The looming issue of climate change has far-reaching implications, not least of which are relevant to the financial and investment world. Today we spend some time considering these impacts, with a focus on the question of whether climate risk is a priced investment. The short answer, conferred by the numerous academic explorations into the subject, is yes. This answer, however, still leaves investors with many options and contrasting possible approaches as to how to act. We get into some of the different avenues to explore when considering your best route, taking into account both ethical constraints and returns, as well as a long-term vision of sustainability. We also talk about why big companies with less of a focus on ethics may be tempted to go green for financial reasons, how investors might enact a moral stance by investing in fewer green companies, and many more surprising possibilities that arise out of the current findings. Rounding out all this serious discussion, we squeeze in an interesting book review from Hans Rosling, some Talking Sense questions, and of course, bad advice of the week, all of which you are not going to want to miss.   Key Points From This Episode: This week's book review, looking at Hans Rosling's Factfulness. [0:08:09.2] Recent financial and investment news; penalties, TFSAs, and a big shift from Wealthfront. [0:14:36.7] The question of climate change and markets connected to the use of fossil fuels. [0:19:04.5] Expected rate of returns in relation to the costs of capital, and the idea of climate hedging. [0:26:46.2] Looking at empirical evidence on the pricing of climate risk. [0:28:40.1] Recent scholarly findings on the subject of whether climate risk is priced. [0:31:50.3] Summing up the academic arguments for why and how pricing of climate risks operates. [0:38:35.7] The cost of capital incentives for companies to reduce their exposure to climate risk. [0:40:19.3] Participating in the transition of companies to greener and more sustainable practices by investing in them. [0:45:12.9] Financial needs for different age groups, at the beginning and the end of a lifetime. [0:48:17.6] Personal savings goals versus generosity towards loved ones. [0:51:47.2] This week's Bad Advice of the Week: making inflation trades in cryptocurrencies and gold. [0:53:27.1]

One of the major topics we hope to help our listeners with is retirement planning, and today we have a really informative and illuminating conversation with a true expert in the field, Don Ezra. His approach is typified by his focus on retirement and happiness, and their important intersection, subjects he has broached in his many published books, notably Life Two, and Happiness. Don is a self-professed financial nerd, so you know that he will fit right in on this podcast! His advice is relatable and easy to understand, a result of working on his own retirement along the way. Don is an actuary by trade and helped establish Russell Investments Canada in 1984, through which he worked on many huge pension funds across the world, endowing him with amazing expertise in the space. In our conversation, Don gives us such a wide-ranging view of his approach, and the amazing conglomeration of ideas he has amassed on the subject of better retirement, or as he likes to call it, graduation from full-time employment! He breaks things down in easy and catchy ways, giving us some fundamental questions that can help initially guide the retiree, around purpose, action, and money. From there he talks about the seven asset classes of your life's abundance portfolio, needs versus wants, and even finds a spot to comment on the strengths and weakness of the FIRE philosophy. So for all this and much more, join us on the Rational Reminder today!    Key Points From This Episode: Don's feelings around the time of his retirement from such a successful career! [0:02:10.4] The common feeling of discombobulation around retirement and Don's thoughts on addressing it. [0:03:41.2] Questions people should be asking and answering as they approach retirement. [0:06:45.8] Safety, growth, longevity; the three things we need for our finances in retirement. [0:08:49.7] Don explains the sequence of returns and some misconceptions about averages. [0:10:21.1] Weighing the uncertainty of life expectancy against that of random stock returns. [0:12:24.8] Better ways to calculate life expectancy for individuals and couples. [0:15:15.7] Don's advice to the average person looking to build a diversified portfolio for retirement. [0:16:54.1] How Don has approached his own portfolio and generating retirement income. [0:21:10.8] The importance of flexibility and adjusting a retirement budget over time. [0:23:48.7] When retirees should be seriously considering annuities. [0:25:52.1] The dimension that inflation adds to these questions for people in retirement. [0:27:49.4] Assumptions that Don uses for his life expectancy planning. [0:34:06.1] Calculating what is needed against what you have; Don explains the personal funded ratio! [0:36:33.7] Lessons that Don learned during his work with huge pension funds before retirement.[0:38:35.4] The question of filling one's time in retirement; staying busy and maintaining purpose. [0:41:29.5] Don breaks down the seven asset classes of your life's abundance portfolio. [0:45:22.1] A look at the different parts of the FIRE movement and its success and failures. [0:48:38.5] A few approaches to challenge below-average advice from any expert. [0:50:42.1] Fostering healthy ambitions and dreams for the years of your retirement. [0:55:24.5] Better conversations with family around money, inheritance, and financial planning. [0:57:21.2] The emotional legacy that Don views as the success of his life! [1:01:16.8]

