In this episode, we unpack key tenants of investing and the quality of financial advice in Canada's banking industry. In our conversation, we present a list of lessons we have learned about investing, which has been consolidated from contributions by the Twitter community and the Rational Reminder Community. In our conversation, we discuss ways to beat the market, how narratives can impact the economy, and why timing the market is a bad investment approach. Discover why performance chasing is not a successful strategy, why incentives matter, and why economic growth is a poor predictor of investment success. Learn about the nuanced relationship between expected economic growth and stock returns, why wealth does not give you access to market-beating investments, and the effectiveness of investing in low-cost total market index funds. Finally, in our after-show segment, we delve into the quality of financial advice provided by Canada's six big banks, investment strategies, listener reviews, and much more. Gain valuable insights into navigating the complexities of investing and learn why simplicity, discipline, and skepticism towards overly complex or costly strategies are vital for financial success. Tune in now!
Key Points From This Episode:
(0:00:00) Introduction and outline of today’s topic: The Most Important Lessons in Investing.
(0:04:55) Why you cannot outsmart the markets and what it takes to beat the market.
(0:07:47) The notion that "this time is always different" during times of financial upheaval.
(0:10:45) Explore the forward-looking nature of markets and their impact on decision-making.
(0:12:08) Unpack the unreliability of market forecasts for making investment decisions.
(0:14:48) Hear why time in the market beats timing the market.
(0:16:11) Important aspects of funds and why investors should not chase portfolio performance.
(0:19:20) Learn about the role of incentives in the distribution of financial information.
(0:25:09) Common misconceptions about the link between economic growth and stock returns.
(0:27:28) We discuss the importance of good financial planning over portfolio management.
(0:30:51) Uncover the relationship between risk and expected returns in financial markets.
(0:32:33) How the risk-return relationship changes over different time horizons.
(0:34:59) Why fees and taxes matter and the nuances of permanent insurance.
(0:41:55) Find out why there is no such thing as a perfect investment strategy.
(0:44:51) Tailoring your investment portfolio to meet your goals and sticking to it.
(0:46:48) Investigate why there is no such thing as a passive investment.
(0:50:59) Understanding why wealth does not provide access to market-beating strategies.
(0:53:22) Why diversification is the only free lunch in investing.
(0:58:58) Recommendations and pitfalls to avoid when assessing investments.
(1:01:02) What the structure of a financial portfolio looks like for most people.
(1:03:11) The aftershow: the state of Canadian banks, investment advice, 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 — info@rationalreminder.ca
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
The Economist — https://www.economist.com/
ARK Invest — https://ark-funds.com/
The Canadian Investor Podcast — https://thecanadianinvestorpodcast.com/
Episode 257: Giorgio Ugazio (Mr. RIP) — https://rationalreminder.ca/podcast/257
Mr. RIP on YouTube — https://www.youtube.com/@mr_rip
The Money Scope Podcast: Episode 9 — https://moneyscope.ca/2024/03/15/episode-9-taxable-investing-in-canada/
Book a meeting with a PWL Financial Planner —
Books From Today’s Episode:
A Wealth of Well-Being — https://www.amazon.com/Wealth-Well-Being-Holistic-Approach-Behavioral/dp/1394249675
Wealthier — https://wealthierbook.com/
Papers From Today’s Episode:
‘Where’s the Beef?’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4035890
‘SPIVA® Canada Scorecard’ — https://www.spglobal.com/spdji/en/documents/spiva/spiva-canada-year-end-2023.pdf
‘2018 Paper’ — https://doi.org/10.1093/rfs/hhy046
‘CBC Article’ — https://www.cbc.ca/news/business/marketplace-hidden-camera-banks-1.7142427
Episode 270: Victor Haghani and James White: The Missing Billionaires
Episode 269: Preet Banerjee: A multi-dimensional analysis of the value of financial advice
Episode 268: Itzhak Ben-David: ETFs, Investor Behavior, and Hedge Fund Fees
Episode 267: The (Expected) Cost of Pessimism (Plus Matthew Dicks on the Value of Storytelling)
Episode 266: Prof. Cass Sunstein: Practical Reason in Ordinary Life
Episode 265: 5% HISA... for the Long-run? (Plus Stoicism with Michael Tremblay)
Episode 264: Pim van Vliet: The Volatility Effect, Revisited
Episode 263: A Tribute to Harry Markowitz with Alex Potts & 7 Steps to a Better Portfolio with Edward Goodfellow
Episode 262: Francisco Gomes: Consumption and Portfolio Choice over the Life Cycle
Episode 261: Structured Products with Felix Fattinger and Petra Vokata & Jill Schlesinger
Episode 260: Prof. James Choi: Practical Finance
Episode 259: Comprehensive Overview: Estimating Expected Returns
Episode 258: Prof. Meir Statman: Financial Decisions for Normal People
Episode 257: Giorgio Ugazio (Mr. RIP): Life Design, In Progress
Episode 256: Prof. Hal Hershfield: Your Future Self
Structured Products (Plus Just Keep Buying with Nick Maggiulli) (EP.255)
David Blanchett: Regret Optimized Portfolios, and Optimal Retirement Income (EP.254)
Complex Financial Instruments with Prof. Paul Calluzzo (Plus Sean Silcoff on Losing the Signal) (EP.253)
Prof. Burton Malkiel: 50 Years of A Random Walk Down Wall Street (EP.252)
Covered Calls (Plus Robin Powell and Jonathan Hollow on How to Fund the Life You Want) (EP.251)
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