The Power of Simplicity in Investing with Ben Felix

A quick reminder before the episode, registration is open for the 2026 Boglets Conference. We have some phenomenal speakers on the lineup this year. Go to bogalcenter.net/2026conference to register. Coming up on the 95th Bogleheads on Investing [music] podcast. I had really been noticing ads, a lot of ads that were marketing stuff that I knew were not great products for the end users where I was like, "Okay, I see an ad for private equity that's not promising, but suggesting very strongly that you're going to outperform public equity with private equity." Oh, that's that's an interesting claim. Let's let's screen cap this and put it in a folder. What I kind of found was that to nobody's surprise probably is that all of the products that are getting advertised are products that will generate the highest fees for the people selling them. >> Few people have done more to bridge the gap between academic finance and practical investing advice than the guest for today's episode, Ben Felix. Ben is chief investment officer at PWL Capital, co-host of the Rational Reminder podcast, a CFP professional, and a CFA charter holder. We start our conversation by talking about the fundamental drivers of investing success. We then get into misleading financial product advertising. We talk about how money can help us live a good life. And then we get pretty geeky at the end of our conversation where we talk about a 100% stock portfolio for retirees. And then lastly, we dig into factor investing. Hi everyone, I'm John Luskin, board member for the John C. Bogle Center for Financial Literacy and host for this episode. Stick around to the end of the episode where I'll give you my comments and reactions to the interview. And if you're listening on an audio only version, be sure to check us out on YouTube where we've added a few visuals throughout the episode to help clarify some of the concepts we discuss. Lastly, our data shows that fewer than half of our viewers are subscribed. So, please help us advance the mission of the John C. Bogle Center for Financial Literacy, building a world of well-informed and capable investors by subscribing, liking, and commenting on this episode. And now on to the episode. Ben, let's kick it off. We've got a great question here from Tempe Grumble from Bogalheads Reddit. He asks about what are some investing basics that's true worldwide. >> Yeah, I mean no matter where you are, fees, and this is going to be music to the ears of bogal heads. Fees, costs, taxes, and diversification matters everywhere. Those things matter everywhere. Beating the market is hard to do consistently everywhere. You might argue that some countries are maybe easier to beat the market. I've heard stories about various countries, but when you look at the the SPIA data, for example, around the world, it's pretty consistent. I'll do a direct John Bogle quote here just by the haystack. I think that's true everywhere. No matter where you are, asset allocation is one of the biggest drivers of long-term expected outcomes. Getting that right, your mix between stocks, bonds, and whatever other assets you want to hold in your portfolio. That's one of the most important decisions for any investor to make regardless of where they are in the world. >> Yeah. Naturally, I absolutely agree. How important is simplicity in that framework? Because I think about there are investments that they can be low fee and they can be diversified, but it takes a lot of work to get there. Like if you're going to invest in a bunch of uh private companies yourself, that's something me Faber does, for example, or maybe you're doing real estate investing and you're investing in a lot of properties yourself. How important is simplicity when considering the framework of lowcost and diversification? >> It depends on the person. It depends on the investor. For me personally, I can tell you that I place a lot of weight on simplicity. My public market investments are all in a single fund. My overall investments include uh I think just two other assets, my house and shares in in the company that I work for. So I I think simplicity is really important. Different people have different opinions on that. If I look at PWL's clients, there's also a an interesting dispersion in preferences for simplicity there where we've and I know we'll talk about taxes and stuff later, but we we've made really economically obvious recommendations to to certain clients to implement some planning strategy or whatever and been able to show, listen, like this is going to benefit you and your family and they've just been like, yeah, no, it's too complicated. I don't want to have to deal with all that stuff. So I, you know, people have different preferences for simplicity, and I think you have to respect that when you're designing a strategy. And again, for me personally, I I place a ton of weight on simplicity. Me, too. All right, we touched on taxes. How much does optimizing for taxes matter when it comes to the success of an investor? >> I'm in Canada. My clients are in Canada. I don't have expertise in in in the US. So, just I want listeners to keep that in mind as I'm talking because some of the stuff is Canada specific. I'm skeptical of strategies like tax loss harvesting and asset location for most investors most of the time. So those are strategies that get thrown around as you know everybody should be doing this or or you're making a mistake if you're not. I'm I'm skeptical. If