The Rational Reminder Podcast

Listener Questions and Re-Framing Risk (EP.68)

Oct 17, 2019

47:46

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In this podcast, the hosts discuss topics such as adjusting the stock and bond ratio, index investing, different types of risk, planning for longevity in retirement, and questionable actions from TD Ameritrade.

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Quick takeaways

Annuities can provide longevity insurance and address the risk of sequence of returns for retirees.

The shift to free trading by online brokers may lead to excessive trading and irrational decision-making.

Understanding different types of risk and aligning risk allocation with individual goals and preferences are crucial for optimal investment outcomes.

Deep dives

Annuities for Longevity and Sequence of Returns

Annuities provide longevity insurance, protecting retirees against the risk of living a long time. They also address the risk of sequence of returns, offering a guaranteed income as long as the insurance company remains solvent. The Prairie tool, developed by Professor Moja Malefsky, helps optimize product allocation and recommends a mix of annuities and financial market investments to maximize sustainability and expected legacies. An example showed that allocating 15% to an annuity and increasing the portfolio equity allocation to 80% resulted in a higher sustainability quotient and expected legacy.

Introduction

2min

Utility and Factors in Portfolio Construction

7min

Challenges of Active Management and the Importance of Reliability

2min

Transitioning to Index Funds and the Role of Machine Learning in Investing

7min

Understanding and Mitigating Investment Risks

15min

Understanding Annuities and Their Benefits in Retirement

10min

The Impact of Dropping Trade Fees

5min

Welcome back to the podcast everybody, we have another great round-up episode for you where we field questions that you sent in and cover a bunch of things we think you need to hear! We discuss how you should weight your stocks and bonds ratio and times that you could think about changing it, we also talk about index funds, Michael Burry and why his reputation is a bit overstated. Then we get into the different types of risk! We cover volatility, uncompensated risk, skewness, and inflation and help you think about each and the impact that they may have on your portfolio. The conversation then turns to planning, longevity, and sustainability and we talk about how to prepare for your last years cleverly and realistically. Goals are so important when laying out a sustainable strategy and we give you a bunch of questions to ask yourself to make the task a bit easier. We finish off with another edition of last wee's worst advice and this time around we are talking about some questionable actions and remarks from TD Ameritrade. For all this and more, join us on the Rational Reminder, today!

Key Points From This Episode:

Considering a bond to stock ratio and when you might adjust it. [0:01:22.7]
Questions when switching to index investing and what to hold on to. [0:06:04.3]
The Michael Burry question and how much index funds affect prices. [0:11:46.0]
Risk 101; going through all the different types of risk. [0:18:07.6]
Identifying which risk you are actually averse to and the results of this. [0:31:04.2]
Planning and annuities; longevity risks and age-related questions to ask yourself. [0:32:48.1]
Increasing the sustainability of your investments and the importance of goals. [0:36:46.9]
Last week's worst advice! TD Ameritrade's confusing decisions around fees. [0:42:01.8]

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/ Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on Twitter — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Larry Swedroe — https://www.etf.com/contributors/larry-swedroe

Vanguard — https://investor.vanguard.com/corporate-portal/

Michael Burry — https://www.cnbc.com/2019/09/04/the-big-shorts-michael-burry-says-he-has-found-the-next-market-bubble.html

Barry Ritholtz — https://ritholtz.com

The Economist — https://www.economist.com