Welcome back to your weekly reality check on sensible investing and financial decision making for Canadians. On today’s episode we kick it off with a combo of a current topics, answering listener questions, and discussing the bad advice of the week. We then dive into the huge shift in the industry in the US in terms of fund flows into index funds out of active mutual funds. When you look at the overall US market cap, 13% of it is in index funds. This means that price discovery is being done by 87%. Inside this episode we unpack what that means for investments overall and how it differs in the Canadian market. We then take to a deeper discussion on our portfolio management topic of the week, which is looking at the relationship between price and future returns. We know that when prices are high, future returns tend to be low, so we dive into how that affects the context of pricing. We also take a look at the AQR study, Vanguard’s dollar cost averaging versus lump sump study, and of course our planning topic for the week; renting versus buying a home and understanding the unrecoverable costs. Join us today and be sure not to miss out on today’s incredible episode!

Key Points From This Episode:

Answering a listener question: using dividend stocks to pay down your mortgage. [0:03:41.0]
Busting the beliefs and concepts of this week’s worst investment advice. [0:06:33.0]
The shift in the US market place: index funds versus active mutual funds. [0:11:27.0]
Understanding the Grossman-Stiglitz Paradox: market efficiency. [0:15:40.0]
Portfolio management topic of the week: relationship between price and future returns. [0:18:19.0]
Discussing the Vanguard study: Lump sum versus dollar cost averaging. [0:24:18.0]
A viral topic: understanding the debate of whether to rent or to buy a house. [0:28:28.0]

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/

Shop Merch — https://shop.rationalreminder.ca/

Join the Community — https://community.rationalreminder.ca/

Benjamin on Twitter — https://twitter.com/benjaminwfelix

Cameron on Twitter — https://twitter.com/CameronPassmore

About The Author

Cameron Passmore

Cameron Passmore has been a leading advocate for evidence-based, systemic investing for over 20 years in the Ottawa area. Today, Cameron and his team serve a broad range of affluent clients across Canada.

Benjamin Felix

Benjamin is a Portfolio Manager and PWL Capital’s Chief Investment Officer. He co-hosts the Rational Reminder podcast and also hosts a popular YouTube series