you're in the US where and again I don't have expertise there but if if those strategies might make sense for for people because of the different tax treatment I think you have to be really careful about running the numbers for your specific circumstances as opposed to just kind of taking the sales pitch about those types of strategies at face value and considering the costs of of implementation. Now, I I think that there are other things that can make a a really meaningful difference to someone's overall expected outcomes. And that's stuff like contributing to and withdrawing from the right types of accounts at the right times. And again, those account types are going to be different in Canada and the US, but the the concepts are the same. And we have pre-tax accounts and post- tax accounts and taxable accounts and all that kind of stuff. proper estate planning to avoid unnecessary taxes on death as another example where again that's going to mean different things in Canada and the US and probably in different states and provinces as well. Uh but the the concept still applies. So all that to say taxes can matter but I think that they're often used as a tool to sell strategies that in my opinion have maybe questionable actual value for people. >> Yeah, I'm inclined to agree. So correct me if I'm wrong. PWL you're managing money for clients. You're not working with do-it-yourselfers, is that right? >> Yeah, we don't do any fee only planning. It's all asset management based service. >> Now, a lot of the listeners on the show are do-it-yourselfers. What should do-it-yourselfers be considering when they're evaluating maybe putting in place a complicated tax strategy or other investing complexity? >> Keeping in mind that I I have a bias toward simplicity, I think that there is often a tradeoff between complexity and optimization. I mean, you kind of mentioned this earlier that like you could you could build the lowest cost portfolio possible and you're going to save some basis points, but if it ends up being really complicated to implement while there there are other implicit costs involved with that. I think that particularly DIY folks need to be very careful not to make their situation too complex. I I mentioned earlier that we'll sometimes propose more complex strategies to clients in that case in those circumstances where a firm like PWL who has people who are experts in their field doing this stuff for clients every day. If they're doing the implementation, I think it's a lot different and they're also a little bit separated from from the actual situation when when they're doing it professionally. So complexities can become a little bit more manageable in in that environment. But even then, like I mentioned the story before where we've recommended more complex strategies to to some folks who have e even though we're going to be doing most of the hard stuff, they've looked at it and just been like, "No, I don't have to think about all that stuff in my life." So, but but if it's a DIY person who's really completely doing it themselves, I think that that point becomes even stronger where simplicity just has so much value. >> I agree. So, recently you put out a video on your YouTube channel about financial advertising. What are some important takeaways that do-it-yourselfers should be aware of? Oh, man. So, I I I spent a lot of time thinking about finance and investing as as people can imagine and and and reading about it online and like all normal people, I scroll Reddit a lot. That was kind of a joke. But uh um I I I had really been noticing ads, a lot of ads that were marketing stuff that I knew with, you know, just with the research that I've done and and just being in in this in this field professionally that I knew were not great products for the end users. And so I started just kind of collecting in a folder a bunch of these examples where I was like, "Okay, I see an ad for private equity that's not promising, but suggesting very strongly that you're going to outperform public equity with private equity." Oh, that's that's an interesting claim. Let's let's screen cap this and put it in a folder. And I see ads on uh US options trading specifically, which it matters in in Canada for reasons that I can explain in a sec. Uh so I screen cap that. That's okay. And and so I just kept collecting these these ads and what I kind of found was that to nobody's surprise probably is that all of the products that are getting advertised are products that will generate the highest fees for the people selling them. Which like of course that's true. If I'm a business and I'm selling a really low margin product and a really high margin product, I'm going to put my advertising dollars behind the high margin product. Like that that's what businesses do and that's fine. And so I I just kind of compiled this list of all of these examples, private equity being one, where in the example that I used, the firm promoting it, I had to do a lot of digging, but I was able to find in a disclosure buried in in a PDF that they're they're taking what is effectively a kickback from the private equity fund that they're recommending to clients, which was not obvious to to me. And like I feel like I should be pretty good at uncovering that kind of stuff. I actually had to ask Claude to to find it. I was like, "Can you find any conflicts of interest?" And it was able to find a PDF from the firm anyway, but like I my own human digging, I I was not able to find it. So, I can only imagine a