
The Rational Reminder Podcast
A weekly reality check on sensible investing and financial decision-making, from three Canadians. Hosted by Benjamin Felix, Cameron Passmore, and Dan Bortolotti, Portfolio Managers at PWL Capital.
Latest episodes

Nov 5, 2020 • 1h 19min
(Irrationally) Investing in Technological Revolutions, Household CFO Job Analysis, and Learning to Sell Mutual Funds (EP.123)
As counter-intuitive as it may seem, most of the companies that push us into the next technological revolution deliver poor investment returns. Today we look at current and historical data to show why this is the case but first, we chat about the top financial news of the week. Borrowing heavily from Carlota Perez’s Technological Revolutions and Financial Capital, we then explore how the links between tech revolutions and investing adhere to a consistent model. Following this model, we discuss how our current information-led revolution is as impactful as revolutions experienced in previous generations. We touch on the factors that lead to innovation, historical perspectives of technology companies, and the many investing phases resulting from tech revolutions. Despite making for poor returns, we talk about why the frenzy of investing that accompanies innovation is good for that industry and leads to a golden age of tech adoption and growth. A key takeaway, we dive into how investors are paying too much for the expected growth of new companies and that there is little to no link between massive growth and high stock returns. From guessing the next IPO winner, we move to our planning topic of the week — how to be a successful household CFO. We close this episode with our bad financial advice of the week. There’s a lot of pressure in the market to invest in tech. Despite that, tune in to hear why you shouldn’t invest in the next technological revolution. Key Points From This Episode: Hear about host Benjamin Felix’s burgeoning 3D printing addiction. [0:0:06] Sharing listener feedback and messages from the Rational Reminder community. [0:02:02] Robinhood and why users are treated as the product, not the customer. [0:04:33] News on what might be the largest cash raise in IPO history. [0:07:25] How most ETF assets are in products that were launched prior to 2015. [0:09:24] Benjamin shares details about his project exploring the value of investing in tech revolutions. [0:11:05] Modelling the consistent sequences that technological revolutions follow. [0:14:38] Why current tech revolutions are as powerful as those experienced in previous generations. [0:16:55] Which common factors lead to tech revolutions. [0:18:31] Looking at historical examples of innovations and the performance of tech companies. [0:20:35] Why innovative big companies become unable to lead the next tech revolution. [0:23:18] How explosive growth and a frenzy of investment is common during early tech breakthroughs. [0:29:30] Signs that our current tech bubble has begun to pop. [0:34:45] The benefits of investment frenzy phases for tech industries and society as a whole. [0:36:15] Exploring what happens after phases of investment frenzy. [0:38:10] Evidence showing that investors pay too much for the expected growth of new companies. [0:42:42] Why there is no link between massive industry growth and stock returns. [0:50:00] Applying lessons from our discussion to our current investing environment. [0:52:03] Why you probably shouldn’t put your money in the technological revolution. [0:58:04] How people operate as unofficial CFOs within their households. [01:02:45] The many tasks that household CFOs need to perform. [01:05:20] Bad advice of the week; swap your bonds for dividend-paying stocks. [01:10:42] Why increasing inflation may be a key post-pandemic government strategy. [01:15:40]

Oct 29, 2020 • 54min
Prof. Moshe Milevsky: Solving the Retirement Equation (EP.122)
There are seven equations that, if understood, will put you in the best possible position to tackle your retirement plan. Today we speak with business professor Moshe Milevsky about these equations, which he’s written extensively about in his best-selling book, The 7 Most Important Equations for Your Retirement. After introducing Moshe, we dive straight into the first equation that maps out the longevity of your money. Following this, we talk about determining how long you will live by comparing your biological and chronological ages. Regarding the third equation, Moshe provides his insights into evaluating the usefulness of an annuity plan, and at what age they become relevant to you. We then chat about what annuity plans are offered in Canada versus elsewhere and why people don’t want to buy annuities during a bull market. Despite the popularity of the ‘4% spending rule’ — which we also unpack — Moshe discusses the importance of being adaptable with your retirement spending rates. Reflecting on the key theme of another of his books, we explore the question of whether people are stocks or bonds. Moshe shares some investing advice for younger listeners and touches on what the ideal mix of stocks, bonds, and human capital looks like. For the last equation, we look into the impact of probability frameworks and why financial advisors need to understand the math behind retirement plan probabilities to make meaningful recommendations. Throughout our discussion, Moshe presents coherent answers and pragmatic advice. Tune in and learn more about the equations needed to build the best possible retirement plan. Key Points From This Episode: Introducing today’s guest, Professor Moshe Milevsky, and his work. [0:0:15] Exploring Moshe’s book, The 7 Most Important Equations for Your Retirement. [0:02:57] Mapping the longevity of your money according to Moshe’s ‘Fibonacci Equation.’ [0:03:25] Determining how long you will live when planning your retirement funds. [0:04:37] Understanding the difference between your biological and chronological age. [0:06:22] A challenge to our retirement system; it’s based on chronological and not biological age. [0:08:45] Introducing the concept of annuities and how they can be valued. [0:10:03] Striking a balance with your annuity plan and answering — “How much is too much?” [0:11:42] Moshe shares his thoughts on how much insurance companies factor in biological age. [0:14:04] Ideas on using your biological age to your advantage. [0:15:35] Why you probably shouldn’t even consider getting an annuity until you’re 60. [0:17:16] Canadian annuity plans versus elsewhere; “The shelf feels empty here.” [0:18:30] The correlation between being in a bull market and people not wanting annuities. [0:20:35] Establishing your ideal retirement spending rates — flexibility is important. [0:25:25] Unpacking the ‘4% rule’ and why it’s a ridiculous spending framework. [0:28:04] What your mix between stocks, bonds, and human capital should be. [0:31:08] Answering the question — are humans stocks or are they bonds? [0:33:28] Leveraging youth to get quicker exposure and equity. [0:36:03] Life insurance and measuring your financial legacy. [0:39:10] Details on the life of Andrey Kolmogorov and his effect on understanding probability. [0:40:54] How important probability frameworks and analysis are to retirement planning. [0:43:17] The impact of low-cost index funds on retirement income planning. [0:45:18] Keeping finance students engaged in the industry. [0:47:24] How Moshe defines success, his other research interests, and reflections on the success of his books. [0:49:53]

Oct 22, 2020 • 1h 5min
Day Trading and Overconfidence (EP.121)
Despite the mountain of evidence against it, day trading is thriving. Today we dive into the research and explore why the practice is alive and well before answering the question — “Can too much confidence lose you money?” After touching on investing news, listener feedback, our books of the week, and our take on the ‘Ultimate Ned Debate,’ we open our discussion on day trading. In our conversation, we look at the results of numerous papers on the topic, none of which present-day trading as sound financial practice. We shed light on the reasons that people day trade, the performance differences between traders, what a day trader’s learning process looks like, stock-picking strategies, and why it’s impossible, except in outlier cases, to earn a living as a day trader. As we unpack the literature, we discuss key insights on the impact of day trading on the financial world. From one investing sin to another, we talk about how overconfidence can harm your investment performance. We balance the positives and negatives of having confidence, highlighting how too much confidence can lead to poor decision-making and a false sense of how much you know. Tune in to hear some of the latest investing news and to learn more about the pitfalls of day trading and overconfidence. Key Points From This Episode: Acknowledging the 33rd anniversary of Black Monday. [0:01:08] How the podcast is faring against other podcasts within the investing category. [0:02:07] News on past and upcoming episodes and responding to listener feedback. [0:04:09] From technological revolutions to starting with a ‘why’, we explore the books of the week. [0:07:23] Top news story; Fidelity Magellan Fund is moving to an ETF format. [0:12:06] Weighing in on the “Ultimate Nerd Debate” on the value and risks of small-cap allocation. [0:14:45] Why performance doesn’t change when you invest in a fund using a different currency. [0:19:12] Introducing today’s portfolio and planning topics — day trading and overconfidence. [0:21:56] Examining the data sets and papers that assess the effectiveness of day trading. [0:23:48] Analyzing two competing theories that explain the behaviour of day trading. [0:25:57] Attributing a portion of all portfolio return losses to the effects of day trading. [0:30:39] Comparing the performance of the best and worst day traders. [0:33:52] Why it might be impossible for you to earn a living as a day trader. [0:36:58] Applying Michael Mauboussin’s ‘Paradox of Skill’ to day trading. [0:39:50] Three reasons why people still day trade, despite evidence that they make for bad investments. [0:42:38] Which stocks day traders trade and how they pick their stocks. [0:45:42] Why overconfidence can turn you into your worst enemy. [0:50:25] Trends in which investors develop an inflated sense of how much they know. [0:56:02] Hear this week’s bad advice of the week; ignore the data and only invest in excellent companies. [01:01:24]

