Episode 309 - Are Robo-Advisors Passive Investors?

There is a huge range of factors that can impact our investment decisions, whether we realize it or not, from our level of financial literacy to our political affiliations. This is borne out in research conducted by today’s guest Professor Antoinette Schoar, the Stewart C. Myers-Horn Family Professor of Finance at MIT Sloan. Today, Antoinette joins us to share her insights and challenge conventional wisdom on various topics from target date funds to cryptocurrencies. Tuning in, you’ll learn about the transformative impact of target date funds on investment behaviours and asset allocation, before delving into the subject of financial literacy and financial advisors. Antoinette also sheds light on the unique dynamics of crypto trading and breaks down why retail investors' strategies in crypto differ significantly from those in traditional markets. We also discuss the complexities of private equity and venture capital, focusing on why these asset classes might not be suitable for retail investors due to high barriers and risks. Our conversation also covers the critical role of regulation in maintaining market stability and protecting investors. Join us for a thought-provoking discussion that promises to deepen your understanding of financial markets and enhance your investment decisions!   Key Points From This Episode:   (0:00:18) An introduction to today's guest, Antoinette Schoar, and her extensive research. (0:03:44) The rise of target date funds in the American retirement system: how it’s affected asset allocation and trading behaviour of retail investors. (0:09:39) The impact of target date funds: how they have affected mutual fund flows, arbitrage opportunities, market efficiency, the elasticity of aggregate demand, and trend-chasing anomalies. (0:16:48) The influence of individual beliefs, like political affiliation, on financial decision-making and portfolio adjustments, and how to counteract it. (0:21:54) Perceptions of risk in housing investments: how this affects the rent versus buy decision, what changes people’s housing risk perceptions, and how to make better housing decisions. (0:29:29) Findings from Antoinette’s study on financial advisors and their effectiveness at undoing bias in their prospective clients. (0:33:51) How investors' prior beliefs affect their receptiveness to receiving financial advice and why better financial literacy is essential. (0:41:38) What consumers need to know about advisor compensation structures and what they should look for when seeking out financial advice. (0:47:05) How Antoinette’s students motivated her to research cryptocurrency and teach it. (0:49:40) Antoinette’s insights on the applications of cryptocurrency and blockchain, and some of the surprising positive outcomes from the rise in cryptocurrency. (0:52:13) The trading behaviours of retail investors in cryptocurrencies compared to traditional asset classes. (0:57:30) An analysis of the Terra Luna collapse explaining the systemic issues and resulting financial impact on smaller investors. (01:02:14) The broader implications of cryptocurrency trading and the need for regulatory oversight to protect investors. (01:06:05) An overview of the challenges and risks of investing in private equity and venture capital for retail investors. (01:11:56) Antoinette’s reflections on success, professional goals, and the broader impact of research on financial markets and investor behaviour.   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://x.com/RationalRemind Rational Reminder on YouTube — https://www.youtube.com/channel/ Rational Reminder Email — [email protected] Felix — https://www.pwlcapital.com/author/benjamin-felix/  Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/ Cameron on X — https://x.com/CameronPassmore Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/ Antoinette Schoar — https://mitsloan.mit.edu/faculty/directory/antoinette-schoar Monika Piazzesi — https://economics.stanford.edu/people/monika-piazzesi   Papers From Today’s Episode:    ‘Belief Disagreement and Portfolio Choice’ — https://www.nber.org/papers/w25108 ‘Credit Supply and House Prices: Evidence from Mortgage Market Segmentation’ — https://www.nber.org/papers/w17832 ‘Retail Investors’ Contrarian Behavior Around News, Attention, and the Momentum Effect’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3544949 ‘Anatomy of a Run: The Terra Luna Crash’ — https://www.nber.org/papers/w31160