client of that firm wouldn't be able to find it. But there there it was. And the Financial Times reported on that being a pretty systemic issue where where a lot of these private funds are paying big sort of kickbacks to wealth firms and brokers and stuff like that. Anyway, so that was one example. The US options one, man, this one is crazy. So in Canada, you can't take payment for order flow as a brokerage. Payment for order flow is like if if you're a brokerage, you can you can bundle up your orders and you can sell them to be executed and then you receive payment for for selling that block of trades, which like as a practice, you know, is it good? Is it bad? That's a question that people have been asking for a while now. There's lots of research on it suggesting that for stocks, it's probably not so bad. For options specifically, it seems like it results in in in wider spreads and probably makes investors worse off overall in in stocks. It looks like it actually probably makes investors better off overall because one of the things payment for order flow has been able to do is eliminate trading commissions. Like when people ask why are my trades free now because they're selling your order flow. So anyway, in stocks that seems fine. In options it seems like there's a big implied cost there. It's also much more profitable for brokers to sell options order flow. So anyway, the ads that I was seeing were for specifically trading US options through a Canadian broker. I was able to infer and I found a on on their website a disclosures that they are selling the order flow. So I was like, okay, they're advertising trading US options, which they're probably selling the order flow for and they're probably getting big uh margins from doing that. And then there's other stuff. I mean, there's like thematic ETFs. I talked about covered call ETFs. The the basic lesson is, and this is not going to be news to to bogleheads, the people listening to this podcast, the basic lesson is that if someone is advertising a financial product to you, it's probably a high margin product for the company advertising it, which implies that it's probably not a very good product for you to invest in. >> Yeah. Fun fact, I had a rep from a a big fund company on the show and I wanted to talk about their very boring, very simple, lowcost investing products and and they counter offered, "Hey, can we talk about our buffered ETFs instead?" >> Yeah, I didn't talk about buffered ETFs in that video, but I did talk about them in a a recent video or earlier this year called the rise of ETF slop. I characterized buffer ETFs as ETF slop. That that's a good YouTube thumbnail I feel like. >> Yeah. [laughter] >> Yeah. I think about your comment about advertising performance of PE funds, right? I mean, they can put whatever they want on that little bar chart, but then, you know, as you point out in the video, they sort of make up those numbers. They're calculated a certain way over a certain time period compared to certain indexes, public indexes. The one I showed in the video is it could have been worse. Like they were not using an IRR. they were using a a time weighted index of private market funds. IRRs can be worse. They can be I think manipulated or presented in a way that's more misleading. The index in the comparison that I was referring to is still NAV based net asset value based which is like the funds saying this is how much our underlying holdings are worth as opposed to a market tested valuation which is common in private equity because the underlying assets are not sold frequently. in private equity, it's just I've talked about this on my podcast, too. It's like it's a point of debate whether private equity has actually outperformed public equity. And the very fact that that is a point of debate to me is really challenging as an investor because if we don't actually know how this asset class has performed, it's really hard to form expectations about the future and it's really hard to make asset allocation decisions. I think I formed that thought independently, but when Eugene FMA was on the Rational Reminder podcast years ago, he basically said the same thing. He talked about how the market portfolio is a good starting point for any investor. When I asked him, okay, well, if the market portfolio makes sense, shouldn't we include private equity? And his comment was a version of what I just said. We don't know what the expected return of private equity is. So, I find it really hard to say it should be included in any portfolio. And I think that's what we see with a lot of the research coming out. It's like I I can get two published papers literally, one saying private equity has not outperformed public equity and one saying it's outperformed by 4% a year. It's like what? How? I don't know. So, I don't know how you make sensible decisions about investing in that asset class. >> Yeah, certainly if you have an unclear answer on the performance, then you have guaranteed fees and guaranteed illiquidity, I struggle to argue that it makes sense to have stuff like private equity in a portfolio. Yeah, I agree. >> All right, let's talk about using your money to have a good life. We got a couple questions from the Bulgar community on this topic. Luke Swanson and hi, my name is Steve from the Boguts forums. You've put a paper out finding and finding a good life and then you also talk about this on your show as well. Tell us what are some takeaways from that paper from what you've shared in your own shows? I