The Rational Reminder Podcast

Episode 297 - Do Stocks Return 10-12% On Average? & Zero to Millionaire with Nicolas Bérubé

Mar 21, 2024

01:11:44

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Diving into the flaws of the 10% stock return myth, survivorship bias in U.S. equity premiums, and historical asset pricing behaviors. Contrasting U.S. and global stock returns, emphasizing long-term vision in investing, and navigating investment options. Also, discussing entertainment, dining experiences, basketball triumphs, Patagonia vests, and AI advancements.

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Quick takeaways

Investing in stocks doesn't guarantee consistent 10% returns, emphasizing the need for realistic long-term expectations.

Learning from experienced investors like Monish Pabrai can instill discipline and a long-term perspective in investing behaviors.

Index investing simplifies the process by focusing on long-term compounding and embracing a gradual progress mindset.

Deep dives

Realistic Expectations in Stock Market Returns

Understanding the historical data on stock market returns and the fallacy of assuming consistent 10% returns. Research emphasizes the need for realistic long-term expected returns and the impact of valuation changes.

Becoming an Optimist Through Market Realities

00:54

Capturing Market Returns

01:00

Introduction

2min

Challenging the 10% Stock Return Myth

16min

Survivorship Bias and Historical U.S. Equity Premiums

11min

Analysis of Data Quality and Historical Asset Pricing Behavior

2min

Comparing US and Global Stock Returns in Developed Countries

2min

From Losses to Optimism: A Journey in Investing

7min

Long-Term Vision in Investing

11min

Navigating Investment Options

12min

Entertainment, Dining Experiences, and Basketball Triumphs

5min

10.

Challenges with Patagonia Vests and Impressive AI Robot Discussion

3min

As human beings, our brains are wired to solve problems. This can make long-term investment strategies, like passive investing, surprisingly challenging, especially if you’re not accustomed to the ups and downs of the market – it can feel pretty unintuitive to stay the course when your instinct is to take more active steps to solve the problem! So, how can investors remain firm in their strategy and not get spooked by market changes? Joining us today to unpack this question is financial journalist, Nicolas Bérubé, whose new book From Zero to Millionaire: A Simple and Stress-Free Way to Invest in the Stock Market serves as a guide to investors on how to grow their wealth and achieve good portfolio diversification at a low cost. We talk with him about the contents of his book, his observations on financial media and its effect on investors, how to stay committed when making long-term investments, and more. We also spend the top half of the show discussing a popular idea we’ve seen posted by influencers online, namely that investing in stocks will give you a return of 10% or more per year on average, and the flaws in their arguments. Tune in for a deep dive into investor psychology, financial media, and much more!

Key Points From This Episode:

(0:01:42) A breakdown of the flaws in the trending online theory being posted by influencers claiming that investing in stocks will give you a return of 10% or more per year on average.

(0:09:17) Taking a longer-term view of the US stock market (and other global markets), how it’s changed in the past 100 years, and what this means for investors today.

(0:16:12) Relevant findings from various papers on US and global stock market returns, US stock market valuations, performance, the impact of survivorship bias, and more.

(0:27:01) Why it can be so difficult to capture market return as an investor, and a breakdown of how best to approach historical data.

(0:33:33) Talking with Nicolas Bérubé about what he learned from his failed options trade before he started studying markets and the research that helped him become a market optimist.

(0:38:24) An overview of Indo-American investor, Mohnish Pabrai, and what Nicolas learned from meeting him.

(0:41:05) Unpacking the difference between investing in the stock market and playing in the stock market and the importance of having an infinite vision when investing.

(0:44:52) How Nicolas would explain the benefits of index funds and index investing to a novice and why behaviour is the number one obstacle to investor outcomes.

(0:48:29) The effect of financial media on investors from Nicolas’s perspective as a journalist.

(0:51:52) Advice on whether to delegate your investment actions to a financial professional or do it yourself ie. automatic transfers using a robo advisor.

(0:56:14) What people should be looking for if they do seek out financial advice and Nicolas’s opinion on what investors struggle with most.

(0:59:58) Aftershow section: future topics for the show, why we’re excited to see more of Mark McGrath, updates on our 24 in 24 reading challenge, upcoming meetups, and more.

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/

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://twitter.com/RationalRemind

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/

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

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

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

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

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

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/ Mark McGrath on X — https://twitter.com/MarkMcGrathCFP