Ben Felix: For a later question, we actually have some data on the probability of stocks and bonds returning above zero over 10 years. I don't have those notes for this question. We do financial planning assumptions. We create expectations that our financial planners are supposed to use to build financial plans. Right now, for a market cap-weighted global equity portfolio, it's 6.86% annualized. That's notably a lot lower than 10%.
We did do an episode, episode 297, which I looked up when I wrote these notes, Mark. I didn't pull that out of my head. We did episode 297 on that topic, and then I also have a YouTube video why 10% is not a realistic expected return for stocks, explaining why 10% is not a realistic expected return for stocks.
Dan Bortolotti: It is aptly titled.
Ben Felix: Yeah, yeah, yeah.
Dan Bortolotti: That Credit Suisse data was always one of my favourite things where they compile returns over a century from every country for which they have data. It's pretty compelling that stock returns in the US have been the best and they have been in the ballpark of 10%. And so people were like, "Okay, I'm going to pick the single best country and assume that that's normal."
How about if you look at the average and assume that that's normal and the number is a lot lower? I think that the rule of thumb that they give, and I actually don't think this is a terrible place to start, is five percent above inflation. Right now, you get to not far off that seven or so percent that we're using for our expected return. Again, if you just want a rule of thumb and you want to find out whether your expectations are ridiculous or realistic, that's a pretty good place to start.
Ben Felix: It's no mistake that that number is close to the Dimson-Marsh-Staunton number from that yearbook because we use that number as the anchor of our expected returns for stocks. We give a 75% weight to that, to the 120, whatever it is, something year historical return for the global market, going back to 1900 through at this point 2024, I guess, for this most recent update, and then a 25% weight to the expected return implied by current market valuations. So we're a little bit lower than that historical number overall. Because US valuations are so high, it's pushing down the expected return number for that portion of the portfolio, which is a pretty big part of the portfolio.
I think we actually also adjust for the contribution from valuations to that historical number. If the historical number is five percent, but 30 basis points came from rising valuations, we take that out as the starting point. Anyway, a big part of the number, though, is exactly that long-term historical average.
Mark McGrath: Before we go on to the next question, Ben, can I see your shirt? Do you have like the Sharpe ratio or something on your shirt? Or is it like cap numbers? I just see like the mkt minus r or something.
Ben Felix: It's got the factor premiums.
Mark McGrath: Oh, okay. There you go. So cool.
Dan Bortolotti: I'm not wearing my market cap shirt, but I'll wear it to the next episode.
Mark McGrath: Did you wear that for the debate with Dan, a show of dominance?
Ben Felix: This was the shirt that was sitting on the banister at the top of the stairs this morning.
Mark McGrath: Not planned. Sure, man.
Dan Bortolotti: He doesn't need a t-shirt to show dominance.
Mark McGrath: There you go. Yeah. Nice. Sorry for the side chat there. It just caught my eye.
Ben Felix: The joke was that this was a premium t-shirt. I think this came from the Rational Reminder community. Someone's like, "We should make premium t-shirts," and I thought it was such a good idea.
Dan Bortolotti: Or small caps.
Mark McGrath: There's like seven people in the planet that would understand that joke.
Ben Felix: We never actually had them made. We thought about selling them through the Rational Reminder merch store. I don't even know if we still have merch in there. But anyway, we talked about it, but it never happened, so I just went and got one made because I thought it was such a good idea.
Mark McGrath: Yeah, of course. The shirt doesn't exist anywhere else. You got it made.
Dan Bortolotti: It comes in various sizes, one inch small, minus big.
Mark McGrath: Good dad joke. We need like a “ba dum tish.” We need like one of those. We need a sound effects engineer here.
Dan Bortolotti: All right.
Mark McGrath: Question eight, “Will PWL ever open a branch in the US? What would be the main challenges or obstacles do you associate with any US-based advisors or plan to open branches in the US? I have a family member to whom I'd like to recommend your services.”
Ben Felix: With the one digital transaction, we are owned by a firm that has an RIA in the US. We have connected with people over there who are very similar to PWL in terms of their approach to planning and investment philosophy. We're happy to make introductions to those folks on the one digital side. Reach out by email. How do people contact us? Contact form on the website, probably. That probably makes sense.