did a recent video on my YouTube channel where I kind of did an overview of this paper and added some more up-to-date research. So, if people want to check that out, I would actually suggest watching the video instead of reading the paper, but the paper's still I think it's still all right. That that paper was interesting. So, that was like and I [clears throat] don't mean to to diverge from the question a little bit here, but so years ago, we had someone come in, Brian Portoy, who's been a guest on my podcast, great guy, consider him a friend. He he basically has a consulting practice for financial advisors where he he helps you connect with clients on a more personal emotional kind of level. And when he first brought this to PWL, I was super skeptical. This is not what we should be talking to clients about. Eventually I I I I started to get it and then I started writing my thoughts down. that turned into this paper which I think really helped me formalize I guess in my own head how this is why this is relevant to the practice of financial advice and how we can be using it to to give better advice to our clients and so I wrote the paper put it up on the PW website and I don't know if it's still true today but for years it was the most downloaded resource on the PW website and we publish a lot of stuff but it was the most downloaded resource so kind of validating and interesting that that this mattered to people but it it turns out that it It really does and we see this with our client interactions now too. So the main takeaways of the paper a big one is that similar to investing where we have a five factor model and French five factor model for asset pricing in positive psychology which is like the field basically of what leads people to be happy is a simplification but close enough. There's also a five-factor model which I love because I like five factor models. So the factors in this model of human flourishing are positive emotion, engagement, relationships, meaning and accomplishment. There's a sixth factor added later. Maybe it's like momentum in asset pricing. I don't know. But it's vitality, which is basically like sleeping well and eating well. So that's one big takeaway, and I talk about that a lot in the paper. I've talked about it a lot since. I think it's a super simple framework to just like I and I do it all the time. I just check in with myself. Where am I at on these factors? It's like, do I enjoy what I'm doing right now? You know, I'm talking to you. We're having a good time. I like that. Engagement. Same thing. Like that's like doing challenging tasks that match your skill level. I think like this for me falls into that category as well. Relationships, which is just having strong positive relationships with your family and friends. Am I seeing my friends enough? Am I spending enough time with my kids? Meaning is being part of something greater than yourself. And again, just using myself as an example, I do find doing stuff like this and my my YouTube channel and our podcast where I get tons of feedback from people literally telling me that I've changed their life, that's like to me I get a lot out of that. And then accomplishment is is the last one, which is basically achieving hard things like setting challenging goals and achieving them over time. I just think that as a framework is super powerful and there is evidence suggesting that those factors do contribute to lives that people evaluate as good. Other big takeaways from that paper, more money is not the key to happiness, at least above a certain point. The most up-to-date research on this does suggest that happiness does increase with rising log income. That log term is important there. But the relationship is still pretty weak. And log income, if listeners are not aware, means that the relationship is based on the doubling of your income. So if we see like a small incremental change with rising log income, that's not like your income went up 5%. It means your income doubled and you got a little tiny bit happier. Little tiny, I'll put that in context. The correlation between average happiness and log income is 0.09 in the experience sampling data this paper's based on. So it's a really low correlation. It's positive and statistically significant but low. Another example from from that paper is that the difference between the medians of happiness at household incomes of 15,000 and $250,000. We probably have to adjust those for inflation, but whatever. You see, it's like a huge gap in household incomes. The difference in happiness is only about five points on a 100 point scale. So it's like yes, there's a bit of a relationship between money and happiness, but it's not very strong. So I I do think that that general concept that getting a whole bunch more money, yeah, it might improve things a little bit. You might be a little bit happier if your income 10x's that'll lead to increased happiness, but it's it's a lot weaker than I think people often think or or expect it to be. Another big takeaway is that people are bad at predicting what will make them happy in the future. It's a concept called weak effective forecasting and related to that but also related to some other things. People are really bad at setting the right financial goals. That's a really interesting one because you know why do we invest? To achieve some future goal. And likewise for me professionally and for for the folks that work at PWL professionally, what's our job? Well, it's to help people achieve their