Welcome back to another episode of the sensible money show. The focus this week is the age-old question of housing; whether to buy or to rent. After our preliminary remarks, book review, and a new TV recommendation, we get down to brass tacks on the important things to look at when assessing your living situation. There are some commonly held views on the expenses and sacrifices associated with real estate, and we do our best to share some of the facts as they stand. We get into some meaningful ways to truly compare the costs of each option, looking at the financial aspects, risk, quality of life, and related psychological elements to the debate. The truth is that there will be costs associated with each, but that they may not always lie where you think they do! For instance, it is commonly believed that it is less risky to own than to rent, however, the evidence suggests otherwise. Similarly, many of us assume that the costs of owning a property are greatly diminished once it is paid off, again, this is not necessarily true. Our main argument here is to base your choices on factors more closely related to your physical and mental health, things like stress and relaxation due to noise and travel times.    Key Points From This Episode: This week's highly recommended book, Noise. [0:05:37.3] Unpacking the new article by Larry Swedroe titled 'The Misguided Faith in the Fiduciary Standard' [0:11:50.7] A few thoughts on FIRE, positive psychology, and moral judgments. [0:16:49.2] The big decision that so many of us are faced with: buy or rent? [0:20:41.7] Flawed logic around mortgage payments and rental costs. [0:25:55.5] Opportunity and maintenance costs and the truth about depreciation. [0:29:51.7] Equating the total costs of renting and owning and making a judgment based on this. [0:36:53.8] The ratio of prices to rent in Canada currently and in the last few decades. [0:39:47.9] Risk and homeownership; why renting is less risky in many ways. [0:40:50.8] Keeping the focus on living a good life when making real estate decisions. [0:45:15.7] The surprising relationship between owning a property and a sense of control. [0:49:16.8] Weighing all the factors and making an informed decision based on wellbeing. [0:55:30.4] This week's Talking Sense segment dealing saving, speed of decision-making. [0:56:08.8] Bad advice of the week: Fidelity's investment initiative aimed at teenagers. [1:00:34.4]  

Today we speak to Professor Johanna Peetz about how the errors people make about predicting their futures affect financial planning and relationships. Professor Peetz is an Associate Professor of Psychology at Carleton University and her three main research interests are time perception, personal spending, and close relationships. We kick the conversation off on the topic of biased spending estimates, the idea that people are bad at budgeting, and Professor Peetz gets into the main causes and implications of this issue. Our guest gives pointers for how to make less biased predictions for spending and makes a great point about how people with more aggressive saving goals often don’t spend less. We move onto the subject of long-term financial planning and motivation, and Professor Peetz weighs in on a few methods to get better at breaking down big goals into steps as a way of keeping motivation up. Another big discussion from today is how this idea of behaviour predictions fits into the context of healthy relationships. We talk about the connection between partner-satisfying decisions and happiness, and how partners should view each other's ability to keep promises. So for all this and more on how to get better at knowing your personality traits and the effects this can have on finances and relationships, tune in today.   Key Points From This Episode: Introducing Professor Johanna Peetz and her research on predictive errors. [0:00:48.2] If people are good at predicting how much money they're going to spend in the future. [0:03:05.2] The causes and implications of these biased spending estimates. [0:04:33.5] What people can do keep their spending in line with their goals. [0:06:53.5] The financial literacy gap between men and women. [0:13:37.5] Increasing motivation to reach long-term financial goals based on a future self. [0:17:05.7] Setting goals using intrinsic over extrinsic reasons. [0:21:40.5] How financial planners can help their clients find and reach their goals. [0:23:56.5] The relationship between pro-social behaviour and happiness. [0:24:51.5] How good people are at predicting relationship-enhancing behaviour. [0:28:27.0] Dealing with money-related relationship conflict amongst being bad at predicting behaviour and spending. [0:32:39.0] How unpacking expenses can help people make less biased spending predictions. [0:34:26.0] Different ways of responding to boredom in a relationship. [0:39:34.0] Taking the perspective of the other person to improve the forecast of relationship-enhancing behaviours. [0:43:10.0] What Professor Peetz is working on now that makes her most excited. [0:46:05.0] How knowing your personality traits can help you make better financial decisions. [0:48:20.0] Our guest’s definition of success. [0:49:09.0]

