The Rational Reminder Podcast

Join Abby Davisson, co-author of Money and Love and founder of the Money and Love Institute, as she shares her insights on intentional decision-making in relationships. Discover her unique "5Cs Framework" for making wise choices about finances, household responsibilities, and life transitions. Abby emphasizes open communication between partners and explores crucial topics like equitable division of labor and proactive financial planning. Her practical tips and personal experiences offer a refreshing perspective on navigating life's important decisions.

Marco Sammon joins Ben and Dan to unpack his latest paper, ‘Index Rebalancing and Stock Market Composition’, beginning with how Marco’s work (co-written by John Shim) compares to the Nobel Prize-winner Bill Sharpe’s paper, ‘Arithmetic of Active Management.’ We investigate the missing links in Sharpe’s logic before defining “the market” and ascertaining the main objectives of index funds. Then, we dive deeper into the mechanics of Marco’s paper, index and market tracking errors, why delayed rebalancing is more beneficial than instant rebalancing, and the role of technology in the modern tracking error obsession. We also assess the passive-active spectrum of index funds in portfolio management and learn how investors should choose their optimal excess return. To end, Marco shares practical applications for improving performance benchmarked against traditional indexes, and The Aftershow is all about bridging the gap between PWL Capital and you, our listeners. Key Points From This Episode:   (0:00:00) Key takeaways from Marco Sammon’s latest paper and how it compares to Bill Sharpe’s ‘Arithmetic of Active Management.’ (0:08:10) Marco describes what’s missing from the ‘Arithmetic of Active Management’ logic. (0:09:11) Defining ‘the market’, the main objective of an index fund, and how index funds track the market. (0:15:57) The mechanics of Marco’s paper, ‘Index Rebalancing and Stock Market Composition.’ (0:18:38) Factor exposure, index and market tracking errors, and how often index funds trade. (0:26:28) Rebalancing less frequently; why delayed does better than instant rebalancing. (0:31:59) The tech run-up and lazy rebalancing, and the modern tracking error obsession.  (0:36:51) Assessing the passive-active spectrum of index funds in portfolio management. (0:41:02) Exploring how investors should decide on their optimal excess return.  (0:45:14) How the rising index fund ownership of stocks impacts the implicit cost of indexing (0:46:58) Practical ways to improve performance benchmarked against traditional indexes. (0:52:30) The Aftershow: Canadian finances, more airtime for Cameron, and PWL – OneDigital.    Links From Today’s Episode: Meet with PWL Capital — https://calendly.com/d/3vm-t2j-h3p 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://x.com/RationalRemindRational Reminder on TikTok — www.tiktok.com/@rationalreminder Rational Reminder on YouTube — https://www.youtube.com/channel/ Rational Reminder Email — info@rationalreminder.caBenjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/ Episode 322: Prof. Marco Sammon: How are Passive Investors Affecting the Stock Market? — https://rationalreminder.ca/podcast/322 Episode 200: Prof. Eugene Fama — https://rationalreminder.ca/podcast/200  Episode 268: Itzhak Ben-David: ETFs, Investor Behavior, and Hedge Fund Fees — https://rationalreminder.ca/podcast/268  Episode 112: Michael Kitces: Retirement Research and the Business of Financial Advice — https://rationalreminder.ca/podcast/112  Marco Sammon — https://marcosammon.com/  Marco Sammon on LinkedIn — https://www.linkedin.com/in/marco-sammon-b3b81456/  Marco Sammon on X — https://x.com/mcsammon19  Marco Sammon | Harvard Business School — https://www.hbs.edu/faculty/Pages/profile.aspx?facId=1326895  Marco Sammon Email — mcsammon@gmail.com  John Shim on LinkedIn — https://www.linkedin.com/in/john-shim-2931271b/  Vanguard — https://global.vanguard.com/  Sheridan Titman on LinkedIn — https://www.linkedin.com/in/sheridan-titman-226b0811/  Alex Chinko — https://alexchinco.com/  Erik Stafford | Harvard Business School — https://www.hbs.edu/faculty/Pages/profile.aspx?facId=6625  Itzhak (Zahi) Ben-David on LinkedIn — https://www.linkedin.com/in/ibendavi/  Bill Ackman on X — https://x.com/billackman   ‘Millennium Loses $900 Million on Strategy Roiled by Market Chaos’ — https://www.bloomberg.com/news/articles/2025-03-08/millennium-loses-900-million-on-strategy-roiled-by-market-chaos   Bogleheads — https://www.bogleheads.org/   The Money Scope Podcast Episode 8: Canadian Investment Accounts — https://moneyscope.ca/2024/03/01/episode-8-canadian-investment-accounts/  The Wealthy Barber Podcast — https://thewealthybarber.com/podcast/   Financial Advisor Success Podcast — https://www.kitces.com/blog/category/21-financial-advisor-success-podcast/  Financial Advisor Success Podcast Episode 433: When You 10X Your Advisory Firm To Over $20M Of Revenue…And Want To 10X Again, With Cameron Passmore — https://www.kitces.com/blog/cameron-passmore-pwl-capital-10x-revenue-growth-advisory-firm/   OneDigital — https://www.onedigital.com/  The Longview Podcast: Ben Felix   Papers From Today’s Episode:    ‘The Arithmetic of Active Management’ — https://www.jstor.org/stable/4479386    ‘Index Rebalancing and Stock Market Composition: Do Index Funds Incur Adverse Selection Costs?’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5080459     ‘Luck versus Skill in the Cross-Section of Mutual Fund Returns’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1356021    ‘The Passive-Ownership Share Is Double What You Think It Is’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4188052    ‘Long-Term Returns on the Original S&P 500 Companies’ — https://www.researchgate.net/publication/247884354_Long-Term_Returns_on_the_Original_SP_500_Companies     ‘The Price of Immediacy’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1001762   ‘Competition for Attention in the ETF Space’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3765063    ‘Passive in Name Only: Delegated Management and “Index” Investing’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3244991      Jeremy Stein — “Unanchored” Strategy