goals. But if we ask someone what their goals are, they're not going to do a good job of articulating what their goals are. That's something that's changed at PWL over the last probably five or so years is that we've become very aware that people are not good at articulating their goals. And so we've developed a whole bunch of tools and processes to help people elicit goals that are meaningful to them. Another, this one, this one's super important. Social comparison is a big drain on happiness. and also on financial resources. There there is evidence that people will sort of spend up to the people around them kind of always chasing spending up to the next bracket uh which can be very financially damaging. Oh man. Yeah. Time versus money. People who focus on time over money rather than money over time tend to be happier, have greater social connection, have a better relationship with their spouse, and are more likely to choose work that they enjoy. So that's literally like would you rather have a little bit more time in exchange for a little bit less money or do you have a little bit more money? And what the evidence suggests is that that preference for time over money has a lot of positive attributes or correlations. I talked about how people can't really predict what will make them happy in the future. One of the best ways to deal with that is instead of imagining some big future goal that you want to save up for or that you want to to achieve, making more frequent but smaller experiential purchases rather than a few large material ones like I don't know like instead of buying a mansion, you know, taking your friends out to dinner more frequently, stuff like that. And I think that's particularly true when those experiences contribute to positive emotion. So, it could be like simple stuff like savoring a coffee. I like to do that sometimes. There's a nice cafe near where I live. Sometimes I'll, I don't know, take the kids to school and then go just sit down, have a coffee, and chill for a minute. You could spend on stuff that results in engagement. That could be like spending on a hobby. You can spend on relationships. I already mentioned the example of taking a friend out to dinner. You can spend on your community that relates to to meaning. And you could spend on accomplishment which is I don't know maybe paying for a course that you want to complete or or or something like that. And then there's a whole section of the paper on regret which is like the the first part of the paper focuses on like what leads to a good life. What are the positive actions that that you can expect to lead to a life that you will be happy with that you'll feel good about. And then there's this other angle which is regret. It's like looking at what do people regret. When you ask people what what past decisions are you not happy about today, I think that gives a really interesting lens into sort of what not to do as opposed to what to do. And there are a couple interesting pieces of research on that. There's a Dan Pink who's an author did a whole book on regret. And as part of that, he did a survey of folks in the US. Uh he found that the most common regrets involved family, romantic partners, education, career, finances, and health. Oh, and another big one that comes up in this research is that most people regret their inactions more than their actions. So then that's that's Dan Pink's research. Then there's an academic paper on regret and the authors in that one find in a representative US sample this time that the most common regrets involve romance and then it's family, education, career, finances, and parenting. And again, as I mentioned, regrets about action tend to dissipate. you do something, you regret it. That tends to go away. But regrets about inaction don't tend to go away. They actually tend to get stronger over time. So that's like if we tie it back to financial decision-m, it's like playing it safe today on decisions like, I don't know, starting a business or declining a job opportunity or something like that that leads to a missed opportunity. It might feel like not a big deal today, like you you didn't take the risk, you didn't take the job, whatever, but then over time th those regrets tend to get stronger. That's fascinating. Such interesting content. Certainly a divergence of most stuff us bokelets think about. We got a couple questions from the bokelets community. We got one from 816 ft from the forum and from Energy Base from Reddit. They're asking about what sort of things you've changed your mind about over the course of learning about personal finance and investing. I've answered this question before talking about Scott Cedarberg's research, which I know we have some other questions about, but I I don't really know if that changed my mind because I was making content about the relative risks of stocks and bonds for long-term investors. Scott Cedberg's research plus his co-authors basically showed that 100% equity portfolios make sense over the full life cycle from accumulation up through retirement. And I think that paper made a lot of people think even if they disagreed with the result, it was very interesting analysis. May maybe it shifted my conviction a little bit, but I I I made a video years before that paper had even come out in draft, like initial draft form about basically the same topic. I didn't have the empirical rig rigor that Scott and his co-authors did, but I don't know. I don't know if I've actually really changed my mind on that. It's