Welcome back to your favourite Canadian podcast about sensible investing! Today we are focusing on evaluating equity strategies and wondering aloud whether you should be chasing these anomalies, thinking about the costs and turnover, and how these products are being implemented. These are just some of the important questions that can be asked on this subject, and we do our best to cover the most vital points in this episode. We start things off with our customary book review segment, taking a look at Katy Milkman's fascinating new title How to Change and the thesis it lays out on the continuum from now into the future. We then turn to a few interesting and pertinent news stories dealing with the CPP and clarifying the role of fund managers! After the preamble, we get into the main course of today's show and talk about some of the most prominent literature on the subject of equity strategies before laying out some criteria for useful data in this discussion. Our main point can be simplified as such: in the event of selecting systemic equity strategies with hopes of beating the market, there are many additional tradeoffs and costs that should be considered, many more than we even have time here to go through! To close out the show we take on a few questions for our Talking Sense segment and share some somewhat relieving news for our bad advice of the week!   Key Points From This Episode:   A retraction and re-review of the last episode's book of the week, Effortless! [0:04:26.4] This week's book review of the exciting new title from Katy Milkman, How to Change. [0:06:35.6] A round-up of recent news stories from the WSJ, The Globe and Mail. [0:10:32.2] The surprising results of the Canadian year-end SPIVA scorecard. [0:14:55.8] Investment topic of the week: evaluating equity strategies and the inspiration behind it. [0:17:24.5] The identification of systematic factors; Fama and French's original findings and newer research. [0:21:15.9] Conditions for useful data: persistent over time and pervasive across markets, strong economic rationale, and non-reliance on rising valuations. [0:23:44.3] The two forms of implementation costs that the data needs to survive: implicit and explicit. [0:32:40.1] The importance and impact of taking transaction costs into account for your portfolio. [0:35:53.0] The rough estimations that Ben put together in 2019 for a fund premium regression. [0:38:54.6] The 'what if I am wrong' check; the usefulness of maintaining a healthy level of skepticism. [0:42:22.5] Summarizing today's argument about additional costs and tradeoffs when selecting equity strategies. [0:46:01.7] Talking Sense segment; thoughts on money's purpose, and goals and sacrifices. [0:46:39.1] This week's bad advice! The amazing claims of TFSA maximizer schemes. [0:52:21.0]

There is an overarching investment philosophy that permeates most of what we do here at the Rational Reminder Podcast, and while some guests' positions might differ at times, it is rare that we have someone on the show whose approach is as strongly contrasted with ours, as Professor Brad Cornell. Professor Cornell's arguments are so well-founded and researched that they require a re-examination of positions that we feel have been a given for us for a long time. He is the author of about 150 referenced articles, four books, and has conducted hugely interesting work on the current state of value investing. His research with Aswath Damodaran, and insights into Tesla's valuation provide great food for thought, and we get into all of this on today's show! Our conversation also covers ways to go about picking a fund manager and a slightly different lens through which to view past performance. We feel truly grateful to have such a different, yet valid, perspective expressed so well here, and cannot wait to share this highly useful information with all of our listeners. Tune in to hear it all from Professor Brad Cornell!   Key Points From This Episode: The difference between a stock characteristic and a stock risk factor loading. [0:03:30.2] Some of the challenges in using characteristics to develop an investment strategy. [0:05:43.8] The problem of non-stationary frameworks as a starting point for investing. [0:07:33.4] How little we know about the cross-section of expected stock returns. [0:08:32.1] Concentrated, characteristic-focused portfolios versus something more diversified. [0:11:12.7] Unpacking the 'big market delusion' and the huge power of the narrative. [0:12:11.4] Looking at the example of the electric car market and what it teaches us. [0:16:18.4] Professor Cornell's thoughts on how to pick a fund manager. [0:21:23.0] Assessing the issues with mean reverting performance. [00:25:58] The most relevant ratio: price to a value estimat [00:30:35.2] Some thoughts from Professor Cornell on the rise in ESG investment. [00:32:22.5] Approaches to the expected equity risk premium for investors and planners. [00:39:45.0] Bringing in historical context to the conversation about predictability. [0:45:16.1] Professor Cornell's approach to calming down investors' reactivity to volatility. [0:47:56.5] A great definition of success from Professor Cornell! [00:49:57.2]