When robo-advisors first came onto the scene, they were pitched as an easy way to access index funds. These digital platforms provide algorithm-driven financial planning and investment services, with little to no human supervision, and typically use passive investment strategies. But while this technology has revolutionized access, not all robo-advisors are created equal. In today’s episode, Mark, Ben, and Cameron sit down to discuss the role of robo-advisors as passive investors, and the performance disparity in robo-advisor returns, as they investigate different robo-advisors, from Wealthsimple to Wealthfront. Next, in this week’s version of ‘Would you rather?’, we have robo-advisors pairing off against active bank mutual funds, with each of our hosts debating the pros and cons of these two approaches. For our aftershow section, we discuss listener feedback, interesting community discussions, Ben’s addiction to Excel, and much more. Tune in for a deep dive into robo-advisors and how to navigate this technology! Key Points From This Episode:   (0:04:20) The history of robo-advisors and how they are used today. (0:08:30) Why there is such a marked dispersion among robo-advisor portfolios; an overview of Wealthsimple’s portfolios and the changes they’ve made over time. (0:16:00) Wealthsimple's investment returns, fees, and an attribution analysis. (0:24:19) Why Wealthfront pulled value out of their factor-tilted portfolios in 2022. (0:26:13) PWL’s investment approach and why no strategy is truly passive. (0:30:43) What the average investor needs to understand when using a robo-advisor. (0:32:02) Wealthsimple’s value proposition and why people are drawn to it. (0:33:33) Our ‘Would You Rather?’ Question: Would you rather put all your money with a robo-advisor or in a big bank actively managed mutual fund? (0:40:30) The growth of passive investing vs active management in the financial industry. (0:44:12) AI's impact on financial planning and an update on new calculators we’ve released. (0:52:38) Aftershow section: listener feedback, community discussions, leasing versus buying vehicles, Ben’s addiction to modelling, 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://x.com/RationalRemind Rational Reminder on YouTube — https://www.youtube.com/channel/ Rational Reminder Email — [email protected] Felix — https://www.pwlcapital.com/author/benjamin-felix/  Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/ Cameron on X — https://x.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://x.com/MarkMcGrathCFPWealthsimple — https://www.wealthsimple.com/en-ca Wealthfront — https://invest.wealthfront.com/ Rational Reminder Episode 308: Dan Bortolotti — Episode 299: The Most Important Lessons in Investing — https://rationalreminder.ca/podcast/299 The Money Scope Podcast — https://moneyscope.ca/Episode 251: Covered Calls — https://rationalreminder.ca/podcast/251 Ashleigh Madison: Sex, Lies & Scandal — https://www.netflix.com/za/title/81602884   —    Papers From Today’s Episode:    ‘Are Banks Better Money Doctors?’ — https://www.researchgate.net/publication/377037694_Are_banks_better_money_doctors_An_analysis_of_mutual_fund_flows_of_bank_and_non-bank_funds_using_Canadian_data

When it comes to DIY investing, there’s always a temptation to make things more complicated than they need to be. But, in reality, embracing simplicity is one of the best ways to ensure good investment outcomes. Today’s episode features an exceptional conversation with our long-time friend and colleague, Dan Bortolotti, who has worked alongside us as an Portfolio Manager at PWL Capital for over ten years. Some of our Canadian listeners might recognize Dan as the man behind the Canadian Couch Potato blog (one of the most popular resources for Canadian investors) and the voice behind the Canadian Couch Potato podcast. Dan is a consummate communicator, both on paper and in person; beyond his extensive blogging, he has also written a number of books, both fiction and non-fiction, the most recent of which includes Reboot Your Portfolio: 9 Steps to Successful Investing with ETFs. Dan has played a pivotal role in making PWL Capital what it is today, and in this episode, we learn about his surprising journey to becoming an advisor, before hearing his wide-ranging insights on DIY investing. Dan breaks down key components for investors, from how to approach your asset allocation and picking index funds to navigating fees, taxes, and performance. We also discuss how the investing landscape has changed since Dan started writing and essential lessons he has learned over the years. To hear all about investing from the Canadian Couch Potato himself, be sure to tune in for this expansive conversation!   Key Points From This Episode:   (0:03:52) The origin story of the Canadian Couch Potato blog, by Dan Bortolotti. (0:08:17) How the availability of index funds in Canada has changed since Dan started writing about them in 2010, and his role in the index fund revolution. (0:10:01) Why Canadians have been slower to adopt index funds than Americans. (0:12:09) How the model portfolios on his site have changed over time. (0:14:20) Why simplicity is so important to a good investment outcome. (0:16:38) The biggest obstacle Dan has observed when it comes to successful investing. (0:19:40) Advice on how to approach decisions around stocks, bonds, and asset allocation. (0:24:34) How to select the ideal ETF or index fund to express your asset allocation. (0:27:22) Some of the ways that Dan’s views have changed since starting the Couch Potato