an easy one to say as an answer because I think it did change a lot of people's minds. But anyway, something that I've actually changed my mind about is we touched on it earlier is the idea that people know what they want to achieve with their investments. I I do think there's an assumption among both investors and professionals that people have goals that they want to achieve and that the job of investing is just to achieve those goals. But we've done research at PWL and and we've applied that research to conversations with real clients and it's become increasingly obvious to us that people often need a lot of help thinking through what it is they actually want to achieve with in their life basically like what what are you investing for is is a really complicated question that's not easy to answer and it can have material effects on things like asset allocation, savings rate, uh even what is your retirement goal? Do you want to retire early or or later? Or are you going to find some other work after you finish your whatever highpaying job that you may have right now? All that kind of stuff. And so what we see at PWL is that people really do need a combination of of prompts about kind of life design, if we can call it that, but just kind of stuff that some of the stuff that we've been talking about combined with financial planning modeling to see what compromises they may need to make later in life to avoid compromises today. just like they need that combination of prompts about life design, about what what do you want to achieve combined with the ability to model those trade-offs in in real time, which is how we approach financial planning. We we did some research on this ourselves where we asked a bunch of people what their goals were and then we we added a few prompts. That research was list your goals, double the list, and then we provided the perma model that that I talked about earlier, the five factor model of human flourishing. We we provided those factors as categories that goals might fit into and asked people if that elicited further goals and then we collected all that data. So the three steps and we did some analysis. We turned those goals into a single master list of goals, which is again something that the research suggests is really helpful to people. It's like if if you ask someone what their goals are, they'll give you some goals and the the goals they give you might be relevant. If you then present them with a master list of goals, which is like a list of goals collected from a whole bunch of other people who have done some kind of goals exercise, people will often find as many goals that are critically important to them on that master list as they were able to identify initially themselves. So it's like this stuff really matters. So we turn that into a master list of goals that people can use as part of this goal setting process and that we now use as part of a goal setting process. Morning Star actually took our data and they did some really cool analysis. from Morning Star's behavioral research team confirming that the process that we had taken people through did result in in more a meaningful goals. They called them deeper goals. And so now we we always take people through that type of process because we've realized how important it was. So that's a it's a you know it's not even the answer that I would expect to give. But when I when I read this question was thinking through like what have I really changed my mind about. I think this is one of the biggest ones where it's it's so easy to just think people know what they want and we have to figure out how to make the investments help them achieve that. But I don't think that's right. I think people often don't know what they want and going through a structured process to make sure that they're working toward the right goals is is super important. And so that has changed how PWL operates with clients. Like we we have a structured goal setting process. We actually have a free app on our website if if people go to research-tools.pwlcap.com. There's a goal setting app there and you can go to that app and it takes you through the structured process that I just mentioned. So I know people are using that a lot and getting a lot of value from it. That's the biggest thing for sure that I've changed my mind about. Maybe an unconventional answer to that question. >> No, it's a great answer and we'll link to that in the show notes as well as Ben's other content for folks who want to check that out. So, let's talk more about this paper, this 100% stock portfolio for the lifetime of an investor. And that's going to run counter to other research that's out there. We had Bill Bangan on the podcast recently, and he showed that a moderate portfolio is going to be most ideal for retirees. Uh we had Christine Benz on previously. Her own research shows the same thing. If you're retiring or spending down your assets, you want to have a moderate stock bond mix. And uh Ben's research looks at past performance. Christine Benson's research uses a Monte Carlo simulation and they both came to the same conclusion. You want that moderate portfolio. How does that differ from the methodology in the Cedarberg paper? >> That's really the crux of the question, right? And you can find different optimal portfolios. You can find different optimal glide paths leading up to and and into retirement depending on what data set you're using. So the way that Scott and his co-authors did their research is using something called