In this insightful discussion, Jason Pereira, a seasoned Canadian financial planner with over 20 years of experience, dives deep into what it means to be a financial planner. He shares his client-centered investment philosophy and the importance of fiduciary duty. Jason unpacks why Canada lags behind the US in index fund adoption and challenges common myths in financial planning. He explores ethical considerations with ESG, the role of technology in the industry, and why a transformation in advisory practices is desperately needed.

The discussion begins with the need for calm during stock market volatility. Historical resilience of markets is highlighted as a key to understanding downturns. There's insight into why bonds may not be the best for returns. They examine the proposed Alberta Pension Plan and reflect on influential guests who have shaped their investment strategies. The debate between Dimensional Fund Advisors and Vanguard is revisited, alongside the complexities of financial planning for business owners. Personal reflections on semi-retirement underscore the importance of family over work.

Jessica Moorhouse, a money expert and bestselling author, shares her insights on the emotional underpinnings of personal finance. She explains the crucial differences between financial planners and counselors, highlighting the importance of empathy. Jessica discusses how early money memories shape our financial habits and the role of shame in decision-making. The conversation also examines the impact of trauma on financial behavior and emphasizes the need for introspection to foster healthier money management.

Dive into the fascinating history of Dimensional Fund Advisors and Vanguard, two titans in the asset management world. Uncover the birth of index funds and why Vanguard's innovative strategies reshaped investing. The discussion moves to the intricacies of multi-factor models and the vital role of diversification in portfolio management. Alongside practical investment insights, hear an uplifting personal update reflecting resilience in the face of health challenges, showcasing the human side of financial advising.

Scott Cederburg, Associate Professor of Finance at Eller College, returns to address lifecycle investment strategies. He critiques traditional beliefs about domestic versus international investments and highlights the advantages of an all-equity portfolio with higher international exposure. Cederburg discusses how US market trends influence global allocations and the necessity of dynamic asset allocation. He also examines the impact of smaller countries in investment analysis and the complexities of market correlations, emphasizing the need for tailored approaches in retirement strategies.

In a lively AMA session, the hosts debate factor investing versus market cap-weighted portfolios, revealing their differing perspectives. They dive into the psychological challenges investors face, emphasizing the importance of decision-making strategies. Retirement planning gets reexamined with a critique of the 4% rule, promoting personalized withdrawal strategies instead. The conversation also covers managing corporate cash reserves and the role of bonds, all while sharing humorous anecdotes about childhood memories of inflation and childhood traditions.

Join economist Andrew Barclay, a senior analyst at Statistics Canada, as he unpacks the intricate world of inflation measurement. Discover why personal costs often feel higher than official inflation numbers. Andrew reveals the complexities behind the Consumer Price Index (CPI), the challenges of measuring housing costs, and the impact of consumer behavior shifts, especially post-pandemic. He also addresses skepticism surrounding government data and emphasizes the importance of accuracy and transparency in understanding inflation.

Discover why low-cost index funds could be the ultimate investment strategy for most individuals. The hosts break down the evolution of index funds and their substantial advantages, including lower fees and consistent performance. They tackle the common pitfalls of active management and reveal studies showcasing the long-term benefits of a globally diversified portfolio. Additionally, personal health updates and community interactions add a relatable dimension to the conversation, emphasizing the importance of financial education and informed decision-making.