Oct 15, 2020 • 54min
Annie Duke: How to Decide (EP.120)
Good decision-making is a fundamental part of achieving our goals, so getting better at it would be in anybody’s best interest. Here to talk about making better decisions is Annie Duke, expert poker player and author of How to Decide: Simple Tools for Making Better Decisions, and Thinking in Bets. Annie starts by defining what a good decision should look like and some of the steps involved. From there, we explore the idea of how to accommodate the fact that our preferences change and we sometimes do not even know what they are in our decision-making processes. Uncertainty is a big part of what makes future choices difficult, and Annie talks about how it is caused by either luck or ignorance, the latter of which we can control, thereby reducing uncertainty as much as possible. Another big theme today how to know which decisions to spend time on and which not to. We waste a lot of time on choices that do not affect our happiness much, and on the other end of the scale, big choices often are hard because the different outcomes they present look quite similar. Annie gives us a few tools to deal with both scenarios. Toward the end, Annie dives deeper into what a good decision involves, talking about the need to step outside our beliefs by building an evidentiary record of the process which involves outside input. Tune in for a fascinating conversation that will help you get better at choosing. Key Points From This Episode: Introducing today’s guest, Annie Duke, and her work on decision-making. [0:00:16.3] The definition of a good decision and the steps involved in making one. [0:02:51.3] Examining probabilities of potential choices and the beliefs informing the examination. [0:05:00.3] Factoring in the possibility of preferences changing while making decisions. [0:08:56.3] Beliefs as formed by actions, and how to not see a change in course as failure. [0:13:30.3] When our preferences are clear and when they are not. [0:15:00.3] Dealing two kinds of uncertainty, one based on luck and the other on ignorance. [0:16:39.3] How to know how much time to spend on making decisions, and the need to record the process. [0:20:49.3] Using the ‘happiness test’ to judge decisions and free up time for the important ones.[0:27:46.3] Choosing ‘quittable’ things to gather information for more binding decisions. [0:30:03.3] Doing things in parallel so you don’t have to make one choice. [0:31:57.3] Understanding that choices become hard when they present similar outcomes, thus that it is not sensible to deliberate too long. [0:32:32.3] How to speed up the harder decisions; the ‘only option test’. [0:35:47.3] Involving others while producing an evidentiary record of a decision-making process. [0:37:11.3] How often we should aim to update our beliefs, making them less subjective. [0:37:11.3]

Oct 8, 2020 • 1h 12min
The Stock Market vs. Elections, and Incentives in Financial Planning (EP.119)
Thank you for tuning in to this episode of the Rational Reminder. We start this show with some great news about the comment section and our migration to Discourse. Having an open dialogue has always been crucial for us—it has even led to our latest hire—so we felt it was time to add more structure to it. We then talk about mortgage rates and why so many people do not know that it is possible to negotiate them down even further. There is often a big gap between what is publicly advertised and what you can actually get, so it’s worth shopping around. Following this, we touch on IPOs, SPACs, and why some are saying it is similar to 1999. In the heart of this discussion, we unpack the relationship between the US election and stock market returns. If you are like Ben, perhaps you thought there is not much material difference, and while over the short-term there is not, the election cycle data is truly astonishing. We find out the fascinating explanation of why there are higher excess returns under Democratic leadership, and it is probably not what you think! Moving on, we chat with our newest advisor Jordan Tarasoff where he sheds light on his previous employment at a sales and product-centric advisory firm. We talk about how this affects both the customer and the advisor, and Jordan ends with talking about his positive time at PWL so far. To hear more, be sure to tune in today! Key Points From This Episode: Some great news about migrating the comment section to Discourse. [0:00:09.3] The new PWL team member we are welcoming and our shop opening. [0:01:27.3] Why Cameron recommends everyone