The Rational Reminder Podcast

In this episode, we're joined by Martin Schmalz, Professor of Finance, Economics, and Real Estate at the University of Oxford's Saïd Business School, for a wide-ranging conversation about index funds, common ownership, investor behavior, and wealth management. Martin's research challenges us to look beyond the benefits of indexing for individual investors and consider what happens when everyone makes the same rational choice. Could the growth of index funds affect asset prices, expected returns, and competition between companies?
 
We explore the equilibrium effects of indexing, how common ownership might influence competition and consumer prices, and what existing antitrust laws could mean for large institutional shareholders. Martin also explains why wealth creation and wealth preservation require different mindsets, why wealthy investors can struggle to embrace passive investing, and how delegated investment management can help people stick with an investment plan when markets become uncomfortable. We finish with a discussion of family offices, the compounding impact of costs, and Martin's thoughts on why thinking like an economist might not always make us happier.
Sources From Today's Episode — https://zbib.org/a79d2e68294b4263a796d83123543200

 
Key Points From This Episode:
(0:01:13) Why indexing has been such a valuable innovation for investors, and the central question of whether its widespread adoption creates unintended market-wide consequences.
(0:03:24) Why the equilibrium effects of indexing matter more than simply comparing index funds with individual stock picking.
(0:05:55) How lower-cost indexing changes investor behavior, asset demand, stock prices, and expected returns.
(0:08:35) The possibility that greater demand for diversified equities raises prices and lowers future expected returns.
(0:12:03) Why the impact of indexing differs across investors depending on wealth, risk aversion, and asset holdings.
(0:13:35) Indexing as a potential tragedy of the commons, where individually rational decisions may have collective effects.
(0:15:15) The theory of common ownership and concerns about competition when the same investors own competing firms.
(0:19:05) Why common ownership is not solely an index-fund phenomenon, with active investors, family offices, and other large owners also playing a major role.
(0:23:11) What airline-industry research suggests about the relationship between common ownership and consumer prices.
(0:28:00) Competing explanations for the evidence on common ownership, including weaker monitoring and reduced incentives to compete aggressively.
(0:31:31) Why theoretical models should not be treated as proof of real-world outcomes.
(0:35:14) How existing antitrust laws, including the Hart-Scott-Rodino Act, Sherman Act, and Clayton Act, relate to common ownership.
(0:38:00) Potential policy responses, including ownership restrictions and limits on voting rights.
(0:41:32) Why many wealthy investors fail to index, and how the skills that create wealth often differ from those required to preserve it.
(0:46:00) The costs of poor diversification, excessive trading, market-timing mistakes, and inadequate due diligence.
(0:49:59) Horizon-dependent risk aversion: why people become more risk-averse when potential losses feel immediate.
(0:55:46) Why delegated investment management can act as a commitment device that helps investors avoid costly behavioral mistakes.
(0:58:39) How wealthy investors and family offices can still fall victim to expensive products, complexity, and poor decision-making.
(1:02:00) The compounding cost of fees and complexity, and why simple, diversified portfolios may outperform many private-market approaches.
(1:08:35) Why economic thinking is powerful for markets but may be less useful for personal happiness, leading to a broader discussion of success, well-being, and creating value for future generations.
 
Links From Today's Episode:
Martin on LinkedIn — https://www.linkedin.com/in/martin-schmalz-19060a5/  
Martin on X (for antitrust-related posts) — https://x.com/martincschmalz?lang=en  
Martin's website — https://sites.google.com/site/martincschmalz?pli=1&authuser=0  

Meet with PWL Capital: https://pwlcapital.com/
PWL Team — https://pwlcapital.com/our-team/
Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder on Spotify —https://open.spotify.com/show/6RHWTH9iW7hdnA7eAg7ukO?si=fe7f60349b584026
Benjamin Felix — https://pwlcapital.com/our-team/
Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
 
Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

In this episode, we begin with our first client story, featuring Dr. Simon Bérubé, an interventional cardiologist and professor at the Université de Sherbrooke. Simon shares how listening to Rational Reminder helped him approach personal finance with the same evidence-based mindset he brings to medicine. He discusses why financial planning extends far beyond investing, what led him to work with PWL Capital, and how expertise, integration, and oversight can become increasingly valuable as family finances grow more complex. He also reflects on the importance of transparency, intellectual honesty, and using money as a tool to support a meaningful life.
Then, Ben Felix and Dan Bortolotti take a personal turn, discussing how they came to their investment philosophies and how they invest their own money. They trace their paths into evidence-based investing, explore how childhood experiences and research on happiness have shaped their views about wealth, and explain the reasoning behind their personal portfolios. From global equities and fixed income to private company ownership, homeownership, and cash reserves, they discuss the trade-offs behind decisions that may not be theoretically optimal but can still make sense for an individual. The conversation is a reminder that a good financial plan is about more than building the perfect portfolio—it is about understanding risk, opportunity cost, and what matters most in life.
Sources From Today's Episode — https://zbib.org/94305cdbe966456384180c72fc89f2f7


Key Points From This Episode:
(0:33:00) First Rational Reminder client story: Why people hire financial advisors.
(2:38:00) Meet Dr. Simon Bérubé, interventional cardiologist and longtime listener.
(4:28:00) Applying evidence-based medicine principles to personal finance.
(5:30:00) Financial planning is broader than investing alone.
(7:43:00) Building an investment philosophy around diversification and low costs.
(12:20:00) Focus on processes, not outcomes.
(15:04:00) Similarities between health planning and financial planning.
(15:49:00) PWL's transparency and intellectual honesty as a client.
(17:04:00) Why Simon still uses an advisor despite financial knowledge.
(18:15:00) Coordinating investments, insurance, corporations, and retirement planning.
(20:14:00) Sharing his story out of gratitude and a desire to help others.
(22:23:00) Success defined by relationships, purpose, and impact.
(24:00:00) Main topic: How Ben and Dan invest their own money.
(26:41:00) Ben's exposure to wealthy families shaped his views on money and happiness.
(30:04:00) Research on affluent children and well-being.
(32:39:00) Income, happiness, and the concept of income satiation.
(36:32:00) Dan's early lessons about saving, debt, and family.
(39:24:00) Ben's early career selling insurance and mutual funds.
(40:38:00) The article that pushed Ben to question active management.
(43:35:00) Evidence on active funds and market underperformance.
(44:53:00) Dan discovers passive investing through MoneySense and Norbert Schlenker.
(47:35:00) Fama-French, Dimensional, and evidence-based investing.
(49:30:00) How Ben's connection with Dimensional led him to PWL.
(51:03:00) Dan's journey from financial journalism to financial planning.
(55:56:00) PWL's foundation: financial planning plus low-cost portfolio management.
(56:45:00) Using money to support family, health, experiences, and time.
(59:39:00) Ben's portfolio: globally diversified equity with factor tilts.
(1:00:55) Dan's simple ETF portfolio and "benign neglect" approach.
(1:03:13) Ben's 100% equity allocation versus Dan's 70/30 portfolio.
(1:06:17) The lasting impact of experiencing the 2008 financial crisis.
(1:07:55) Choose an asset allocation you can stick with.
(1:09:47) Ben's ownership stake in PWL became his best investment.
(1:16:00) Homeownership as a poor financial investment but excellent lifestyle choice.
(1:21:53) Cash reserves can provide peace of mind despite lower returns.
(1:24:08) "Suboptimal" financial decisions can still be rational.
 