Mark McGrath: Yeah, mostly.
Ben Felix: All right. Shall I read the next one?
Mark McGrath: Sure.
Ben Felix: “What does the investing literature say about huge piles of cash being parked in T-Bills from multi-billion dollar companies? How does the strategy compare to the time in the market common wisdom? Is there a point where the risk-reward is just too high due to the sheer amount of money generating millions a year in country-backed interest payments anyways? Kind of an interesting question.”
I think people worry about this. People see big companies holding large amounts of cash and think that maybe they should be holding large amounts of cash, too. I think it's important to remember that companies are not like households. They don't typically invest in a diversified portfolio of stocks with their excess cash, so I don't think we can really call them out for market timing in the same way. They could be holding out for investment opportunities that haven't come around yet. That's what Warren Buffett talks about, for example. It could be precautionary savings. They're hedging against some kind of risk for the operations of the business.
One of the other things that comes up in the literature on this is agency conflicts, where management doesn't want to distribute cash to shareholders. There's a 2012 paper in the Journal of Financial Economics that finds that riskier firms have higher savings, which does imply a positive relation between expected equity of returns and cash holdings, which is kind of interesting. The paper does find that to be true empirically, that the higher cash holdings are associated with higher expected returns.
Buffett, like I mentioned, does talk about Berkshire Hathaway's cash. He was asked about it at the 2019 shareholder meeting. He says that, yeah, investing in an S&P 500 index fund could be a reasonable strategy. He hasn't done it, but whoever takes Berkshire over after him, they may want to consider it. He does note that being in index funds in 2007 or 2008 might have changed the way they were able to respond to that situation because they did make some pretty opportunistic moves. Right now, Buffett looks quite smart because they've got a ton of cash, and they sold it to Apple basically at the top. They've got a huge pile of cash right now when the market's crashing, so we'll see what Buffett's next move is. I'm quite interested.
After COVID, a lot of companies did start hoarding a lot more cash. There was a post from the Federal Reserve Bank of Kansas City that looked at this, why are companies holding cash? They found that investment opportunities, which they measured by the ratio of a firm's market value to its book value, explains the largest portion of the cash ratio, both before and after the pandemic. That kind of suggests that investment opportunities are a big one. There are lots of interesting reasons why companies might hold a lot of cash. I don't think any of it matters to a retail investor making decisions for their household.
Dan Bortolotti: Agree. They're really not parallel, are they? Their risks are very different, and I wouldn't read too much into it.
Ben Felix: I agree.
Dan Bortolotti: We'll read the next one here. “What is the probability that over a period of 10-plus years, an addition of bonds to a portfolio will enhance the returns? To rephrase the question, other than serving as a behavioural anchor, do bonds add any actual real value to a portfolio nowadays? If you choose to elaborate even more, VGRO, for example, also includes international bonds to the mix. Does that change your answer in any meaningful way?” We obviously covered the big part of this already, but you've got some additional information here to add, Ben.
Ben Felix: You said it earlier, Dan. Bonds are not really there to enhance returns. That's just not why you invest in bonds. Scott Cederburg does have another paper looking specifically at long-horizon asset returns for stocks, bonds, and bills. They have data in the paper for the 10-year horizon specifically. I looked at that to answer this question. They find that 30% of their simulated outcomes have negative real returns for bonds at a 10-year horizon. Well, it's only 18% for international stocks and 22% for domestic stocks, so they're all pretty risky at a 10-year horizon. But in real terms, as with their longer-term data, bonds are a little at riskier.
An interesting thing is that even in the tails, so if you look at the first percentile outcomes, the worst outcomes of the 10-year horizon, bonds, again, look worse than stocks. Now, it is possible that bonds zig, well, stock, a zag, which gives you a diversification benefit. But the interesting thing, and I think one of the big things they find in their research, is that that largely goes away or at least is diminished at longer horizons. At a monthly horizon, the correlation between stocks and bonds has a correlation coefficient of 0.18. But if you look at the 30-year horizon, that goes up to 0.46. That's that, I guess.
I do think it's important that in nominal terms, so not accounting for inflation, bonds offer stability, which matters for behaviour, as we've been talking about. Longer maturity, real return bonds can offer a perfect inflation hedge, but can also be very volatile in the short term.
