Are You Different From the Market?

The holy grail of investing known as alpha, excess risk adjusted returns. Most actively managed funds charge high fees and lack diversification. If all they're delivering is tax inefficient exposure to systematic risk with added noise due to a lack of diversification, investors can instead get their systematic risk exposure using low cost, tax efficient index funds.

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Today is our final episode featuring just the two of us before our annual wrap-up show, and we thought we would use this opportunity to cover some important foundational aspects of rational investing. Ben goes over some of the most fundamental concepts about market prices, risk, and actual returns before answering five common questions that relate to this level of information. From investing in an employer's stock to predicting the future and real estate comparisons, these five touch-points are always worth returning to, and should even interest the more experienced of our listeners. For the second half of the show, we offer a quick book review of The Culture Playbook by Daniel Coyle, and have a brief and illuminating conversation with Professor Amer Kaissi about his book, Humbitious, and some of his thoughts on the part that reading plays in rich and progressive life. Press play to catch all this and more on the Rational Reminder Podcast.

Key Points From This Episode:

Picking up a thread from our discussion on the 2% Rule. (0:06:05)
Getting to grips with investing basics. (0:10:45)
How market prices work in response to traders' actions and risk. (0:17:59)
The main determinants of actual returns and starting points for your portfolio. (0:23:15)
Unknowable futures and the eternal doom and gloom predictions. (0:35:43)
Assessing the value of owning an employer's stock. (0:38:21)
Holding stock picks in Tax-Free Savings Accounts. (0:42:07)
How to prepare a portfolio when a recession is predicted. (0:43:49)
Comparing investments in real estate with the stock market. (0:45:14)
Weighing the value of building and emergency fund. (0:47:11)
A thirty-second recap of our episode with Cliff Asness. (0:50:06)
Today's book review focussing on the lesson from The Culture Playbook by Daniel Coyle. (0:51:48)
Professor Kaissi shares a quick summary of his book, Humbitious. (0:58:40)
The potential to develop characteristics and the role that reading plays. (0:59:38)
Professor Kaissi talks about his reading habits. (1:02:12)
Application of ideas from books and how Professor Kaissi captures and organizes information in his own reading. (1:05:15)
A few of Professor Kaissi's favourite book recommendations and how to increase your reading habit. (1:08:52)