a block bootstrap methodology. So they took data for 39 countries going back into I think 1890 was the earliest but not not all the data starts in 1890 but they basically get this big think about like a big bucket of returns from all these different countries and the way block bootstrap sampling works is that they reach into that bucket. So say we're in we're in stocks right now. We're simulating stock returns. They reach into the bucket of stock returns and they pull out on average a 10-year block of returns. But it's on average. So some blocks might be whatever 12 years. Some might be eight years. They're varying around that that average block length. So we pull out one block and maybe it's like a block of returns from Italy. So okay, we pull out a block of Italy returns. We stick it there. That's our domestic stock return. And then the international stock return. They're going to reach into the bucket of international stock returns. We're going to pull out the same block as we got for for Italy except it's going to be for the same period world excluding Italy measured in Italian dollars. Okay, there's our international stock return. And then they're going to take Italian bonds for that block. They've got bills in there, too. And then they're going to reach in again and they're going to take the next block and it's whatever going to be some other country. and they're going to string all those blocks together until they have one run of lifetime returns for a hypothetical person. And they do that a million times in their paper. So they get all these potential lifetime returns from international stocks, domestic stocks, bonds, and bills. And then they test various asset allocations over the life cycle. The way that they set it up probably highlights that nominal bonds can be a lot riskier than maybe like a Monte Carlo would show. It also preserves what are called time series characteristics of returns. So stuff like mean reversion in stocks which means after bad stock returns, stock returns tend to get a little bit better. After really good returns, they tend to get a little bit worse. And mean aversion in bonds. Bonds actually have the opposite trait where when bond returns have been bad usually due to inflation or during periods of high inflation, bond returns tend to continue to be bad and they don't have that bounce back that stocks have. So you add all this up, you take the distributions of returns that they have in their in their sample, you preserve the time series characteristics of returns and their analysis leads to some pretty unconventional conclusions. Uh probably largely driven by the fact that they have a very large sample of countries historical records to draw from and the fact that they're preserving the time series characteristics of returns. But I mean, is that right? Or is Christine Ben's Monte Carlo right? or is Bill Benginan's historical, I'm assuming, US analysis, right? None of them are right. They're just different tests on different distributions of returns and they give you different pieces of information. >> It begs the question, what should we be leaning on in designing our portfolio going forward? Which methodology for assessing the right stock fond mix makes the most sense to pick? >> They all contain information. I mean, would I base my forward-looking investment decisions purely on historical simulations going back to 1890? Probably not. I think stock returns over that period leading up to to now basically have been incredibly high. I mean, in the US market in particular, we have had just unbelievably high stock returns and have continued to be unbelievably high despite valuations being as high as they are. Do I think that can continue for the next 50 or 60 or whatever number of years? I'd be amazed if they did. And the the difference between stock and bond returns in Scott sample was also quite large. Should we expect that to continue? I don't know that things have changed. The world changes. So, it's tough. It's still informative. And I I love that paper. It's one of my favorite papers ever. We don't use that when we do financial planning for clients. We use something probably closer to what Christine does. uh in her analysis where we're doing Monte Carlo simulations. We're using our expected returns for stocks and bonds. And so in practice, we're not recommending 100% stock portfolios to everyone, which is something that I think some people think that I am doing because I like that paper and I've talked about it a bunch, but I think the average client of PWL is probably closer to 70% in stocks. We also have a relatively young client base relative to most of our industry. Anyway, there's no way to know. It's basically asking how can we predict the future and we can't right. So I I think that different methodologies and different tools can give us different pieces of information but ultimately we're building portfolios for an uncertain unknown future and we've we've just kind of got to do the best we can with the tools we have available. >> Yeah. It's surprising that in, you know, both the backward-looking and the forward-looking of of the Monte Carlo both come to the conclusion that with more volatility, the safe spending rate goes down. And it's interesting how that doesn't necessarily show up in the 100% stock takeaway from the Cedarberg paper. Yeah, that may be related to the uh well the specific data sample that they have and the fact they're preserving the time series characteristics of returns where you're