watch The Social Dilemma. [0:04:19.3] Recommended books: Open and Succession Planning for Financial Advisors. [0:08:27.3] Results from a survey around people’s knowledge of mortgage rates. [0:11:43.3] Some of the reasons that mortgages can be tricky. [0:14:20.3] What is happening with IPOs and why it is being likened to 1999. [0:15:26.3] Insights from Hendrick Bessembinder about how investors should use his findings to structure their portfolios. [0:19:16.3] A follow up about safe withdrawal rates we touched on a while back. [0:21:44.3] Today’s investment topic: The US election and stock market relationship and Ben’s assumptions prior to research. [0:24:13.3] Are returns affected by US elections? Hear Ben’s findings. [0:27:26.3] The relationship between beliefs and optimism in the market. [0:30:31.3] Unpacking the link between volatility and the election. [0:32:09.3] Looking long-term at the stock market through election cycles. [0:33:14.3] How the timing of a Democratic president being elected results in positive excess returns. [0:39:26.3] The short-term effects of the election are minimal compared to changes over an entire election cycle. [0:44:39.3] Get to know Jordan Tarasoff, PWL’s newest advisor, and his previous experience. [0:47:01.3] Some of the conflicts and tension Jordan experienced in his former advisory role. [0:49:33.3] What to keep in mind about adding segregated funds to your portfolio. [0:54:47.3] Why you should not put a great deal of money into life insurance. [1:01:11.3] The flawed hiring model that Jordan experienced at his former workplace. [1:02:49.3] Jordan’s advice for anyone with a product-centric financial advisor. [1:05:49.3] What PWL does better, according to Jordan. [1:07:55.3] Bad advice of the week! [1:08:57.3]

Oct 1, 2020 • 44min
The Psychology of Investing — Bounded Rationality with Victor Ricciardi (EP.118)
Victor Ricciardi, a behavioral finance expert and Visiting Assistant Professor at Washington and Lee University, dives into the psychology behind investment decisions. He discusses the importance of self-awareness and understanding one's risk tolerance for better investing outcomes. The conversation explores the impact of biases and emotions on decision-making, as well as the role of financial therapy in navigating money's complexities. Ricciardi also addresses how trust plays a crucial role in financial advisory relationships, urging investors to critically evaluate the advice they receive.

Sep 24, 2020 • 1h 21min
A Message from the Bank of Canada, and Safe Withdrawal Rates with Factor Tilts (EP.117)
For the first part of today’s discussion, we are joined by Don Coletti from The Central Bank of Canada. He is here to talk about their upcoming recommendation for a monetary policy framework for the next five years which is incorporating public feedback into its development through the survey, Lets Talk Inflation. From there, we touch on some favourite books, Starbucks’s stored value card liabilities, the benefits of keeping inheritance in a separate account, new standards for financial planners and advisors proposed by the FSRA, and why SoftBank did not pile into call options and cause the rally in tech as the previous headlines suggested. Heading into the meat of the episode next, Ben shares some findings from a model he built inspired by a program written by one of this show’s listeners that tests historical safe withdrawal rates for factor loaded portfolios. Ben gets into a series of papers that speak to the diversification benefit of adding factors in this section too. He wraps up the discussion with a spanner in the works though, which looks at this question through the lens of time-series momentum rather than cross-sectional momentum. Here, he considers trend following as another type of diversification that has shown favourable impacts on portfolio returns in the data that exists. As usual, we wrap up with our bad advice of the week, hearing Cameron relate the bizarre ‘findings’ of a Forbes article claiming that active management beats passive investing in the face of piles of data to the contrary! Key Points From This Episode: Updates: An upcoming guest, great reviews of this show, and the brilliant discussions thread. [0:00:23.0] Introducing Don Coletti to talk about The Bank of Canada’s outreach programme. [0:04:52.0] Alternative approaches to monetary policy the Bank of Canada is considering. [0:07:19.0] Thoughts on the US Federal Reserve’s change to average inflation targeting. [0:11:43.0] How open the Bank of Canada is to making a change. [0:13:14.0] Why the Bank of Canada is placing more emphasis on engaging with the public as part of their renewal. [0:14:35.0] Why questions about large scale asset purchases and forward guidance were included in the survey. [0:17:00.0] The response rate so far to the Bank of Canada’s Let’s Talk Inflation survey. [0:18:59.0] Favourite books and series, and Starbucks’s stored value card liabilities. [0:21:50.0] The benefits of keeping inheritance in a