portfolio, and the evolution of his blog. (0:31:46) Why you should be clear on your financial goals before investing and the importance of saving rate relative to fees and performance. (0:37:32) Understanding the value of financial advice if we consider investing to be effectively solved by low-cost ETF mutual funds. (0:40:23) Why it’s so important to close the gap between providing a financial plan and implementing it. (0:43:25) What surprised Dan about his clients during his transition from blogger to advisor, and what he has learned about earning his clients’s trust. (0:48:22) Dan’s thoughts on how people should make the decision between DIY investing or hiring an advisor, and what people should look for in a financial advisor. (0:55:46) The story of how Dan connected with PWL Capital and the key ways he has helped shape the company.   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 — [email protected] 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/ Dan Bortolotti — https://www.pwlcapital.com/profile/dan-bortolotti/ Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/ Canadian Couch Potato Blog — https://canadiancouchpotato.com/ Canadian Couch Potato Podcast — https://canadiancouchpotato.com/podcast/ Larry Swedroe on LinkedIn — https://www.linkedin.com/in/larry-swedroe-18778267/ Larry Swedroe books on Amazon — https://www.amazon.com/Larry-E-Swedroe-Books/s?k=Larry+E.+Swedroe&rh=n%3A283155   Books From Today’s Episode:   Reboot Your Portfolio: 9 Steps to Successful Investing with ETFs — https://www.amazon.ca/Reboot-Your-Portfolio-Successful-Investing/dp/1988344328 Wild Blue — https://www.amazon.com/Wild-Blue-Natural-History-Largest-ebook/dp/B005BP0E3W

Are you confident about the amount of life insurance coverage you have? Are you maximizing your tax savings with the principal residence exemption? In this episode, we delve into life insurance and optimizing capital gains to answer these essential questions. In our conversation, we unpack the nuanced topic of life insurance, what people get wrong about it, and how to effectively calculate your life insurance policy needs. Using his own experience as the lens for the conversation, Mark shares how he calculated his life insurance and incorporated costs such as funeral cover, emergency funds, short-term expenses, and income replacement. Learn about using the safe withdrawal rate shortcut, free resources for calculating life insurance costs, and the best financial tools for getting the most out of your policy. He also delves into capital gains and how to use a lesser-known exemption to reduce the amount owed significantly. Mark walks listeners through how the principal residence exemption works and how it impacted the sale of his rental properties. Then, jumping to a brand new segment on the Rational Reminder Podcast, Ben introduces his financial decision-making iteration of the game of ‘Would you rather’. Finally, we share listener reviews and feedback on previous episodes and debate whether to lease or buy a car in our after-show segment. Tune in now!   Key Points From This Episode:   (0:03:13) Mark explains how he and his wife calculated their life insurance needs. (0:06:55) Learn how to plan for income replacement and why it is so complicated. (0:12:10) Ben’s perspective on Mark’s approach to calculating his life insurance coverage. (0:13:54) Find out why there are differences between Ben and Mark’s calculations. (0:18:17) How Mark factored in retirement costs into his life insurance calculations. (0:22:30) Free resources and tips to accurately calculate your life insurance needs. (0:27:04) Why Mark considers whole life insurance as a separate asset class. (0:31:25) The principal residence exemption and how Mark applied it to his situation. (0:39:19) How we would choose to invest $1 billion in today’s market. (0:42:26) Would You Rather segment: only life insurance versus only disability insurance. (0:45:02) The exciting development of a tool for realizing capital gains in a corporation. (0:51:06) Trends in the awareness of corporate notional accounts and tax planning intricacies. (0:54:12) Listener reviews, episode feedback, and leasing a car instead of buying.   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://x.com/RationalRemind Rational Reminder on YouTube — https://www.youtube.com/channel/ Rational Reminder Email — [email protected] Felix — https://www.pwlcapital.com/author/benjamin-felix/  Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/ Cameron on X — https://x.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://x.com/MarkMcGrathCFP ‘How Much Life Insurance Do You Need?’ — https://www.linkedin.com/pulse/how-much-life-insurance-do-you-need-mark-mcgrath-cfp-cim-clu--tjwwe/ InsureRight — https://www.insureright.ca/ Episode 65: Dr. Wendall Mascarenhas — https://rationalreminder.ca/podcast/65 Dimensional Fund Advisors — https://www.dimensional.com/ Money Scope Podcast — https://moneyscope.ca/ Braden Financial Services — https://www.bradenfinancialservices.com/ Hendry Warren on LinkedIn — https://www.linkedin.com/company/hendry-warren-llp/ Brady Plunkett on LinkedIn — https://www.linkedin.com/in/brady-plunkett-712489105/ Capital Gains Calculator for Non-Corporations — https://research-tools.pwlcapital.com/research/realize-gain Episode 305 - Is Private Credit Special? — https://rationalreminder.libsyn.com/episode-305-is-private-credit-special