Exploring the different investment approaches and commodities to hedge against inflation. Discussion on the performance of stocks, bonds, gold, international stocks, and value stocks. Highlighting the challenges and opportunities in managing inflation and effective investment strategies. Analyzing historical performance of value stocks and critiquing misleading investment advice on dividend stocks.

Today’s guest is Professor Robert Novy-Marx, the Lori and Alan Zekelman Distinguished Professor of Business Administration at Simon Business School of the University of Rochester. Professor Novy-Marx is best known for his articulation of the profitability factor and has also done a ton of great work on momentum and low volatility. We kick our conversation off with Professor Novy-Marx’s thoughts on how profitability should inform portfolios. From there we hear why Professor Novy-Marx has a problem with evaluating the performance of a multi-signal strategy the same way that we would a single-signal strategy. He then talks about the trade-off between concentrated versus diversified factor exposure for capturing premiums. Next, we discuss why there is no good empirical evidence that we can time premiums. Professor Novy-Marx makes a great argument for why the regressions people use to say that the value spread works to predict the value premium can't be taken seriously. Our conversation moves to focus on how our guest defines price momentum and what drives it, and the nuances of investing in momentum. We then hear his perspectives on the low volatility anomaly and how profitability helps to explain it. After that, we talk about whether investing in a low-vol fund is a way of accessing value and profitability, and why the five-factor model is a trustworthy factor model for regular investors. In the last part of our conversation, we talk to Professor Novy-Marx about his approach to critiquing other methods before ending off with his definition of success. Tune in for this excellent evergreen conversation.   Key Points From This Episode:   We introduce today’s guest, Professor Robert Novy-Marx, and his work. [0:00:17] The significance of the relationship between profitability and stock returns for asset pricing. [0:02:45] How the risk-based story around profitability is completely counterintuitive. [0:08:51] The best way to go about using profitability in portfolios. [0:12:34] When to target premiums individually and then combine them after the fact. [0:14:48] How profitability is different from quality. [0:16:26] Risks of building strategies that draw insight from different signals to identify a premium. [0:18:10] The trade-off between concentrated versus diversified factor exposure for capturing premiums. [0:23:33] Whether the recent decade’s run of underperformance impacts Professor Novy-Marx’s view of the value premium. [0:25:10] The vagueness of the equity premium and if it is possible to time premiums. [0:27:58] How Professor Novy-Marx defines momentum and what drives it. [0:32:32] Whether investors should be using momentum in portfolios. [0:38:47] Professor Novy-Marx’s perspectives on the low volatility anomaly. [0:44:19] Whether investing in a low-vol fund is a way of accessing value and profitability. [0:32:32] Why regular investors need factor models and how to choose one. [0:51:58] Whether it is reasonable to pursue factor premiums in a smaller market like Canada. [0:57:45] Professor Novy-Marx weighs in on writing papers that critique other methods. [0:58:44] Why Professor Novy-Marx consults for Dimensional Fund Advisors. [1:01:15] Insights Professor Novy-Marx has carried over from his years as a professional triathlete. [1:01:15] How Professor Novy-Marx defines success. [1:01:15]