separate account. [0:26:24.0] Standards for financial planners and advisors the FSRA is proposing. [0:28:20.0] Why SoftBank was not piling into call options and responsible for the rally in tech. [0:31:43.0] Ben’s remodelling of a listener’s code that tests historical safe withdrawal rates for factor loaded portfolios. [0:34:40.0] Safe withdrawal rates for different stock indexes according to Ben’s model. [0:37:15.0] A paper looking at the interaction between factors historically and the results this produced. [0:47:52.0] Findings of a paper looking at the five factors through business cycles. [0:56:57.0] Papers exploring whether a factor can be cheap and therefore have a higher extended premium. [1:00:41.0] The shadow time-series momentum casts on this; the impact of trend following on safe withdrawal rates. [1:02:46.0] Bad advice of the week: Active management beats the stock market. [1:15:51.0]

Sep 17, 2020 • 58min
Recovering from Active Management through Education (EP.116)
Joining us on the Rational Reminder today is one of the pioneers in the space of evidence-based investing, and someone who has been a massive inspiration to us, Mark Hebner! His website, Index Fund Advisors, was one of the first to start explaining the ideas of an evidence-based approach and the power of indexing, way back in the 1990s. We get to hear from Mark about his transition from misled active investor to his discovery of indexing and how this led to him founding Index Fund Advisors. One of Mark's mantras is to replace speculation with education, an idea he has held dear since his first forays into passive strategies and a message he delivers to his new clients repeatedly. Mark also tells us about the niche he filled with his business, visually presenting the evidence that was being ignored, in a way that was both easy to understanding and also convincing for investors. Our conversation covers the troubled waters of DIY investing, why Mark believes that an advisor is a necessary part of a good approach, as well as the parts of wealth management that are not actual investing. Mark unpacks his definition of risk and how best to think about it before we get into the topic of taxation. So for all this valuable information from a true authority, be sure to listen in with us and hear what Mark has to say! Key Points From This Episode: The events that led up to Mark founding Index Fund Advisors. [0:03:18.7] Mark's 12 step process for getting out of active investing and the importance of the first one. [0:11:41.3] Advice for avoiding the allure of active management — the idea of the Ulysses Pact. [0:16:12.2] Thoughts on large-cap growth stocks and the lessons we learn from history. [0:18:34.6] You cannot cheat risk; rules that have remained the same since 1720. [0:22:37.3] The folly of market timing and Mark's approach for explaining this. [0:27:55.1] Understanding tax and how it should impact and propel passive strategies. [0:33:10.1] The best way to think about risk — the uncertainty of your expected returns. [0:36:16.6] Important lessons that Mark has learned while educating clients over the years. [0:39:02.4] Aspects of wealth management apart from investing; saving, withdrawal rates, spending, and more. [0:43:28.2] The indispensability of an advisor — why DIY investing is not the way to go. [0:47:08.7] Mark's personal definition of success: Freedom of choice and the opportunity to help. [0:51:04.4] The public company that Mark had and exited before he got into investing. [0:54:23.8]

Sep 10, 2020 • 1h 22min
Actively Managed Funds vs. COVID-19, Behavioral Nudges, and a Sustainable Investing Update (EP.115)
Our focus for this episode of the Rational Reminder is split into two sections; first, we cycle through our regular features, looking at a number of studies and articles of interest, the market during the pandemic, and our bad advice segment, and then Benjamin is joined by Tim Nash to talk about ethical investing and comment on Wealthsimple's new sustainable portfolio. We start off our weekly round-up talking about the idea of broadening a knowledge-base and how reading widely and diversely on all manner of subjects can influence and benefit your investing. From there, we turn to the topic of quantitive easing before exploring Tim Wu's thesis about information empires and how they cyclically influence economics. We then dive into the Ontario Securities Commission Investor Experience Study and Lubos Pastor's paper, 'Mutual Fund Performance and Flows During the COVID-19 Crisis'. Both of these shed light on investor behaviour and market performance during 2020 and also offer some interesting findings on the strength of some active management. Daniel Crosby has laid out what he calls '22 Behavioral Nudges to Optimize Client Outcomes', which we then run through, touching on each of his ideas and commenting where necessary. Our bad advice of the week comes from TikTok, and we listen in on two, worryingly misleading clips from TikTok personalities — the social platform may