Mark McGrath: The other component being the question about international bonds is interesting. On the one hand, the fixed income component of your portfolio is intended to be there for safety of capital, right? It’s there to reduce volatility. If you have international bonds, you have either one of two things. You have an additional currency risk usually, or you've hedged that risk, which usually comes with an additional cost. I expect. I don't know the answer to this. Maybe you know. But the cost to hedge back to your home currency, that cost likely eats up a good chunk if not all of the delta between interest rates and that foreign currency and interest rates at home. You probably end up somewhere in the same place. I'm not sure that you would add any meaningful source of diversification if you add international hedged bonds to a portfolio. I don't know if either of you have thought further about this, but I'd be curious to see what you have to say.
Dan Bortolotti: I agree with you that if you introduce currency risk, then you've kind of defeated the purpose. Because if the goal of bonds in your portfolio is to reduce volatility, once you increase or once you add currency exposure, you lose that. The portfolio is probably more volatile now. Then the second part is, like you said, well, you can hedge the currency. But if you hedge the currency, the additional diversification benefit is really minimal. The only thing I would say would be if you were investing in bonds that had any meaningful risk of default. Then if I lived in a country where I was genuinely concerned that the federal bonds were default, then I would want some international fixed income with currency hedging.
In a country like Canada or the US where that's a remote possibility, I think you can just safely invest in domestic bonds only, and then you don't have to add the currency hedging. That's what we do. We don't use any kind of international bonds, except if you're holding a fund like VGRO or VBAL. It's built-in. The iShares versions, interestingly, of those asset allocation ETFs include only US bonds and no international bonds. Personally, I don't think you need either one.
Ben Felix: In the case of Vanguard, they actually have a bit of a form withholding tax cost on their international bonds as well, which makes it a little bit tougher even to justify. Dimensional does use international bonds, but it's for a different reason. They're doing a variable maturity and a variable credit strategy, and being global gives them more opportunities to look for places where those things may exist, where there's a wider credit spread or where there's a steeper yield curve. It's a little bit different. It expands the opportunity set, but they're not targeting any benefit from currency exposure and like that because it's all hedged back. This is a very different situation because it's more of an active strategy, and expanding the opportunity set can improve the expected outcome.
Last one. This is a question from a listener who – there's a long preamble asking whether we pick stocks or use ETFs. I kind of cut that out while I just paraphrased it. Question, “If you manage portfolios using ETFs, how would you justify that choice to other advisors in your group/firm and to clients who are used to having individual stocks? The understanding that it is almost impossible to beat the market takes a lot of time to develop, and it seems hard to do within a few client meetings. I'm getting a lot of mixed opinions with all the information I'm taking in from the financial services industry, my studies, and the podcast, so your input would be very interesting to hear.”
PWL, there's no need to justify things to each other. We talked about this beginning at the beginning of the podcast. Everybody at our firm is either using market cap-weighted ETFs or dimensional funds. That's the biggest difference between any two client portfolios is they might hold DFA, or they might hold market cap weighted ETFs. Many client accounts hold a mix of the two, so it's not something we spend a whole lot of time justifying to each other. We are all at this firm because we agree on the basic premise that we can't beat the market. We should keep fees and costs low and focus on things that we can control. We're all on the same page on that.
I think it would be hard to be an advisor that thinks like we do and be at a firm where the guy in the office next to you is making fun of you for not picking stocks. I've heard from people where that's the actual situation. You're the butt of the joke, being the guy using index funds while everyone else is trying to beat the market. I think that'd be tough. On the client aspect, Cameron and I learned pretty early on in my time at PWL that we're not going to change people's minds in a meeting. We used to do some traditional advertising.
Cameron and I used to do a radio show in Ottawa a long time ago. We'd go on there on the weekend to do this talk show thing where we'd get asked questions about investing, and people would call in, and it was kind of fun. But we got people coming to talk to us through that, and we would never talk too much about indexing and things like that. It was nothing like this podcast. People would come in for meetings, and they would expect us to be picking stocks or picking actively managed funds or whatever. Those meetings never went well. We were just like, "Oh, no. Yeah, we don't do that. We use index funds." People would look at us like we were crazy.