Designing a robust portfolio requires considerable expertise, data, and experience. And while there are plenty of published articles that can guide how you build your portfolio, they are not investment solutions by themselves. Wei Dai is the Head of Investment Research and Vice President at Dimensional Fund Advisors, and she joins us today for a comprehensive and informative conversation on portfolio design for higher returns. Her background includes a Doctor of Philosophy degree in Statistics, Operations research, and Financial Engineering from Princeton. She has also earned a bachelor's degree in mathematics and applied mathematics from Zhejiang University. Her work has been published in multiple journals, including The Financial Analysts Journal. She has also collaborated on articles with esteemed figures such as Professor Robert C. Merton and Robert Novy-Marx. In our conversation with Wei, we explore the contents of these articles, key findings from research conducted by Dimensional Fund Advisors, and how they are implementing this knowledge in their portfolios. We discuss the fundamental aspects of portfolio design, like expected return, risk, and costs, with Wei providing a detailed breakdown of each subject. There’s a lot to be learned from today’s conversation, and while things get pretty technical, you are in very capable hands! Tune in for a fascinating dive into the latest research on portfolio design and much more.   Key Points From This Episode:   (0:03:37) The main risk premiums that Dimensional Fund Advisors target in their portfolios. (0:05:42) How long-term drivers of returns vary across different regions: an overview of the tests and outcomes they’ve seen at Dimensional Fund Advisors. (0:07:15) Unpacking whether the value premium differs from the profitability premium across regions; why it makes sense to be globally diversified. (0:08:57) Typical approaches to a multi-premium strategy in a portfolio: a rundown of the three approaches they take at Dimensional and the trade-offs between each. (0:13:44) How they evaluate portfolios at Dimenstional: the benefits of taking a holistic, integrated approach, and instances where that doesn’t make sense. (0:17:24) Weighting schemes: Dimensional’s approach to assigning individual security weights to achieve the desired level of exposure and how investments factor into weights. (0:26:46) Advice on how investors should decide whether to currency hedge their foreign asset exposures, and insights on how to approach currency hedging. (0:30:42) Premium timing: Why timing exposure to premiums is so tempting; parameters that must be defined to implement timing strategies; and which strategies worked in their research. (0:39:21) Valuation ratios: why it theoretically makes sense that they would be related to differences in expected returns and why they aren’t useful in timing premiums. (0:42:11) An overview of the main implications for pursuing premiums that arise from Dimensional’s research. (0:44:10) Diversification and how to improve your odds of capturing return premiums. (0:46:38) The tradeoff between concentration and expected returns, and defining the optimal balance. (0:49:06) What investors should look for when choosing a systematic investment manager, why not all systematic strategies are created equal, and Dimemsional’s approach. (0:52:52) The downsides of performance fees, specifically for systematic managers and what it was like writing a paper with Robert Merton. (0:57:41) How short-term reversals differ from momentum, ways that reversals are related to liquidity, and how reversals vary across different stocks. (01:03:12) The ways that Dimensional is implementing this knowledge in their portfolios; how their ideas go from research to publication to implementation. (01:08:18) What sets Dimensional apart, and the value that they add, despite their research being available online.   