not be the best place to find sound financial advice! For the last part of the show we hear from Tim Nash; he shares his thoughts on Ken French's appearance on the show recently and what the pandemic has proven about sustainable funds going forward. So for all of this and a whole more, in a jam-packed episode, be sure to listen in with us! Key Points From This Episode: The importance of a wide range of reading material and looking at Peter Thiel's Zero to One. [0:03:35.2] Quantitative easing and the important work that Frances Coppola has done on the subject. [0:09:22.8] Tim's Wu's economic theory around the cycle of information empires. [00:11:49] Takeaways from the Ontario Securities Commission Investor Experience Study. [00:13:53] Narratives about actively managed funds during the COVID-19 crisis. [0:20:04.1] The performance and flows of mutual funds; looking at Lubos Pastor's paper. [0:28:35.7] Sustainable funds during the crisis — the past research that this now underlines. [0:38:03.3] Looking at the 22 behavioural nudges identified by Daniel Crosby for optimizing client outcomes. [0:43:23.7] Bad advice of the week: A couple of concerning clips of financial of content on TikTok. [0:58:46.2] An introduction to Wealthsimple's new sustainable model portfolio. [1:03:45.5] Tim weighs in on what this progressive portfolio really means. [1:08:32.7] A response to the conversation we had with Ken French about ESG. [1:11:44.1] The increasing prioritization of sustainable companies during the pandemic. [1:16:47.8]

Sep 3, 2020 • 45min
Patricia Lovett-Reid: Financial Wellness in a Crisis (EP.114)
When it comes to your financial life, you can have endless conversations about asset allocation but we often neglect the impact of communication and asking difficult questions. Today we speak with Chief Financial Commentator and awarded media personality, Pattie Lovett-Reid. We start the discussion by COVID silver-linings and the financial lessons that people have been learning due to the pandemic. Pattie explores how people’s views of risk have shifted, along with the realization that our portfolios may not be as watertight as we had thought. We dive into financial control and Pattie emphasizes how better family dialogue and managing your emotions are key elements. After talking about how the COVID crisis is different from previous crises, Pattie talks about how stress impacts people’s financial decision-making. We ask Pattie for advice on teaching children about finances, and she uses examples from her own life to show how you can instill financial responsibility in your kids. From kids to partnerships, Pattie highlights why you should be on the same financial page as your partner before explaining the concept of financial abuse. We touch on what job-seekers should consider as they apply for jobs, tips for retirees facing the challenge of low-income rates, offering financial advice through Instagram, and how the work-from-home trend is affecting real estate. Our conversation this episode filled with practical advice, and Pattie’s approach focuses on the importance of asking difficult questions and communication, be that with your family, partner, or financial advisor. Tune in to hear more about why asking difficult questions is critical to controlling your finances. Key Points From This Episode: Introducing this episode’s guest, Pattie Lovett-Reid. [0:00:15] Key financial lessons that people have learned from the COVID-19 pandemic. [0:04:01] How the way that people view their portfolios has changed due to the pandemic. [0:05:08] Pattie’s insights into what people can control regarding their finances. [0:06:15] Why Pattie has bought dividend-paying stocks in sectors that have been performing poorly. [0:07:26] Why controlling your emotions is important in making sensible financial decisions. [0:09:06] Pattie’s media perspective on the current market, compared to previous crises [0:09:44] How stress has impacted people’s financial decisions for the worse. [0:12:07] What people can be doing to make sure that they don’t make poor decisions. [0:14:06] Hear how you can begin discussing personal finances with your children. [0:15:29] Planning for future upsets, the importance of balance, and being frugal, not cheap. [0:19:04.4] Being on the same financial page as your partner; it allows you to achieve financial goals. [0:21:40] The idea of financial abuse and the need for transparent conversations. [0:25:15] Thoughts on what job-hunters should do once the market opens up. [0:30:07] Pattie shares her ‘big-picture’ opinions on COVID market shifts. [0:31:48] Hear Pattie’s advice to retirees facing the challenge of low-interest rates. [0:33:27] How Pattie uses Instagram and the types of questions that she’s often asked. [0:36:04] The state of the average Canadian’s access to financial advice [0:39:22] Tough questions that you need to ask your financial advisor. [0:41:19] Reflecting on her life Pattie gives listeners some final advice on following your passion. [0:42:23]