You mentioned this earlier, Dan. We started sharing information through content, and people saw exactly what we do and heard us explain exactly why we do it and came to meet with us. Because of that, it just made everything so much easier. There was no justifying. There was no explaining. There was no selling. I know exactly what you do, and that's what I want. That's why I'm here. That was a big shift for us. But trying to change someone's mind, if someone comes to PWL, we talked about this earlier, too, with index funds and dimensional. If someone shows up expecting one thing and you're like, "No, I actually do this," it's going to be really hard to change their mind, no matter how well you can justify it.
Dan Bortolotti: I think that's exactly why we have never gone that sort of route of traditional advertising after those sort of initial experiments. We were chatting a bit about it earlier. I would say that the same is true for referrals. So very often, I'll be working with a client for a number of years. They're very happy with the service, and so they'll recommend us to a friend or a family member. Then that person will call and just say, "Hey, I work with my friend or my family members," so and so. “They're one of your clients. They're really happy. I'm interested in coming on board, too.” Well, the reason that they got referred isn't because they're particularly attracted to passive investing, whether it's factor market cap. They don't know what the difference is. They just heard that you provide good service. You start to have the meeting, and then they'll say things like, "What stocks are you buying these days?" We're like, "Whoa, we have to take a huge step back here and make sure that you know what we do."
I will say that occasional success because some people just aren't really ideological, are willing to listen to you. If they trust you, they will believe what you're saying, and then maybe they'll even read up on it. But, yeah, if you have to try to convert someone who feels strong, it’s just dead in the water. It's never going to happen. We'll just move on, just sort of say, "I don't think we're a good fit for you."
Mark McGrath: I don't know if I've ever come across anybody that's not an advisor that has that strongly held of an opinion. We must have individual stocks to try to beat the market and here's why. Unless they're like a very highly educated person or an advisor, I can explain to people in 10 minutes why that doesn't make a lot of sense. This person's comment that it takes a few client meetings, I think this individual, maybe they work for a firm, and they're having conversations with fellow advisors, and there's some cognitive dissonance there saying, “I was trained a certain way, and it all made sense. And now I'm here, and you guys talk about this other thing, and I'm taking that information back to my colleagues or my boss, and they're hand-waving it away.” So they might be caught in the middle.
I've been in that exact situation before, and I'm sure many advisors listening to this podcast have. Ben, I think you have as well. Dan, I think you came about it another way because you were writing about index funds before you became an advisor. But it's a really difficult spot to be in, and I'll give you my opinion. This entire industry was built on product sales. We come from an industry where traditionally it's based on commission, it's based on product sales, and there's fees baked into a lot of funds, and most of these funds were actively managed mutual funds.
If you've grown up in a shop that traditionally operated that way, and you trained that way, and you were there in the earlier years, and you're kind of older, and you maybe got 5 or 10 years left to retirement, you're not going to upset the apple cart. You're also going to have a very difficult time just personally admitting to yourself that what you've been doing for 20 or 25 years might have been, I don't want to say, wrong. But there might have been a different way, and it's much easier to just hand wave that away.
The other thing is if that turns out to be true and you've spent all of your time with clients and they believe and you've convinced them that the value that you bring to those clients is simply picking stocks, it's going to be a really empty void to admit to yourself that that whole thing isn't true. But it's going to be just as hard to admit to clients that I don't bring you any actual value through my stock picking. I haven't been doing things like retirement planning and tax planning and estate planning. I think there's a lot of advisors out there that keep themselves busy by talking about the portfolio all the time, doing things in the portfolio, and tinkering under the guise of, look, I'm doing something for you that you couldn't do on your own and also would just really have a tough time admitting that if I'm not doing this, I really don't know what I'm charging my clients one percent for.
I don't mean to paint a bunch of people with a brush, but I've been in that exact situation where I said, "I'm flipping the index funds." I've had advisors at that firm I worked for go, "There's no way you can show a client a statement with one thing on it. You just can't do that. They're going to fire you." I said, "No, I don't think they are." And they didn't. A bit of a rant, but that's my strongly held opinion on the topic.