Links From Today's Episode:

Meet with PWL Capital: https://pwlcapital.com/
PWL Team — https://pwlcapital.com/our-team/
Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder on Spotify —https://open.spotify.com/show/6RHWTH9iW7hdnA7eAg7ukO?si=fe7f60349b584026
Benjamin Felix — https://pwlcapital.com/our-team/
Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
 
Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

In this episode, we welcome back Dave Chilton, author of The Wealthy Barber and one of Canada's most influential voices in personal finance. With his retirement approaching, Dave joins Ben Felix and Cameron Passmore for a wide-ranging conversation about the success of The Wealthy Barber Podcast, the evolution of financial advice in Canada, and the lessons he's learned from decades of helping people navigate their financial lives.
 
We explore why retirement income planning remains an underserved area of financial advice, how to evaluate different advisor fee models, and why strategies like the RRSP meltdown can be valuable for some people but inappropriate for others. Dave also shares his concerns about rising living costs, high investment fees, and the potential economic disruption from AI, while explaining why he remains optimistic about the future of financial planning. Along the way, he reflects on the importance of saving consistently, the challenges of communicating complex financial ideas, and why the best advice starts with understanding the individual.
 
As Dave prepares to step away from The Wealthy Barber, he also opens up about what retirement means to him, the importance of spending time with family and friends, and the habits that contribute to a happier life. It's a thoughtful, funny, and practical conversation about financial advice, personal finance education, and making the most of the time we have.

Sources From Today's Episode — https://zbib.org/bfd0e870f53f49f7beae3ef7975e60ff

 
Key Points From This Episode:
(0:02:02) The unexpected success of The Wealthy Barber Podcast and how carefully chosen guests helped build a loyal audience.
(0:04:38) Why retirement income planning and estate planning became two of the most popular topics, and where financial advice has often fallen short.
(0:06:22) How podcasts create a unique connection through storytelling, conversation, and answering real audience questions.
(0:08:15) How the demographics of The Wealthy Barber book differ from those of the podcast, including a stronger female readership for the book.
(0:09:25) What Dave learned from interviewing financial experts and why retirement-related topics generated so much interest.
(0:11:01) Why credible, unbiased educators are needed to continue improving financial literacy after the podcast ends.
(0:14:20) The challenge of simplifying financial concepts without ignoring important exceptions and nuances.
(0:15:21) How humor and storytelling help make personal finance accessible to people of different ages and backgrounds.
(0:20:26) Why Dave tested The Wealthy Barber manuscript with ordinary readers and valued their feedback more than industry opinions.
(0:21:39) Reasons for optimism about Canadian financial advice, including better communication, greater fee awareness, and higher professional standards.
(0:23:11) Concerns about affordability, AI-driven economic disruption, and the long-term impact of government debt.
(0:25:10) How rising costs for housing, transportation, children's activities, and pets are increasing financial stress.
(0:27:12) How Canadians should choose financial advisors and why addressing debt and retirement-plan matching should come first.
(0:29:17) Comparing assets-under-management and advice-only planning models, including the challenge of ensuring clients follow through.
(0:31:00) How AI may improve advisor effectiveness before it significantly replaces human advisors.
(0:32:49) Why retirement income planning and tax-efficient withdrawal strategies can add substantial value without increasing investment risk.
(0:36:16) The RRSP meltdown strategy and why useful planning tools can be misleading when promoted as universal solutions.
(0:39:26) Why financial professionals should help clients think through the right questions rather than offer one-size-fits-all answers.
(0:42:43) Why effective financial planning begins with understanding a client's goals, circumstances, and priorities through meaningful conversations.
(0:44:54) How financial education helps investors understand risk tolerance better than questionnaires alone.
(0:45:15) The risks of borrowing to invest, including borrowing costs, investment fees, market volatility, and investor behavior.
(0:49:57) Common financial mistakes such as outdated wills, inadequate insurance, excessive cash holdings, and high investment fees.
(0:52:00) Why "pay yourself first" remains Dave's most important financial principle and why automating savings works.
(0:57:29) Why Dave chose retirement: family, friends, health, and a desire to enjoy life while his work remains successful.
(1:01:00) Dave's reflections on mortality, gratitude, happiness, and making the most of the time we have.
(1:08:00) His final advice for a fulfilling life: be kind, stay positive, practice gratitude, and help others whenever possible.
 