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 — [email protected] 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/ Wei Dai on Linkedin — https://www.linkedin.com/in/wei-dai-64a3071a/ Wei Dai’s Academic Papers — https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=2888456 Dimensional Fund Advisors — https://www.dimensional.com/ Episode 234: Prof. Robert C. Merton — https://rationalreminder.ca/podcast/234   Papers From Today’s Episode:  Assessing the Relative Magnitude of Premiums — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3981766 Pursuing Multiple Premiums: Combination vs. Integration — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3793594 Weighting for the Right One: Weighting Scheme Design for Systematic Equity Portfolios — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4016481 To Hedge or Not to Hedge: A Framework for Currency Hedging Decisions in Global Equity & Fixed Income Portfolios — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3703333 Another Look at Timing the Equity Premiums — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4586684 Premium Timing with Valuation Ratios How Diversification Impacts Investment Outcomes: A Case Study on Global Large Caps How Diversification Impacts the Reliability of Outcomes — https://carlsoncap.com/wp-content/uploads/DFA_-How-Diversification-Impacts-the-Reliability-of-Outcomes.pdf  On the Valuation of Performance Fees and Their Impact on Asset Managers’ Incentives — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3686987 Reversals and the returns to liquidity provision — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4339591

Private credit is one of the fastest-growing asset classes, and today we take a closer look at why that is, and if it’s really worth the hype. When you invest in private credit, you are essentially lending money to borrowers who might have difficulty accessing loans elsewhere. While these assets may be profitable, they can also incur a lot of risk and typically come with illiquidity. It is traditionally traded among institutional and accredited investors, rather than retail investors, namely, non-professional investors. Since private credit has gained so much popularity in recent years, we use today’s conversation to unpack how private credit works, the role of private credit funds, the associated performance fees and risks, and what retail investors should know about this asset class before deciding to invest. Our conversation investigates one of the top reasons for private credit’s rise in popularity, namely risk-adjusted returns, before evaluating whether this is a worthwhile reason to invest, depending on who you are. Stay tuned for our after-show section where we discuss the proposed changes to the capital gains tax, why the death of value could be exaggerated, and more!   Key Points From This Episode:   (0:00:18) Today’s main topic, private credit, and our upcoming webinar on May 22nd. (0:02:18) An introduction to private credit as an asset class. (0:05:33) Private credit funds: how they work, interest rates, performance fees, and valuations. (0:08:14) Who does valuations on private credit funds and related risks. (0:10:01) Unpacking the underlying risks of private credit and how investors are compensated. (0:11:02) Insights from the paper ‘Direct Lending Returns’ related to publicly listed business development companies (BDCs). (0:16:15) Takeaways from the paper ‘Risk Adjusting the Returns of Private Debt Funds’. (0:18:16) Private credit funds, equity exposure, how private credit gets misrepresented, and what investors need to know about high-fee investment products. (0:25:09) Illiquidity and what retail investors can expect from private credit. (0:30:15) Our aftershow segment, starting with the proposed changes to capital gains tax. (0:33:55) Ben’s conversation with David Chilton. (0:36:55) The value premium and why the death of value could be exaggerated. (0:40:45) Unpacking the heated response to our conversation with Scott Galloway. Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p   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 — [email protected] 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 Webinar May 22nd: Optimal Compensation Strategies for Business Owners — https://us06web.zoom.us/webinar/register/3317145039436/WN_GYudVJCYSnyF8HfUx9UbJQ Money Scope Episode 12 — https://moneyscope.ca/2024/04/19/episode-12-paying-yourself-as-a-canadian-business-owner/ Money Scope Episode 13 — https://moneyscope.ca/2024/04/26/episode-13-optimal-compensation-from-a-ccpc/ Rational Reminder Episode 220: Jonathan Berk and Jules van Binsbergen — https://rationalreminder.ca/podcast/220 Rational Reminder Episode 210: Ludovic Phalippou — https://rationalreminder.ca/podcast/210 David Chilton — https://thewealthybarber.com/ David Chilton on X — https://twitter.com/wealthy_barber?lang=en Rational Reminder Episode 303: Scott Galloway — https://rationalreminder.ca/podcast/303   Books From Today’s Episode:   The Wealthy Barber: Everyone's Commonsense Guide to Becoming Financially Independent — https://www.amazon.com/Wealthy-Barber-Updated-3rd-Commonsense/dp/0761513116   —    Papers From Today’s Episode:    ‘Direct Lending Returns’ — https://rpc.cfainstitute.org/en/research/financial-analysts-journal/2023/direct-lending-returns ‘Risk Adjusting the Returns of Private Debt Funds’ — https://www.nber.org/papers/w32278 ‘An Inconvenient Fact: Private Equity Returns & The Billionaire Factory’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3623820 ‘Reports of Value’s Death May Be Greatly Exaggerated’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3488748  