Dan Bortolotti: I have heard a little bit of it. I don't want to say from genuine prospective clients but just in conversation. People would say things like, "So if you don't pick stocks and you don't tell people when to get in and out of the market, what the hell are they paying you for?" Because that's what they've grown up believing, too. It's not just the advisor community. It's investors themselves who've worked with advisors who think, "Isn't that what your job is?” When you say to them, “No, we just try to capture market returns, and we add value in other ways,” they don't get that until they've seen it.
We used to joke about this all the time is that people used to come to us for the investments, but they'd stay for the planning because they would come in thinking what you're going to do is you're going to enhance my returns, and you're going to build this amazing portfolio for me. It's like, “Yeah, we are, I guess.” But that is in the first six months, we basically set that up for you. Going forward, you're not going to stay with us just because we told you what ETFs to buy. We publish our model portfolios online. If that's all you want to know, it's not a secret. If they're going to stay, we're going to have to demonstrate values in other ways, but it's very easy to do that when you're working with a person. It's harder just in a casual conversation or when you're sitting across a table because people don't usually appreciate the value of planning until they've actually had it.
This whole thing about you don't know what you don't know, I think it's only after people have had a very good plan done for the first time that they go, "Wow, that is not something I ever got from my previous advisor." It takes a bit of time. But, again, that also presumes that you were already working with the person that's the client. It doesn't work so well in talking to a prospective client.
Ben Felix: I did a video on that a few years ago because I got the same question.
Dan Bortolotti: Episode 247.3.
Ben Felix: I don’t know. I don’t know. I don't even remember the title of this one. I didn't look it up beforehand. People say that to me sometimes in real life. I'll meet someone like, "How do you remember all the stuff you talk about in the podcast?" I couldn't. I’m like, "Man, I wrote it down on a page and read it."
Dan Bortolotti: I have notes. Yes.
Mark McGrath: Awesome.
Ben Felix: All right. I think that's good. Aftershow?
Mark McGrath: Aftershow indeed. The SPIVA Year-End 2024 for Canada report came out today. The US one always comes out before the Canada one, so the US one's been out for a while. The SPIVA report is the S&P indexing versus active. Basically, what they do is they track a number of funds in the universe against a benchmark. There's a ton of data in the paper. There's one chart I always like to look at because it summarizes it very, very well. It just shows 1, 3, 5, 10-year returns, and it shows the number of funds that failed to beat their benchmark in a particular category over those time frames. The results are never surprising. It's always the same thing every single year. There's some criticism, I think, that's maybe valid against the construction of the report in terms of how they include certain types of funds in that universe. But I also think it's very, very telling.
Just quickly, I was looking at the year-end report. For the 10-year period ending at the end of 2024, the Canadian equity category, which is benchmarked against the S&P/TSX Composite Index, 95.5 % of funds in that category failed to beat the TSX over the 10-year time frame, the vast, vast, vast majority. The Canadian-focused equity, which I actually don't know the difference off the top of my head, but the Canadian-focused equity, I think, is kind of like a balanced fund that uses Canadian and US. It’s North American but with a heavy tilt towards Canada, like half of Canada. Literally 100% of the funds in that category failed to beat their benchmark over 10 years. The rest of the different categories of US equity, global equity, international equity, the numbers vary. But they're all very, very similar and paint a very similar story.
I always get excited when this report comes out, and it just kind of further reinforces a lot of the stuff we talk about here on the podcast. By the time this episode comes out, it's probably old news, but I just thought it was great that it came out today, and I got a chance to go through it and paint the same story.
Dan Bortolotti: Those 10-year time horizons are really telling. That number is always in at least the high 80s, if not higher. Once in a while, as you said, you see it 100% or close to it. The obstacles are pretty tough to climb over. That's for sure. I think this is what people don't get about managing a portfolio. You see these people on Twitter all the time like, “Bro, I got 336% last year.” What are you talking about? Like, “Okay. You've solved it, man. Good job.” Your time horizon is 60 years. The longer your time horizon, the lower the probability that you're going to get market being returns over that total time horizon. It's just borne out in these reports for the longer the time.
The US ones, I think over 20 years, I want to say, so they had even longer data. But it shows the same thing. The longer the measuring period, the fewer funds outperform their benchmarks. That's logical if you follow the podcast and how we think about markets. But it's just really interesting to just watch it happen every six months. The report comes out and you're like, “Exactly what I thought.”
