Nov 28, 2019
Thanks for joining us for another episode of the Rational Reminder Podcast. We are proud to say that last week’s show received our highest amount of downloads yet, with 10 000 in its first week, so a big thank you to our listeners for that. We begin our discussion this week with some takeaways from the Playing With FIRE documentary about doing affordable things that feel good as a way of cutting costs. Next, we dive into some caller questions, discussing whether putting a downpayment on a rental property as a way of parking cash until you have enough to scale up to a bigger property would be a good idea. We also discuss whether it would make sense to invest in an individual Canadian bank stock based purely on the track record of our banks, which brings up some interesting points about how stocks work. We then dive into our main topic by beginning with some pointers on choosing the best belief system to evaluate investment strategies from, comparing our 5-Factor model with the Quality model and Jim Simons’s too. This leads into a deep dive we take into the legitimacy of the definition of quality given by a variety of American and Canadian funds. We share our main takeaways from this discussion with you which should prove very useful. Our planning advice for the week is around getting insurance for income replacement in retirement. Finally, we make a lot of good out of some bad bank advice by drawing from our recent research into reverse mortgages and annuities, so don’t miss out on this one!
Key Points From This Episode:
- Lessons for cutting spending in the Playing with FIRE [0:05:30.0]
- Whether a rental property is a good hedge against rising real estate prices. [0:12:15.0]
- The effect that leverage would have on equity through market fluctuation. [0:13:50.0]
- How stock returns work and why not to invest in individual Canadian banks. [0:15:47.0]
- The challenge of choosing a belief system to evaluate investment strategies. [0:18:43.0]
- An explanation of the Market Efficiency model. [0:23:12.0]
- Using Occam's Razor to compare the 5-Factor model to the Quality model. [0:23:27.0]
- Assess products using US-listed funds, quantitative implementation, and more. [0:26:19.0]
- Evaluating different funds’ definitions of quality. [0:28:03.0]
- The clause about defensive positions which ruins VFVA and VVL products. [0:29:25.0]
- Why VLUE and QUAL funds have unreliable outcomes due to low holdings. [0:30:15.0]
- Fidelity FQAL is a waste of basis points due to insignificant factors loaded. [0:33:45.0]
- Why Fidelity FDVV shouldn’t use investment as a filter. [0:34:49.0]
- The main takeaways from Ben’s reading of the funds: read beyond the title. [0:36:33.0]
- Many value factor funds are actually actively managed. [0:37:14.0]
- What to do as far as getting insurance for income replacement in retirement. [0:38:09.0]
- Retirement variables such as a mortgage payment or spouse declining to work. [0:41:20.0]
- Why one should discount aggressive investments when choosing insurance. [0:47:08.0]
- How reverse mortgages and annuities can stretch out a portfolio. [0:48:01.0]
- And much more!