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- Опубліковано 11 лют 2025
- After months of research, number-crunching, and receiving listener requests on the subject, today’s episode is devoted to introducing our new model ETF portfolios - which promise to offer a smoother ride to getting reliable returns. We open our conversation with a financial news roundup and by touching on our book of the week. We then dive into the theory behind our model by first exploring how market assets are priced. We discuss historical views on asset pricing models before looking at what academia has done to overcome challenges to the idea of market efficiency. Host Benjamin Felix methodically shows how our model addresses the five systematic risk factors that are included in the Fama-French Five-Factor Model. From emerging markets to stock size, we share insights into what our model accounts for and how this should impact your portfolio distribution and premium expectations. After reflecting on how factor-loaded indexes get higher returns without extra risk, we talk about the ETFs that we use for factor exposure, as well as how you can apply our findings to your portfolio. We round-off today’s show by chatting about the latest bad financial advice. Tune in to hear more about our findings in this, our last episode of 2020.
Check out the new model portfolios: rationalremind...
Links From Today’s Episode:
Rational Reminder on iTunes - itunes.apple.c....
The Almanack of Naval Ravikant - www.navalmanac...
Episode with Dr. Brian Portnoy and Josh Brown - rationalremind...
‘Crashing a 5.2 Trillion Dollar Party’ - www.bloombergq...
‘The Death of Diversification Has Been Greatly Exaggerated’ - papers.ssrn.co...
‘The Relationship Between Return and Market Value of Common Stocks’ - www.sciencedir...
Franco Modigliani - www.econlib.or...
Merton Miller - www.nobelprize...
Episode with Marlene Lee - rationalremind...
‘The Vanguard Total International Stock ETF: Right Idea, Wrong Implementation’ - seekingalpha.c...
This has been one of the most valuable things I've ever seen on UA-cam. Thank you so much for this!
14:20 the title topic starts
1:03:10 ETF portfolio
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Greeting from Romania and the UK. This is a very insightful podcast as always.
Ben, I truly see you as a mentor. You really inspire me to do research and back my thinking with quality data.
Best Wishes,
Rares
Thanks guys, great content again. I have now relentlessly forwarded so many of your youtube links to friends and fam on the US West Coast, I feel I could qualify as an honorary rational reminder marketing intern. Keep it up.
FANTASTIC PODCAST AND CHANNEL!!! Just discovered this last week and have listened to/ watched many episodes. Thank you very much for helping to enlighten investors.
Calm cool intelligent, useful videos. Keep up the excellent work. Very rare this type of quality of youtube.
Hello Ben and Cameron.
First of all a big thank you for all the incredible content. You guys helped me understand so many things that I feel confident enough in making my own investment decisions.
I have a question about the model portfolios. How are dividends considered ? Are they reinvested ? If that's the case at what tax level ? I am asking because I ran a few simulations.
If the model portfolios ignore dividends and I am willing to reinvest them, then the 80/20 portfolio beats the 100/0.
Oh by the way, on the 100/0 portfolio one shade of gray is wrong on the chart ;).
Ben,in one of your papers you recommend that the US equity part of the portfolio consist of 1/3 total market,1/3 large value and 1/3 small value ETFs,but how would those ratios change if one were to use AVUS or the new DFA US ETFs instead of ITOT,VTI or a similar total stock market fund? Should the use of those more tailored ETFs prompt a lesser allocation to large value?
I feel like ben never cares for cameron's book and tv recommendations 😂"Cool"
Yeah, that guy totally needs to lighten up. Makes it kind of painful tbh.
@@SickYeti I like it - so matter of fact that it can be appreciated. makes me curious what kind of drunk he'd be too lol.
@@Austden I second this. Ben Felix is more of a straight-to-the-point type of guy. His videos are huge info dumps. They balance each other here and I like it tbh.
@@Austden Asks you to invest in a well diversified set of low cost index funds
Yeah he barely batted an eye to Cameron's excitement for the Netflix show. He probably only invests his time in diversified low cost index shows.