Dan Bortolotti: It would be interesting to check something like the Vanguard 500, which is like the first index fund that was available from Vanguard, which dates back to like the mid-70s. First of all, how many funds that were around in the seventies are still around? It’s probably a tiny number. How many of those beat that benchmark? Now, granted its benchmark is large-cap US stocks, a lot of funds would have other things in there. It's an almost insurmountable barrier over a 40, 50-year time horizon.
Mark McGrath: Totally. People don't get it. We've talked about this, I think, maybe in a recent episode, where people don't want to settle for average returns. What are you talking about average? Literally, you are at the top of your game. If 100% of publicly managed funds are unable to beat you, you are incredibly, incredibly talented if you've managed to sit in an index fund and outperform all of these experts with their deep resources and everything else. Not average at all.
Ben Felix: I think the Canadian Speedway does overstate it a little bit because they have a lot of A-class funds in there, so there's an additional one percent fee that's coming out of the returns. I think Bessembinder also talked to us about some of their methodology, in his opinion, could be changed a little bit. When he did it for US funds, I think he found that 70% underperformed over the long term, 30% outperformed in the speedway in the US.
Dan Bortolotti: I was damning with faint praise. It's actually not that bad. It's only a 70% failure rate. He's correct. I've heard people say, too, ETFs are almost always going to be in the category of ones that like their benchmark because you charge five basis points. You're going to light the benchmark usually by five basis points. It's a matter of degree, which is not captured in that research. Are you underperforming by 5 basis points or 200? But, again, it's not meant to be the be-all and end-all of the argument. But it is a big dataset with a pretty long history of tracking this, and the news is not good.
Ben Felix: Yeah. No, it's not good.
Mark McGrath: I don't know if it was Cliff Asness and AQR or if it was Alpha Architect that did a paper that tried to measure the degree of underperformance. They came around one percent, which was not shocking. You make a great point. Index funds are guaranteed to underperform their benchmark by a really, really, really tiny amount, and that's acceptable. When you deviate from that, the degree to which you underperform can be devastating. Some of these funds probably just barely, barely underperformed, but some of them might have underperformed by five percent annualized over the measurement period. In which case, that's a big, big risk that you're taking to try to get performance that could also only be marginally better than the benchmark for the ones that actually beat it. I just don't understand why people would take that trade-off.
Ben Felix: They do have the degree in there. They have the 10-year performance for the fund in the index.
Mark McGrath: In this report?
Ben Felix: Yeah, page 12.
Mark McGrath: Nice.
Ben Felix: They have it by asset-weighted and equal-weighted. But if you look at it, that's report four on page 12; S&P/TSX Composite, 10-year return, 8.65%; Canadian Equity Funds, asset-weighted, 6.91%. The S&P 500 one's nuts; S&P 500, 10-year return, 15.58%; US equity asset-weighted, 11.38%.
Mark McGrath: Oh, yeah, massive.
Ben Felix: Ouch.
Mark McGrath: Net of fee, right?
Ben Felix: Yeah. If you look at the US data, the gaps will be smaller because their fees are generally lower, and I don't think they have as many commission-based funds in their sample.
Mark McGrath: One of the arguments I always hear is, well, yeah, no, the US is super-efficient. Nobody's beating the US market, but other markets are where the opportunities are. If you just look at the Canadian equity, what did we say, 95% underperformed over 10 years? What was the gap here? The S&P/TSX Composite over 10 years, average performance was what, 8.65 versus 6.54 for the fund. You're talking a 2.1 % annualized difference over 10 years, massive.
Ben Felix: It’s no joke. A lot of that could be fees.
Mark McGrath: Savage, though.
Ben Felix: Because fees in Canada are still pretty darn high. Speed is always fun to talk about.
Mark McGrath: Another thing that I want to talk about is the tooth fairy and inflation. I want to ask you guys. I don't even know if you remember this. But when you guys were kids and your baby teeth were falling out, how much did the tooth fairy bring you per tooth?
Dan Bortolotti: 50 bucks.
Mark McGrath: Yeah, sure. Per tooth?