The Canadian government has recently proposed significant changes to how capital gains are taxed, but how will this impact Canadians? In this episode, we delve into the proposed capital gains tax changes and their impact on financial planning. We unpack the definition of capital gains tax and the complexity of the proposed changes. Explore the historical trends of capital gains tax rates in Canada, how capital gains tax works, and who will be impacted by the proposed changes. We discuss the intricacies of the alternative minimum tax (AMT), its relevance to capital gains tax, and whether the old or new AMT rules apply to the upcoming changes. Gain insights into tax considerations for long-term investment strategies, the importance of tax diversification in mitigating risk, lifetime capital gains exemption, tax planning ramifications, and more! Although this episode is Canadian-focused, it offers many useful takeaways for non-Candaians as well. To gain a comprehensive understanding of the complexities surrounding capital gains tax and strategies to navigate the proposed changes effectively, tune in now! Key Points From This Episode:   (0:00:00) Introduction and outline of today’s topic: proposed capital gains tax changes. (0:03:07) Overview of the topic, what capital gains tax is, and the proposed changes. (0:08:10) Historical trends in capital gains tax rates in Canada. (0:10:59) Find out who will be impacted by the proposed changes.  (0:14:45) Advice on how to plan for the proposed changes with an example. (0:17:13) Model results and we unpack the nuance of AMT (alternative minimum tax). (0:25:35) How the changes to AMT impact the proposed capital gains tax changes. (0:32:05) Whether the new or old AMT rules apply to the proposed capital gains changes. (0:34:27) Important tax considerations for long-term investment strategies. (0:36:30) Insights into why tax diversification is essential to reduce the tax rate risk. (0:39:25) Interesting budget proposals and their tax planning implications. (0:41:17) Our perspectives on the media response to the proposed tax changes. (0:45:40) After-show: listeners’ reviews, upcoming guests, an update on Mark’s book, 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 — [email protected] 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 Capital Gains Calculator — https://research-tools.pwlcapital.com/research/realize-gain Episode 224 — https://rationalreminder.ca/podcast/224 Episode 284 — https://rationalreminder.ca/podcast/284 Episode 299 — https://rationalreminder.ca/podcast/299 Episode 302 — https://rationalreminder.ca/podcast/302 Canadian Medical Association — https://www.cma.ca/ The Money Scope Podcast  — https://moneyscope.ca/ The Most Important Lessons in Investing — https://www.youtube.com/watch?v=MOjS2zuQMdo Dan Solin — https://danielsolin.com/ Compensation Strategies for Canadian Business Owners — https://www.pwlcapital.com/compensation-strategies-for-canadian-business-owners2/   Books From Today’s Episode:   The Wealthy Barber — https://www.amazon.com/Wealthy-Barber-Updated-3rd-Commonsense/dp/0761513116

What is the role of luck in financial success? And how can we make decisions that will put us in the best possible position to experience long-term prosperity? Joining us today to unpack these questions is Scott Galloway, a talented public speaker, author, entrepreneur, and professor of marketing at NYU Stern School of Business. His latest book, The Algebra of Wealth: A Simple Formula for Financial Security, explores key lessons to help you optimize your life for wealth and success. He is the host of a thrice-weekly podcast, The Prof G Pod, and co-hosts a podcast called Pivot with esteemed tech journalist, Kara Swisher. Scott also has a very popular blog called No Mercy / No Malice, where he shares his thoughts on wealth, business, psychology, and more. In today’s conversation with Scott, we delve into the lessons he’s learned about economic success and the contents of his new book, The Algebra of Wealth. Tuning in you’ll learn how the economic stress he experienced as a child shaped his life, the important role that luck plays in financial success, and why he believes people should follow their talents rather than their passions. Scott goes on to expand on why diversification is essential for financial success before sharing key lessons from the various businesses he has started, built, and sold. We also discuss how he manages his financial worries, his hopes for his children, and how he defines success. Tune in to hear all of Scott’s valuable insights as we take a deep dive into the forces that shape our economic outcomes, and the algebra of wealth!   