I want the hoodie. I never buy stuff like this but i love that hoodie. Plus you helped me ALOT
So for someone like me who’s invested in VGRO, it’s probably best to wait for vanguard or Ishares to release ETFs that can increase my exposure to small cap value stocks. I buy VGRO for the simplicity and I’m not really one to think about buying USD listed ETFs because of the currency transaction costs and tax withholdings
Between the Avantis and DFA ETFs launched, can we get an updated recommended portfolio for the equities portion if it would be better to not just have factor tilt limited to small cap?
I said it before and i will say it again, Cameron and Ben work so well together both vital parts of the podcast. Great episode,i can't really use the portfolios but i got great general knowledge.
Love this podcast! Thanks for the great content.
1:08:18 ♥️
i wonder what a US investor can do to achieve this structure
@@pinkstardiamond I wonder that as well. Time to do some research
Thank you thank YOU!
One of your best and most informative podcasts. Keep up the great work.
Awesome as always, and loving the new hair cuts!
Since as Europeans we don't have access to small cap value ETFs in UCITS format, should we add additional tilts to small cap blend asset class or stick to the large + medium cap market return of Vanguard FTSE All World?
It might be worth reading this thread community.rationalreminder.ca/t/rr-2020-model-portfolios-ucits-eu-version-discussion/2173
@@rationalreminder Why is login required?!
Can you guys produce a meditation track consisting of new age synth chords with Ben & Cameron’s voices explaining the small value premium drifting in and out?
Model portfolio is pretty close to VEQT + a VVL or value exposure. Cool
Looks like AVUV and AVDV exclude large caps, and AVUV also excludes mid caps, but they have more blend stocks than VVL. This is going off of their Morningstar charts.
The joint hypothesis problem sounds like an example of the Duhem-Quine thesis. According to that thesis, no scientific hypothesis can be tested in isolation. For example, Galileo's observation of moons around Jupiter depended on the hypothesis that telescopes faithfully represent reality and don't introduce moon-like artifacts.
Great podcast thanks for the info! Where can i find the pdf and look through the numbers?
I do have a question small value stock are better right so if you divide them in 2 would one be better than the other.
Would appreciate a five factor model for a U.S.-based investor.
Interesting podcast.thank you for sharing this kind of information.if it's possible next time may could you please show some charts and tables with the values you are talking about, and analyze the distribution of the values as well? Just listening to the numbers doesn't help with understanding. Thank you very much. Paul.
Are there US listed ETFs that a DIY investor can use to capture the profitability and investment factors?
I think just use DFA and Avantis ETF suffice, no point leaving value and/or small-cap alone when capturing the two newer factor
Ben mentioned that VIG has positive exposure to both profitability and investment. However it has slightly negative size and value exposure.
Yes all dfa mutual funds are now with etfs versions ,plus avantis avuv avus aves aviv avlv
Plus take a look on shareholder yield etf like syld from cambria interesting
Can you write the names of the papers you used for this episode
Thanks. Why you only consider only the Avantis factor ETFs in your paper. What do you think about the Vanguard offering: VVAL, VBR, VSS?
I would like to understand that as well. (why Vanguard ETFs are not included) . The Vanguard MERs are almost 50% lower.
Vanguard funds don't target the factors as well
@@chubbs6684 They did but they closed some; VVAL was closed. VBR targets value factor wouldn't you say so? VSS small cap factor.
Great topic ! It will be better if there are graph shown for understanding !
Please differentiate US listed ETFs, since that kind of a big deal for many Canadian investors (in the actual PDF)!
It would ne amazing if you can put the names of the papers you have mentioned
It looks very interesting read
Where can I find the new model portfolio?
community.rationalreminder.ca/t/new-rational-reminder-2020-model-portfolios/2162
Love the Podcast and your channel Ben. I had a question regarding the ETF blend used in the Model Portfolio. Why use a Total US Market Cap Index like VUN in the model, when you can use a combination of a SP 500 Index + a Small Cap Value Index to gain exposure to Large Cap growth, Large Cap Value and Small Cap Value stocks and avoiding Small Cap Growth? I suspect the MER ratio will be a bit lower too using an SP 500 Index. Is it just to provide the diversification benefit?
You would miss mid caps that way. Total market is a great starting point for any portfolio. Small growth is a small portion of the market.
@@BenFelixCSI Thanks, Ben.