Dan Bortolotti: A nickel? Yeah.
Ben Felix: I have no idea.
Mark McGrath: You don't remember? You probably still have your baby teeth then. That's why.
Ben Felix: What?
Dan Bortolotti: What's the cost now, Mark?
Mark McGrath: This is what I was trying to figure out. My son lost his first tooth last night. He’s seven. He lost a bit late, but I seem to remember it was like a dollar when I was a kid. This was 35 years ago. I was asking around, and it's 10 bucks now. It's 10 bucks a tooth. That's a respectable answer that I got from a couple of my friends who was like, “Yeah. No, 10 is about right.” I asked Kelly, a friend of mine who works at PWL, and she was saying a friend of hers gives 20 for the first tooth and then 5 for each additional tooth. I didn't actually work this out. I just thought about this right before we started recording, but I'm curious what the inflation rate on the tooth fairy is over the past 35 years. Starting a dollar up to 10 bucks, it’s pretty meaningful.
Dan Bortolotti: I think it outpaces inflation.
Mark McGrath: CPI, yeah.
Dan Bortolotti: I think you're creating an incentive for your kids to go to school and beat somebody up and knock out a few teeth and put it under their pillow.
Mark McGrath: I actually have the tooth in my pocket still, I think, which is super weird, but I just remember that.
Ben Felix: It is pretty weird.
Mark McGrath: I don't know what to do with it. Do you throw it in the garbage? Do you keep it? It's a tooth.
Ben Felix: We have not given our kids money for any of their teeth pulling out.
Mark McGrath: Interesting.
Ben Felix: I just told them the tooth fairy is not real.
Mark McGrath: Are you serious?
Ben Felix: Yeah.
Mark McGrath: It's on brand. I'll give you that.
Ben Felix: Same as Santa Claus.
Mark McGrath: Really?
Ben Felix: Okay. Santa Claus is not real. That's dumb.
Mark McGrath: What age did you tell them that Santa is not real?
Ben Felix: As soon as they could understand what I was saying.
Mark McGrath: Savage. Wow.
Ben Felix: They all love it.
Mark McGrath: They love what?
Ben Felix: Knowing that Santa Claus isn't real and how ridiculous it is.
Mark McGrath: They actively love that Santa is not real. Do you know how many other kids they're going to tell that Santa is not real and that their dad who's a famous podcaster told them so? You've ruined the imaginations of thousands of children across the world, Ben.
Ben Felix: I told them not to tell other kids because they don't want to upset them. They get it. They respect the other kid's desire to want to believe Santa’s real.
Mark McGrath: All right. No judgment then. Makes sense. Okay, one last thing. I recorded The Wealthy Barber Podcast with David Chilton, the OG, and I called him the OG on the podcast. He's like the old guy. I was like, "Oh, yeah. That's not what I meant. You're like the original gangster.” That was really, really cool. He actually wrote us a short testimonial for Wealthier, for the book that Dan Solin and I just wrote, which was like an incredible experience. I'm chatting with Dave Chilton on the phone, walking through the grocery store and squeamish about my book like, "What world do I live in?"
Now, I'm talking on the Rational Reminder about it. It’s nuts. He invited me to talk about TFSAs versus RSPs because we recorded an episode, and he listened to the podcast and really liked it. It was kind of a shorter episode. He's doing shorter punchier episodes, interspersed with the longer episodes. But that's going to air on March 25th. I think this episode that we're recording today will be out before then. So if you're listening, then it'll be a short Wealthy Barber Podcast with me talking about TFSAs and RSPs coming up.
Ben Felix: Yep. March 20th. This one will be out.
Mark McGrath: Nice.
Ben Felix: No new reviews for a while on Apple podcasts, which is where we usually pull reviews from, and it’s still where most of the downloads come from. If you're listening on Apple podcasts and have not left us a review, we would love to hear from you as always, and we'll read it out on a future show. However, someone sent us an email a while ago saying that Podcast Addict, which is another podcast platform, they also have a reviews engine that I didn't realize. There may be other podcast platforms that have review engines that I haven't seen before, but I thought we'd read some of these out because they've never been read before. This is from December 2024. Some of these are a bit of a time capsule because they go back years.