Key Points From This Episode:   (0:00:18) Introducing today’s guest, Professor Scott Galloway. (0:05:43) Unpacking the title of his book The Algebra of Wealth, and what it refers to. (0:10:39) The pursuit of wealth as a whole-person project and why balance is rarely possible. (0:13:38) How stoicism can help you spend wisely and resist temptations. (0:19:23) The difference between working hard and having character when it comes to wealth. (0:22:20) Why it’s so important to acknowledge the role of luck in economic success; how Scott’s awareness of luck impacted his financial decisions and made him diversify. (0:30:41) The concept of having enough, why people always want more, the benefits of giving back, and the role that luck has played in Scott’s wealth. (0:35:31) Why Scott believes people should follow their talents, rather than their passion. (0:39:31) Scott’s thoughts on the work-from-home trend and why he is a big proponent of an office environment and in-person work for young people. (0:41:23) The key ways that physical exercise contributes to financial success. (0:44:37) Scott’s thoughts on financial planners, how to take advantage of technology and low-cost EFTs to diversify on your own, and qualities you should look out for in a financial planner. (0:50:08) Scott’s approach to investing in private businesses, his history of starting and selling companies, and why diversification is key. (0:52:26) What the average person should do when there is excitement about a particular stock. (0:56:06) Scott’s insights on the most beneficial way to trade money for time, how he manages his financial worries, and his biggest financial concerns when it comes to his children. (01:03:32) How Scott defines success in his life, and what he has learned so far from starting ketamine therapy.   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 — [email protected] 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/ Scott Galloway — https://profgmedia.com/ Scott Galloway Books — https://profgmedia.com/books/ Scott Galloway on LinkedIn — https://www.linkedin.com/in/profgalloway/ Scott Galloway on Twitter — https://twitter.com/profgalloway No Mercy No Malice — https://www.profgalloway.com/ Pivot with Scott Galloway and Kara Swisher — https://profgmedia.com/pivot/ The Prof G Pod with Scott Galloway — https://profgmedia.com/the-pod/   Books From Today’s Episode:   The Algebra of Wealth: A Simple Formula for Financial Security — https://www.amazon.com/Algebra-Wealth-Formula-Financial-Security/dp/0593714024  

With a wealth of experience as a market theoretician and a prolific contributor to financial discourse, today’s guest is uniquely positioned to guide us through the complexities of index fund dynamics. Joining us to discuss the problems that passive investing may be causing in financial markets (and what people should do about it) is Michael Green, Chief Strategist and Portfolio Manager for Simplify Asset Management. Tuning in, you’ll learn about the ramifications of the surging popularity of indexing and the sobering reality of mounting market inelasticity, backed by compelling evidence that underscores the challenges facing today's financial landscape. The insights in this episode extend beyond mere observation, with Mike offering policy recommendations and strategies to address the structural issues affecting our markets. While this conversation is certainly challenging, philosophical, and even alarming, it isn't purely theoretical. It’s a call to action to safeguard the integrity of our financial systems. So, be sure to join us as we navigate the nuances of indexing and passive investing at large, guided by the expertise and foresight of one of finance's most respected voices!   Key Points From This Episode:   (0:05:48) The negative effect that the growth of indexing is having on financial markets. (0:07:37) Insight into the XIV trade that strengthened Mike’s belief in this view. (0:13:49) Defining the problem that indexing is causing (which might seem like a good thing). (0:15:57) How market cap-weighted index funds differ from closet index funds. (0:16:57) Indications that markets are becoming increasingly inelastic over time. (0:19:21) Why flows into cap-weighted index funds differ from the overall aggregate of active. (0:24:21) Active versus passive investing in public versus non-public markets. (0:25:57) The catastrophic event that could be caused by index funds (and how to avoid it). (0:30:51) Why we need to rethink the definition of passive investing and the value of diversity. (0:36:10) Market inelasticity versus inefficiency and the impact of active manager performance. (0:41:38) How investors should shift their strategy to respond to the current market structure. (0:53:01) Regulatory recommendations: who actually needs to step up and do something. (0:54:30) Mike’s outlook on US expected returns, market volatility, and 401(k)s. (1:01:50) Why Bitcoin isn’t the solution to all of our monetary and fiscal policy problems. (1:05:22) The definition of success in Mike’s life (and why it’s completely non-financial). 