The Rational Reminder podcast - favorite episodes from 2024

I started listening to the Rational Reminder Podcast somewhere around the beginning of this year and I can highly recommend it to anyone interested in passive evidence based investing and financial decision making. 

The Rational Reminder podcast is weekly podcast about personal finance and investing from a couple of Canadians, Benjamin Felix and Cameron Passmore - both work at PWL Capital. The hosts are experienced portfolio managers who share their knowledge about a broad range of financial topics and the show often features interviews with industry experts, offering diverse perspectives and deep dives into specific areas of finance.

Benjamin Felix also creates educational content on YouTube https://www.youtube.com/@BenFelixCSI where he shares insights on investing and financial planning

Both advocate for evidence-based investing, which often includes passive investment strategies such as index funds and they emphasize the benefits of low-cost, diversified, and long-term investment approaches, which align well with passive investing principles.

Episodes which I really liked:

• Episode 321 - Evidence in Practice with Håkon Kavli (CIO of Reitan Kapital)
• Episode 320 - Kyla Scanlon: In This Economy?!
• Episode 316 - Andrew Chen: "Is everything I was taught about cross-sectional asset pricing wrong?!" about Open Source Asset Pricing
• Episode 313 - When Should You Hire a Financial Advisor?
• Episode 310 - Professor Antoinette Schoar: Consumer Finance, Crypto, and Private Equity
• Episode 303 - Scott Galloway: The Algebra of Wealth
• Episode 302 - Michael Green: Market Efficiency Is Not The Question
• Episode 292 - Rob Copeland: Ray Dalio and Bridgewater
• Episode 291 - The Quant Winter, and is Canada Pension Plan a Scam?
• Episode 289 - Retiring Retirement Income Myths with the Retirement Income Dream Team
• Episode 286: Errol Morris: Tuning out the Noise

Book review: beyond diversification - what every investor needs to know about asset allocation

I recently finished reading Beyond diversification from Sebastien Page.  Sebastien Page (Chief Investment Officer at T. Rowe Price) explains in Beyond diversification the different approaches to forecasting returns, risks and correlations across asset classes by combining academic research and practical hands-on examples. 

This book is most likely targeted at the sophisticated investor  and should not be the first book to pick up if you want to understand diversification but it provides great insights on how asset managers think about their portfolios. 

The book also extensively refers to a number of academic papers that Sebastien Page has written on asset allocation, risk measurement and return forecasting. It explores a number of dynamic asset allocation strategies, acknowledging that risk is time-varying and requires adaptive approaches. Sebastien Page also explains why the typical fixed weight asset allocation (60-40 portfolio) does not deliver a constant risk exposure.

The book recommends using a  heuristics to cope with changes in volatility: assume that next month's volatility for each asset class will be the same as last month's. For the longer term the opposite is true, 5 years of calm markets are more likely to be followed by 5 years of turbulence.

The stock-bond mix is the biggest decision that multi-asset investeros make, but this mix does not reliably reduce risk as correlations shift. Stock bond correlations were positive in the 1970s and 1980s when inflation and interest rates drove volality but then the correlation reversed.

PS With volatility being a proxy for risk, you might also check out the white paper "Practical Issues in Forecasting volatility" from Clive Granger and Ser Huang Poon which was published in the Financial Analyst Journal in February 2005.