It feels like anytime we discover a way in which markets are inefficient, someone slaps a label onto it with the word "risk" on it, and says, "see, now the market is efficient again". What is the proof that there is real added risk when buying value stocks compared to the market? Reminds me of string theory...
If you define everything that outperforms the market as "risky," because axiomatically "greater risk = greater rewards" you default make alpha impossible. That's all Fama French did.
What they should have done is recognized certain asset classes out performed and maybe it's because they were just better assets to hold at that moment in time.
So dumb question...if I currently hold something similar to last year's model portfolio in my TFSA (VCN, XUU, IUSV, IJS, VIU, VEE) do i just sell everything and buy the new portfolio? Am I likely to do this every year to some degree if there are changes and I want to follow Ben's model?
Depends on costs...
If the factor premia are more robust than the market premium, why not have a higher allocation than 30% to small cap value in the model portfolio? I have 50% SCV in my portfolio for that reason.
depending upon your age, that is what paul merriman suggests. thumbs up.
1:00:01 wait but that shouldn't come as a surprise right? The factors SMB HML etc are long / short portfolios so 100% long and 100% short. So these are basically zero investment or hedged portfolios. So periodes where the market premium or simply the market minus the risk free rate was negative are the periods where it would be wise to have a fully hedged portfolio instead of being fully exposed to the market.
Great research. Great video. Thanks so much fo all your good work.
Any thoughts on x2 or x1,5 leveraged ETF?
Any thoughts on good online brokers for international trade?
Ben has a video about leveraged etfs. He is not a fan.
I use interactive brokers
I am not sure I understood the momentum premium. Is there any paper, podcast or else that could explain it a little more. By the way, thanks for the great advices!
The book from Andrew L. Berkin and Larry E. Swedroe, 'Your Complete Guide to Factor‑Based Investing' has a very good explanation of this factor and all the other ones.
@rationalreminder Which portfolio would work best for an RRSP? I'd there any disadvantage to holding Canadian etfs in there?
I think you can hold anything you like in your RSP. If you hold US etfs in your taxable accounts, then your returns can be affected by withholding tax not to mention currency conversion costs? Ben mentions this just after he describes the model portfolio weightings.
I know this is late, but do you post the titles of the research articles you reference in your podcasts? I would like to use these in the classes I teach. Thanks!
We do usually, but they should also be here www.pwlcapital.com/resources/five-factor-investing-with-etfs/
@@rationalreminder thank you very much.
Hi Ben and Cameron, I plan to implement a factor tilt in my portfolio. I think it might be a good time to get in, given the giant performance of large cap growth stock.
What is the rebalancing strategy that you recommended? I know that you don't give advice directly but perhaps what to think about when deciding rebalancing strategy?
Look at Larry Swedroe’s 5/25 rule.
Greetings all the way from the Middle East and as always, thank you so much for the great value you deliver.
I hold 20% in VBR, is it worth switching over to AVUV? Considering I have no tax implications if I made the switch.
AVUV or IJS is more value tilted than VBR.
He mentions VBR vs a similar DFA fund towards the end of "the problem with small cap stocks" video
@@gordongustafson2799 Thank you for the reply. I do understand that AVUV has deeper value and smaller caps but I was interested to see if Ben thinks it would be worth switching 🤷🏻♂️
Only thing making me hesitant is that VBR holds a lot more companies
Thanks guys, my current "safe" portfolio consists of XUU as a combination of choices from both your PWL capital and Dan's Couch potato's model portfolio from 2017. XUU,VCN,XEF,XEC,TEC and some ZAG. As a current holder of XUU, what's the best way forward, do I sell all XUU and buy VUN or stay the course?
IMO it's probably not worth it to jump ship right now. I'm sure BlackRock Canada had noticed the tracking error and will try to correct for it. Also this could be a short term fluke with the later addition of Tesla to S&Ps index which XUU has as a benchmark. If it continues for a while or gets worse then maybe. (FYI I have pretty much the same ETF mix as you)
@@jwebes yea, my concern is that XUU doesn't seem to be trading a very high volume comparitively. Not sure if that would factor into their willingness to make such corrections.