Today we dive deep into the connection between happiness and money, looking at a host of theories and studies that have examined the important factors in this discussion. The main material referenced is the fascinating, The Happiness Hypothesis by Jonathan Haidt, and during the episode, we get to look at a great selection of the findings and claims in the book. To kick things off, we consider the broad ideas around how money can stimulate happiness, as well as its addictive aspects, before examining a few of the most prominent lenses used for measuring different kinds of happiness. Talking about the ideas of Hedonia and Eudaimonia, the influence of forecasting and the future, and the effects of different kinds of spending, we see the common threads as well as the distinctions between these models of measurement. Ultimately all of this material should hopefully enable us to live out a better life with this information in mind, and we spend some time reflecting on some of the key takeaways that seem to come to the surface in the happiness debate. To finish off, we field some listener questions on avoiding spending, and returns on investment, before diving into this week's bad advice featuring a video starring Warren Buffett, Charlie Munger, and Mark Cuban!   Key Points From This Episode: A great book recommendation for getting to grips with branding and building relationships with consumers. [0:03:52.2] The interesting statement released by IIROC regarding conflicts of interest. [0:07:14.7] Barry Ritholtz's interview with Jack Brennan and their perspectives on index funds. [0:10:44.1] Books and studies on the subjects of happiness, finances, and addiction. [0:12:21.4] Different theories for the largest determining factors for happiness. [0:20:21.3] Hedonia and Eudaimonia; two different types of pleasure and their measurement. [0:24:47.6] Experienced happiness and experienced unhappiness; statistics from around the world. [0:32:04.1] Spending and happiness and the debate around the human ability to accurately forecast. [0:40:21.7] Designing a happy life based on all the research in the field. [0:44:48.8] Inverting the goal-setting process and working backward from what you don't want! [0:47:33.9] Love and work as the two most crucial ingredients for human happiness. [0:49:47.3] Avoiding the temptation of spending when aiming to save money. [0:51:15.6] Examples of investments that have paid off for Cameron and Benjamin. [0:52:31.1] Bad advice of the week; Buffett, Cuban, and Munger on diversification. [0:54:03.7]

It takes only a handful of smart choices to convert regular savings into a secure future. Today we welcome famed financial educator Paul Merriman onto the show to discuss how the right habits and investing approach can add millions to your retirement nest egg. After chatting about his personal and professional background, we dive into Paul’s investing philosophy and how it’s been influenced by the work of Eugene Fama. A significant theme in this episode, we then talk about why Vanguard’s portfolio allocation ensures that clients have the smoothest possible emotional relationship with their investments. This leads to a discussion on the benefits of simple versus complex funds and how simple funds fit with the preferences of many do-it-yourself investors. Linked to this, Paul explains why it’s emotion and not strategy that gets in the way of successful investing before exploring the challenges of sticking to portfolios that are heavily weighted in small-cap value stocks. Reflecting on his career as an advisor, we ask Paul about his difficulties in working with clients as well as the role of financial advisors. Later, Paul unpacks some of the top habits and beliefs that lead to investing success; a key focus of his new book, We’re Talking Millions. We wrap up our conversation by touching on target date glide paths, how Paul’s foundation educates investors, and the relationship between money and a life well-lived. With such an illustrious career in financial education, tune in to benefit from Paul’s investing advice.   Key Points From This Episode: We introduce today’s episode with financial educator Paul Merriman. [0:00:17] Paul shares details about his personal and professional history. [0:03:16] How Eugene Fama’s work impacted the way that Paul built his firm. [0:06:55] What PWL Advisors went through to access Dimensional’s products. [0:08:21] Insights into the fateful chat that Paul had with Jack Bogle in 2017. [0:09:08] How Paul helps his clients balance fee frugality with expected returns. [0:13:29] Exploring the trade-offs between simple and complex funds. [0:16:49] Paul compares his former buy-and-hold strategy with his simpler new approach. [0:19:06] The costs of do-it-yourself investors having an overly-complicated portfolio. [0:22:46] The rationale underpinning the small-cap value strategy. [0:27:20] Why it’s so difficult to only invest in small-cap value stocks. [0:25:36] What Paul would say to clients who want to ditch their small-cap value stocks. [0:37:32] Paul reflects on challenges when communicating with investors. [0:40:39] We ask Paul about the value of financial advice and financial advisors. [0:46:32] Discover the habits that every investor should follow. [0:51:29] What Paul is trying to achieve with the Merriman Education Foundation. [0:58:21] Pros and cons to target date glide path funds. [01:02:00] We chat about Paul's radio show from the previous decade. [0:50:35] Hear Paul’s top lessons on the relationship between money and a life well-lived. [01:08:51] How Paul defines success. [01:16:29]