Links From Today's Episode:

Meet with PWL Capital: https://pwlcapital.com/
PWL Team — https://pwlcapital.com/our-team/
Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder on Spotify —https://open.spotify.com/show/6RHWTH9iW7hdnA7eAg7ukO?si=fe7f60349b584026
Benjamin Felix — https://pwlcapital.com/our-team/
Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
 
Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

In this episode, we are joined by Chris Murray, quantitative researcher and former equity quant and trader, and Marco Sammon, Assistant Professor of Finance at Harvard Business School, for an exceptionally nerdy deep dive into leveraged exchange-traded funds (ETFs). Drawing on their research, Chris and Marco challenge common assumptions about daily rebalancing, volatility drag, and the long-term performance of leveraged products, offering a more rigorous framework for understanding how these investments actually work.
 
We explore the mathematics of compounding, the surprising relationship between leverage and long-term returns, and the competing effects of what Chris and Marco call the "convexity bonus" and volatility drag. They explain why leveraged ETFs don't simply deliver a multiple of an underlying asset's long-term return, how financing costs and fund fees compound over time, and why a stock can rise substantially while its leveraged ETF still underperforms. We also examine how daily rebalancing can affect underlying stock prices, why these effects are more pronounced in volatile, less liquid markets, and how to assess the break-even return required 
for leveraged ETFs to outperform their underlying assets.
 
Finally, we discuss what these findings mean for investors considering leverage as part of a portfolio, the distinction between modest leverage on diversified indexes and speculative single-stock products, and why the right benchmark matters when evaluating investment performance. This conversation challenges some long-held beliefs about leveraged ETFs while offering a clearer framework for understanding their risks, costs, and potential uses.
 
Sources for this episode - https://zbib.org/123d8b5649124244b85a4f43846a1fb4



Key Points From This Episode:
(0:02:07) How leveraged ETFs target daily returns rather than long‑term multiples. 
(0:03:37) Growth of leveraged ETFs, especially single‑stock and crypto products. 
(0:04:09) Lottery‑like payoffs and speculative appeal of leveraged ETFs. 
(0:05:18) Convenience: access to leverage without borrowing or manual rebalancing. 
(0:05:51) Economic theory: human capital and equity exposure early in life. 
(0:06:45) Risks of human capital — job losses and market declines coinciding. 
(0:08:10) Why modest leverage (e.g., 1.25×) may align better with portfolio theory. 
(0:10:42) Why 2× ETFs don't simply double long‑term returns of the underlying. 
(0:11:30) Convexity bonus: daily resets can create squared‑return benefits. 
(0:12:00) Volatility drag: fluctuations erode long‑term wealth in leveraged ETFs. 
(0:13:45) Distinguishing compounding effects from volatility drag. 
(0:15:00) Example: up‑10%, down‑10% → underlying loses 1%, 2× ETF loses 4%. 
(0:16:00) Interaction of convexity and volatility drag, amplified by large moves. 
(0:20:23) Daily rebalancing: how ETF trades can influence underlying stock prices. 
(0:23:00) Trading costs embedded in closing auction prices rather than spreads. 
(0:25:19) Reset intervals (daily vs. weekly/hourly): trade‑offs in drift and risk. 
(0:29:44) Overlapping ETFs concentrating rebalancing activity during stress. 
(0:32:18) Challenging the view that daily resets make ETFs unsuitable long‑term. 
(0:45:36) Break‑even return: how much the underlying must gain for ETF outperformance. 
(0:49:51) Fees, financing costs, and volatility drag erasing leverage benefits. 
(0:50:25) Predictable rebalancing trades and risks of front‑running. 
(0:53:00) Lucid example: intraday liquidation wiping out ETF investors. 
(0:55:41) Financing costs explained: borrowing ratios for 2× vs. 3× funds. 
(1:03:00) Distinguishing leverage's usefulness from product‑specific costs/risks. 
(1:31:58) Could modestly leveraged index ETFs have a role in traditional portfolios?
(1:32:56) Comparing ETF‑based leverage with borrowing directly — fees, financing, and restrictions. 
(1:35:28) Why speculative single‑stock leveraged ETFs attract attention while modest products struggle. 
Links From Today's Episode:

Meet with PWL Capital: https://pwlcapital.com/
PWL Team — https://pwlcapital.com/our-team/
Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder on Spotify —https://open.spotify.com/show/6RHWTH9iW7hdnA7eAg7ukO?si=fe7f60349b584026
Benjamin Felix — https://pwlcapital.com/our-team/
Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
 
Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

In this episode, we welcome back Alex Edmans, Professor of Finance at London Business School and author of Grow the Pie, May Contain Lies, and The Madness of Markets. Drawing on academic research and real-world market examples, Alex explores how emotions, social influence, and psychological biases shape investor behavior—and why even apparently irrational markets can be difficult to beat.
 
We examine how a country's stock market can react to a football loss, why investors overreact to exciting stories and underreact to less visible information, and how identical assets can trade at different prices. Alex also unpacks the evidence behind reversal, value, and momentum strategies, the challenges of exploiting market anomalies, and why skewed stock returns make diversification so important. The conversation ultimately returns to a fundamental investing question: even if you can identify market inefficiencies, do you have the edge, patience, and cost advantage needed to benefit from them?
 
Sources From Today's Episode — https://zbib.org/7d62d23b5efc45f7b0b908b769cbfa92
 
Key Points From This Episode:
(0:01:49) How losing a World Cup match can affect a country's stock market—and what this reveals about emotion‑driven trading.
(0:03:01) The relationship between weather, sunlight, and market sentiment.
(0:03:49) Spurious correlations and data mining: why an apparent relationship needs a plausible economic explanation and out‑of‑sample testing.
(0:06:42) Wisdom versus madness of crowds: when collective judgments can be useful and when social influence leads investors astray.
(0:09:44) Overreaction in markets, from the pandemic‑era rise of Zoom to the dramatic response to Allbirds' AI rebranding.
(0:12:06) The reversal effect: why past losers can outperform past winners when investors overreact.
(0:12:53) Underreaction to long‑term information, including research linking strong workplace cultures with better stock performance.
(0:14:57) Misreaction and anchoring: how purchase prices can lead investors to sell winners too early and hold losers too long.
(0:16:50) Value investing and valuation multiples, including why a company's price relative to its fundamentals matters even when it is widely admired.
(0:22:02) Limits to arbitrage: why investors can be right about a market bubble but still fail to profit from it.
(0:24:56) The importance of investment horizons, illustrated by Alex's own equity allocation and a fund designed around a 40‑year horizon.
(0:27:55) The illusory truth effect: how repeated information can feel new and move prices, as illustrated by the market reaction to EntreMed.
(0:33:43) Momentum investing: why recent winners may continue winning, and how momentum appears across industries, sectors, and countries.
(0:39:04) The law of one price and examples of identical or closely related assets trading at different prices, including 3Com and Palm.
(1:02:20) The three recurring principles: markets work, diversification matters, and costs matter.
 
Links From Today's Episode:

Meet with PWL Capital: https://pwlcapital.com/
PWL Team — https://pwlcapital.com/our-team/
Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder on Spotify —https://open.spotify.com/show/6RHWTH9iW7hdnA7eAg7ukO?si=fe7f60349b584026
Benjamin Felix — https://pwlcapital.com/our-team/
Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Alex on LinkedIn — https://www.linkedin.com/in/aedmans/ Alex on X — https://x.com/aedmans Alex's website — www.alexedmans.com
 
Books From Today's Episode:
The Madness of Markets: Why Smart Investors Make Crazy Decisions—and How to Exploit Them by Alex Edmans — https://www.amazon.com/Madness-Markets-Investors-Decisions-Exploit/dp/B0GK117D54

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