In this podcast you spoke about Dimensional ETF products that helped replicate 5 factors however were not available to the public. I came across some public dimensional products recently and was wondering if you recommend any to help achieve a more factor diverse portfolio.
DFAT and DFAS.
Do you recommend either of these products or is the portfolio in this video still as relevant today?
He's Canadian and works with Canadian clients, so he may be talking about certain Dimensional Canadian funds not being available to Canadians. DFAT has been around for US investors since 1998 according to their website.
@10minutes I think he meant the opposite. That the 10 year yield is now lower the dividend of 60% of SP 500 companies.
I think this is because the treasury yields are at historic lows. Sign of the times
Ben was completely zoned out at the beginning of that question.
@@Kylome1 that’s ok. Still the brightest young man in this field IMO. A few more years and he will make an impact
which paper is he talking about? Is there a link somewhere?
www.pwlcapital.com/resources/five-factor-investing-with-etfs/
Fidelity asset allocation ETFs?
Hi, this video is amazing!!! The best one that talks about factor investing. I am an US -based investor, and I clone your porfolio by using VT instead of VUN, XEF, and XEC, but I don't know which ETF should I use to replace XIC?? Is it apporptiate to use SPY or something else??
You don't replace XIC, you leave it out. In investing it is often smart to have a home country bias, but if you're not from Canada VT and AVDV both cover Canadian stocks as part of your international equity.
What's the reasoning for only 16% small+value?
Can I replace VUN with ITOT?
what should i do, i live in europe
Hi guys amazing job as usual. Is there any video where you explain why you have decided to drop the small cap value from your portfolio allocation?
We have not dropped small cap value.
Will you be getting bigger sizes for the hoodies? And in tall versions?
We have xxl, and Ben, at 6’11” wears large, and I wear xl ... but I’m 7 inches shorter than Ben :)
It just occurred to me that if 'value' is a risk factor then this would appear to contradict the concept of 'margin of safety' used by value investors. Am I missing something?
The risk that they are undervalued for a known reason. Companies don't just randomly lose meaningful valuation.
@@xaldath4265 yes, in an efficient market, the valuation of a stock reflects its risk. Therefore, investing in a stock with a low valuation (i.e. high risk) wouldn't provide a margin of safety.
@@davec3974 agreed. In an truly efficient market, there is no such thing as a margin of safety. In our mostly efficient market, on a long enough timeline, history dictates the margin of safety is legit...but misinterpreted by most to indicate less room to fall/low volatility, whatever short term metric you want to attribute to potential loss.
@@xaldath4265 the metric could be the risk of going bankrupt, which is as long term as it gets. But it seems we agree that to invest with a true margin of safety would require the exploitation of a market inefficiency. So the two concepts appear to be incompatible.
Remember, the concept is called efficient market theory...what is the definition of a theory? Nothing is static, especially information and awareness and the rate which it is uncovered and applied in the market.
Can I invest with you guys at PWL Capital, specifically with you guys in Ottawa, with investible assets of 2.5 million? Or do you have a minimum investment amount higher than that?
Ben, could you recommend me a book about the way you see investing?
Check out the other videos for materials and books from guests like William Bernstein (Four Pillars of Investing, Intelligent Asset Allocator, etc.), Larry Swedroe, etc. and obviously anything from Ben's heroes Fama and French. You should also check out the Rational Reminder community.
@@thao6112 I've been trying to get in but apparently you need an invite? Any way you can help?
Cameron: He passed away, complications from smoke inhalation from a home fire a week before that.
Ben: The only thing that jumped out to me as interesting in that story was the fact that he died without a will.
Have you had Paul Merriman on the podcast yet?
Paul Merriman was on a couple years ago episode 147
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You are the best guys. I want to buy a sweatshirt from Turkey. but you don't send ship to Turkey. can you help me?
sure we do ... visit the store and place the order. Free socks included!
@@cameronpassmore1561 yess. i did it. i ordered water bottle like yours :) thank you. cant wait :)
Great episode!!
But, how does someone construct such a portfolio with ex-US etfs?
40:33
24:24
Who is the other guy who is just sitting in red jacket and not saying a thing. looks like a manager who isn't aware of project and doesn't care .
😭😭😭😭