This is from taylordnd. “If you asked me in 2019 how I felt about investing, I would say overwhelmed and uninformed. I can't say that my turnaround has been entirely because of Rational Reminder. But their work, along with Ben Felix's YouTube channel, have played an outsized role. From August through December 2024, I listened to all 358 episodes.” That is wild. August to December, that's — jeez. That's a lot of podcasts listening. “Including their unfinished miniseries on cryptocurrencies. Thank you for the reminder.” That is, in fact, an unfinished project. We'll get to it one day. “The PWL crew has a wealth of information on personal finance investing and the pursuit of the good life. Outstanding.”
Dan Bortolotti: I want to read this one from CanadianCat. It says, "Great podcast, two very insightful and grounded hosts.” I immediately thought it's got to be talking about me and Mark. But then I looked at the date, and it's 2022, so it's two other guys. But anyway, “Who work hard to explain the more complicated areas of finance and technical analysis of financial models, worth the listen indeed.”
Mark McGrath: I'm sure they're not talking about technical analysis and the fundamental sense of reading charts and using oscillators and Ichimoku Clouds and stuff.
Dan Bortolotti: It's analysis that is technical.
Ben Felix: The podcast used to be a lot different back then.
Mark McGrath: Yeah, exactly. Okay. The next one's from Mariana Enrique. “Your end-of-year episode was the perfect way to say goodbye to 2021.” This review is written on January of 2022. “I have listened to it twice and liked how you captured key takeaways of multiple interviews in one show. Looking forward to more episodes like this in 2022.”
Ben Felix: We kind of killed those year-end episodes.
Dan Bortolotti: If only we knew what the market was going to be like in 2022, we would have shared that at the time, but alas.
Ben Felix: That one makes me feel bad about killing the year-end format of the clip episodes that we used to do.
Mark McGrath: Last year was the first time you didn't do that, right? 2024?
Ben Felix: There's just a lot of work, and Cameron did most of it, and he's busier with other stuff, so I wasn't going to do it. Cameron took like two days to collect all the clips and go through every episode. Man, you're impressive for doing this.
Mark McGrath: Yeah, no kidding.
Ben Felix: All right, last one from Goodyear. This is from June 2021. “My absolute number one financial podcast. They cover specialized topics in a precise and educated manner, while still spending time on how money and financial planning should serve a happy, meaningful life. Only a small percentage is Canada-specific. As a USA resident, I find almost all of it applicable to me.” Cool. That's a topic we haven't covered as much recently, the good life stuff. I do want to write an episode on investing in your health. Probably try and do that sometime this year.
Mark McGrath: That's a good one.
Ben Felix: All right, anything else?
Mark McGrath: Don't think so.
Ben Felix: Cool. Thanks everyone for listening, and we'll see you next time.
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Books From Today’s Episode:
Wealthier — https://www.amazon.com/Wealthier-Investing-Field-Guide-Millennials-ebook/dp/B0CX2VD1CW
Links From Today’s Episode:
Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder
Rational Reminder on YouTube — https://www.youtube.com/channel/
Benjamin Felix — https://pwlcapital.com/our-team/
Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/
Mark McGrath on X — https://x.com/MarkMcGrathCFP
Dan Bortolotti — https://pwlcapital.com/our-team/
Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/
Canadian Couch Potato Blog — https://canadiancouchpotato.com/
Canadian Couch Potato Podcast — https://canadiancouchpotato.com/podcast/
Dimensional (DFA) vs. Vanguard — https://www.youtube.com/watch?v=JfknibBat2A
Episode 93: Cliff Asness from AQR — https://rationalreminder.ca/podcast/93
Episode 135: William Bengen — https://rationalreminder.ca/podcast/135
Episode 297: Do Stocks Return 10-12% On Average? — https://rationalreminder.ca/podcast/297
Episode 340: Ben Mathew — https://rationalreminder.ca/podcast/340
Episode 343: How to Choose an Asset Allocation — https://rationalreminder.ca/podcast/343
Credit Suisse Data — https://marketdata.credit-suisse.com/pmdr/en/index.html#/
SPIVA® Canada Year-End 2024 — https://www.spglobal.com/spdji/en/spiva/article/spiva-canada/