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 — [email protected] 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/ ‘Yes, I give a fig… Thoughts on markets from Michael Green’ — https://www.yesigiveafig.com/ Michael Green on Substack — https://substack.com/@michaelwgreen Michael Green on LinkedIn — https://www.linkedin.com/in/michael-green-9a15142/ Michael Green on X — https://twitter.com/profplum99 Nassim Nicholas Taleb — https://www.fooledbyrandomness.com/ Valentin Haddad — https://sites.google.com/site/valentinhaddadresearch/ Jean-Philippe Bouchaud — https://bouchaud.substack.com/ Marco Sammon — https://marcosammon.com/research/ Ralph Koijen — https://www.koijen.net/index.html David Einhorn — https://twitter.com/davidein   Books From Today’s Episode:   The Black Swan — https://www.amazon.com/dp/081297381X Adaptive Markets — https://www.amazon.com/dp/0691135142   Papers From Today’s Episode:    ‘How Competitive is the Stock Market? Theory, Evidence from Portfolios, and Implications for the Rise of Passive Investing’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3821263 ‘How Competitive is the Stock Market?’ Slides — https://drive.google.com/file/d/1QTxuFI7eK_RJwaV3ncAjX41pEb1anLeM/view ‘Do Active Funds Do Better in What They Trade?’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4624934 ‘The Passive-Ownership Share Is Double What You Think It Is’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4188052 ‘The Arithmetic of Active Management’ — https://www.jstor.org/stable/4479386 ‘Sharpening the Arithmetic of Active Management’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2849071 ‘Long Volatility, Asymmetric Alpha, Negatively Correlated Alpha, Convex Crisis Alpha’ Slides — https://www.macrovoices.com/guest-content/list-guest-publications/3860-logica-capital-active-to-passive-for-macrovoices/file ‘The Greatest Story Ever Sold: The Impact of Passive Investment on Markets’ Slides — https://utahfpa.org/images/downloads/Library_Documents/market_policy_presentation.pdf ‘The Inelastic Markets Hypothesis’ — https://www.nber.org/papers/w28967

In this episode, we delve into the best time to claim your Canada Pension Plan (CPP) benefits. Although the focus of this episode is on Canada, there will be many relevant and valuable insights for our non-Canadian listeners. In our conversation, we discuss the importance of understanding the intricacies of CPP benefits, the fundamentals, and how individuals can optimize their retirement income by making informed decisions. Explore the importance of understanding when to claim CPP benefits, how much future financial security a CPP offers, and why the CPP is one of the most valuable retirement assets for most Canadians. Gain insights into how wage growth ties into CPP benefits, the exceptions to deferring a CPP claim, and what made 2022 different regarding CPP claims. Join us as we uncover the nuances of CPP benefits!   Key Points From This Episode: (0:03:25) Unpack the fundamentals of the Canada Pension Plan (CPP) benefits. (0:10:04) How the timing of making a CPP claim is linked to the benefits. (0:14:15) Ben explains the financial implications of deferring a CPP claim. (0:21:34) Uncover common approaches to identify the best time to claim a CPP. (0:26:06) Learn about the situations when it is best not to defer a CPP claim. (0:31:12) Why the CPP is one of the most valuable retirement assets for most Canadians. (0:39:11) The after-show: ideas for the podcast, feedback, segregated funds, 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 — [email protected] 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 Prof. Meir Statman — https://www.scu.edu/business/finance/faculty/statman/ Prof. Meir Statman on Twitter — https://twitter.com/meirstatman  Episode 258: Prof. Meir Statman — https://rationalreminder.ca/podcast/258 The Canadian Institute of Actuaries (CIA) — https://www.cia-ica.ca/ Society of Actuaries (SOA) — https://www.soa.org/ FP Canada — https://www.fpcanada.ca/ When Should You Start CPP? — https://www.youtube.com/watch?v=r9vYji99fhk CE Drive with Jason Watt — https://cedrive.podbean.com/ Episode 137: David Blanchett: Researching Retirement — https://rationalreminder.ca/podcast/137 Episode 254: David Blanchett: Regret Optimized Portfolios and Optimal Retirement Income — https://rationalreminder.ca/podcast/254 Episode 289 - Retiring Retirement Income Myths with the Retirement Income Dream Team — https://rationalreminder.ca/podcast/289 Jason Yi on LinkedIn — https://www.linkedin.com/in/jason-yi-cpa-ca-56544446/ Episode 225: The Index Fund "Tipping Point” — https://rationalreminder.ca/podcast/225   Books From Today’s Episode:   Wealthier — https://wealthierbook.com/ The Algebra of Wealth — https://www.amazon.com/Algebra-Wealth-Formula-Financial-Security/dp/0593714024 Sleep Well, Take Risks, Squish the Peas — https://www.amazon.com/Sleep-Well-Take-Risks-Squish/dp/0757324711/   Papers From Today’s Episode:    ‘The CPP Take-Up Decision: Risks and Opportunities’ — https://www.soa.org/4a223f/globalassets/assets/files/resources/research-report/2020/2020-cpp-take-up-decision.pdf ‘Get the Most from the Canada & Quebec Pension Plans by Delaying Benefits’ — https://www.fpcanadaresearchfoundation.ca/media/5fpda5zw/cpp_qpp-reseach-paper.pdf ‘Financial Advisor Compensation Structure and Client Equity Allocations’ — https://www.tandfonline.com/doi/full/10.1080/15427560.2023.2294812