Episode 68: Listener Questions and Re-Framing Risk

Welcome back to the podcast everybody, we have another great round-up episode for you where we field questions that you sent in and cover a bunch of things we think you need to hear! We discuss how you should weight your stocks and bonds ratio and times that you could think about changing it, we also talk about index funds, Michael Burry and why his reputation is a bit overstated. Then we get into the different types of risk! We cover volatility, uncompensated risk, skewness, and inflation and help you think about each and the impact that they may have on your portfolio. The conversation then turns to planning, longevity, and sustainability and we talk about how to prepare for your last years cleverly and realistically. Goals are so important when laying out a sustainable strategy and we give you a bunch of questions to ask yourself to make the task a bit easier. We finish off with another edition of last wee’s worst advice and this time around we are talking about some questionable actions and remarks from TD Ameritrade. For all this and more, join us on the Rational Reminder, today!

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Key Points From This Episode:

• Considering a bond to stock ratio and when you might adjust it. [0:01:22.7]
• Questions when switching to index investing and what to hold on to. [0:06:04.3]
• The Michael Burry question and how much index funds affect prices. [0:11:46.0]
• Risk 101; going through all the different types of risk. [0:18:07.6]
• Identifying which risk you are actually averse to and the results of this. [0:31:04.2]
• Planning and annuities; longevity risks and age-related questions to ask yourself. [0:32:48.1]
• Increasing the sustainability of your investments and the importance of goals. [0:36:46.9]
• Last week’s worst advice! TD Ameritrade’s confusing decisions around fees. [0:42:01.8]

Tweetables:

“So you’re really looking at what is the difference between the present value of paying this tax in the future and the cost of paying it today. That difference is the hit you’re taking.” — @benjaminwfelix [0:14:43]

“There are two situations where volatility is a real risk. One is when you need the money soon. Then the other time volatility’s a real risk is behaviorally.” — @benjaminwfelix [0:20:03]

“All of the risks that we have talked about so far except for volatility but total loss, uncompensated risk, skewness, those can all be addressed with proper diversification.” — @benjaminwfelix  [0:28:48]

“To think about risk, we have to think about why are we investing in the first place and for most people it is to facilitate future consumption.” — @benjaminwfelix [0:29:47]

Links From Today’s Episode:

Rational Reminder Website — https://rationalreminder.ca/

Michael Burry — https://www.cnbc.com/2019/09/04/the-big-shorts-michael-burry-says-he-has-found-the-next-market-bubble.html

AlphaZero — https://deepmind.com/blog/article/alphazero-shedding-new-light-grand-games-chess-shogi-and-go

Bernie Madoff — https://www.investopedia.com/terms/b/bernard-madoff.asp

Fama French Five-Factor Model — https://blog.quantinsti.com/fama-french-five-factor-asset-pricing-model/

Alexandra McQueen Episode — https://rationalreminder.ca/podcast/2019/8/15/episode-59-financial-economics-and-annuities-rational-planning-for-retirement

Download the transcript of this episode here: Rational Reminder Podcast – EP. 68 – Transcript