Episode 345 - AMA #3 · The Rational Reminder Podcast summary

Key takeaways

Bitcoin's past performance does not guarantee its future viability as an investment.
Investors should be cautious with factor investing when suitable ETFs aren't available.
Buffered ETFs offer potential benefits but come with significant trade-offs.
Emerging markets can add diversification but come with their own risks.
'Return stacking' may allow for leveraged exposure to multiple returns but should be approached cautiously.
High valuation metrics, like the Shiller PE ratio, do not always predict poor future returns.
Adjusting asset allocation should be personalized, taking into account individual risk tolerance as retirement approaches.
Operational rebalancing in portfolios is important for maintaining alignment with investment goals.

Summary

Introduction and Format of the AMA

In this episode, hosts Ben Felix, Dan Bortolotti, and Mark McGrath introduce the AMA format and stress the importance of listener questions. They mention the success of previous AMA sessions and how the current episode will address new inquiries.

Bitcoin as an Investment

The hosts discuss the investment implications of Bitcoin, referencing its past performance. They consider whether Bitcoin remains a good investment, highlighting that while it may have been rewarding for some, the future value is uncertain. They emphasize that past performance does not imply future results.

Factor Investing Without ETFs

Ben, Dan, and Mark discuss challenges in implementing factor investing strategies in markets lacking suitable ETFs. They suggest alternatives like dividend ETFs and acknowledge the importance of understanding the underlying strategies of any investing product.

Using Buffered ETFs

The podcast explores buffered ETFs, discussing their structure of providing downside protection while capping upside potential. The hosts express skepticism about their overall effectiveness, given the trade-offs involved.

Investing in Emerging Markets

The discussion shifts to investing in regions with low transparency, such as emerging markets. The hosts contemplate whether such investments are wise and how they fit into global diversification strategies.

Return Stacking and Leverage

The concept of 'return stacking' is reviewed, where investors can leverage multiple sources of return. The hosts debate the merits of using leverage in individual portfolios and caution against potential pitfalls.

Market Efficiency and Valuation Metrics

The hosts tackle the question of market efficiency, especially in corrupt markets. They evaluate the relevance of traditional valuation metrics like the Shiller PE ratio, suggesting that high valuations do not always correlate with low expected returns.

Asset Allocation Changes Over Time

In addressing the listener's inquiry about adjusting asset allocations as retirement approaches, the hosts delve into strategies for gradual shifts in risk tolerance and the importance of a customized approach to asset allocation.

Operational Rebalancing in Portfolios

The operational aspects of portfolio rebalancing are discussed, including approaches utilized at PWL Capital to keep portfolios aligned with client goals, relevant tax considerations, and the balance between efficient transactions and client behavior.

Show notes

As we continue to answer your questions from our most recent AMA, Ben, Mark, and Dan begin today's episode with Bitcoin and how its value as an investment has changed over the years. Then, after briefly explaining how to find short clips of this podcast online, we discuss why many companies choose not to list directly on the TXS, how to implement factor investing without factor EFTS, the best way to invest if you could only make one EFT investment in your lifetime, and, and understanding buffered EFTs and market-linked GICs. We also cover expected returns in a corrupt market, return stacking for individuals, academia versus real-world applications, and why stock valuations will never be the same as they were in the past. To end, we look at lump sum investing versus dollar-cost averaging, what to remember regarding asset allocation, how we rebalance portfolios here at PWL Capital, and we wish Ben well as he awaits his diagnosis.

Key Points From This Episode:

(0:03:30) Unpacking the value of Bitcoin as an investment; past, present, and future.

(0:09:58) Why we don't use YouTube Shorts anymore and how to find our bite-sized clips.

(0:10:29) Understanding why many companies refrain from directly listing on the TXS.

(0:11:29) An interlude on how we take care of our bodies.

(0:14:22) Implementing factor investing without factor ETFs, and Manulife's multifactor ETFs.

(0:19:21) What we would do if we could only invest in one ETF until retirement.

(0:22:23) Buffered EFTs and market-linked GICs.

(0:26:15) Market efficiency and expected returns in a low transparency/high corruption market.

(0:29:50) Whether return stacking is a good idea for individuals, and unpacking leverage.

(0:40:44) Balancing proven business philosophies with academic thinking.

(0:47:39) The Shiller PE Ratio; why stock valuations are permanently higher than in the past.

(0:54:58) Lump sum investing versus dollar-cost averaging.

(1:00:09) Asset allocation and how to know which assets to sell first.

(1:04:57) How PWL Capital rebalances client portfolios – an operational perspective.

(1:10:42) The after show: Testicular cancer and heartwarming reviews.

Links From Today's Episode:

Meet with PWL Capital — https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — https://rationalreminder.ca/

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

Rational Reminder on X — https://x.com/RationalRemind
Rational Reminder on TikTok — www.tiktok.com/@rationalreminder

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

Rational Reminder Email — info@rationalreminder.ca
Benjamin Felix — https://pwlcapital.com/our-team/

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

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

Cameron Passmore — https://pwlcapital.com/our-team/

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

Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/

'Episode 80: A Planning Checklist, Portfolio Concentration, and Leverage' — https://rationalreminder.ca/podcast/80

'Episode 343: How to Choose an Asset Allocation' — https://rationalreminder.ca/podcast/343

'Episode 234: Prof. Robert C. Merton: ICAPM, Retirement, and Models in Finance' — https://rationalreminder.ca/podcast/234

'Episode 335: What About Warren Buffett?' — https://rationalreminder.ca/podcast/335

'Episode 202: Antti Ilmanen: The Building Blocks of Long-Run Returns' — https://rationalreminder.ca/podcast/202

'Episode 262: Prof. Francisco Gomes: Consumption and Portfolio Choice over the Life Cycle' — https://rationalreminder.ca/podcast/262

'Dan Bortolotti: Index Investing, ETFs and Financial Planning' — https://thewealthybarber.com/podcast/dan-bortolotti-index-investing-etfs-and-financial-planning-twb-podcast-9/

Manulife Investment Management — https://www.manulifeim.com/retail/ca/en

Dimensional Fund Advisors — https://www.dimensional.com/hk-en/financial-professionals

Scott Cederburg on LinkedIn — https://www.linkedin.com/in/scott-cederburg-0917b0121/

Corey Hoffstein on LinkedIn — https://www.linkedin.com/in/coreyhoffstein/

We Study Billionaires — https://www.theinvestorspodcast.com/we-study-billionaires/

Hendrik Bessembinder | ASU Search — https://search.asu.edu/profile/2717225

Shiller PE Ratio — https://www.multpl.com/shiller-pe

'What if You Only Invested at Market Peaks?' — https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

Books From Today's Episode:

The Only Guide You'll Ever Need for the Right Financial Plan — https://www.amazon.com/Only-Guide-Youll-Right-Financial/dp/1576603660

Papers From Today's Episode:

'Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4590406

'Why Not 100% Equities' — https://ibs-masters.narod.ru/olderfiles/1/asness_100equities.pdf

'A Conversation with Benjamin Graham' — https://www.jstor.org/stable/4477960

'Forecasting Stock Returns: What signals matter, and what do they say now?' — https://fairwaywealth.com/wp-content/uploads/Vanguard-Research-11-30-2014.pdf

'Dollar Cost Averaging vs. Lump Sum Investing' — https://pwlcapital.com/wp-content/uploads/2024/08/Dollar-Cost-Averaging-vs-Lump-Sum-Investing.pdf

Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

Episode 345 - AMA #3