getting yes more volatility with stocks but you're also much more protected from inflation whereas bonds in many cases in their analysis are getting just decimated. So that's one of the interesting trade-offs that they highlight in that paper is that yes, stocks are more volatile than bonds, but in terms of purchasing power, like ability to fund your consumption in the future, at least in their analysis, in their in their sample, bonds have been incredibly risky. Now, they don't have tips in their paper. Scots historical analysis did not have them because they didn't exist throughout their sample period and many of the countries in the sample did not and and continued not to have them. When he was on our podcast, we did ask about that and he played with the numbers a little bit with some like simulated TIPS returns and he did find that the optimal stock allocation went below 100% if TIPS are involved as a fixed income instrument. So that again suggests to me that it's really the real risk of nominal bonds is really what's driving that high allocation to stocks more so than stocks being you know the perfect investment for a long-term investor. >> Got interesting that the inflation risk is greater than the volatility risk of stocks for portfolio draw down in that research. >> Yeah. Yeah. Well, I think that's one of the counterintuitive and interesting things they found in that paper is is really just that volatility isn't necessarily the best measure of risk for long-term investors. And I think that it's got other interesting implications, too, like uh should long-term investors really be worrying about the sharp ratio of their portfolio? Maybe not. >> And thanks for those in the Voc community who brought up the Cedar Brook paper. All right, let's talk more about asset allocation. We got some more questions here from the community and one topic that came up is all right so we've figured out what sort of glide path or maybe just static stock bond mix is going to apply for that retirey spending. What about on the way towards retirement? Is there an optimal way to wind down your stock bond mix to maybe that moderate portfolio suggested by Ben or Bangan as you approach retirement? How quickly or slowly should you do that wind down? Similar to my my previous comments, I don't think that it's possible to determine what the optimal glide path is other than within a specific simulation or set of data. As we just talked about in in the Scott Cedarberg data sample, they found the optimal glide path is basically 100% equities. Although there there there is a little bit of nuance there. They they did find that at retirement I think it was around a 30% allocation to bills was optimal which then decreased over the next sort of 7 years to zero. So they were 100% equities and then at retirement you're call it 30% in bills and then that's decreasing over the next whatever it is five or seven years or something like that which was interesting. the the way that they did their baseline model and then where that finding came from is they were modeling a 4% rule spending. So they're spending 4% of the initial portfolio in retirement and then increasing that for inflation thereafter. And in in that setup they do find that optimal allocation to build at retirement. They also test though a flexible spending strategy where instead of spending 4% of the initial value then adjusting for inflation you're spending I think it was 4% of the portfolio value each year. So if the portfolio drops by 20% your spending is dropping by 20%. In the following year uh and they found in the variable spending case that optimal allocation to bills goes away and you're just 100% stocks for the whole time. So in their specific simulation their in their million bootstrap simulations that was the optimal glide path. But it also highlights how the glide path can vary depending on your spending policy. If you want to have fixed inflationadjusted spending, your optimal glide path might be different from if you want to have variable spending. If you're willing to make adjustments to your spending over time, there is one paper in I can't remember which journal it's in, but it's a published paper in a practitioner journal. It's a 2016 paper that does look at various retirement glide paths. It's called the retirement glide path an international perspective and they look at using the dimson marsh stuntton data. They look at 19 countries and the world market over the period from 1900 to 2009 and they're just they're testing a whole bunch of different glide path strategies. They're again using the 4% rule just like I described for Scott Cedberg's paper and it's a 30-year retirement period withdrawal period in this case. They tested declining equity strategies. So that's where the allocation to stocks decreases over time. Rising equity glide path where the allocation to stocks maybe it's self-explanatory increases over time and also static allocations where the chosen allocation is just constant which is closer I guess to what we were just talking about with Scott's paper. They find in in this setup that the static strategies actually tend to offer the lowest or near lowest failure rates and the highest or near highest expected bequest. like how much money do you have left over when you die? Uh they also offer good upside potential and overall the best downside protection. So I thought that was pretty interesting. This is 2016. So this is way before Scott Cedberg's paper. The author of this paper points out that the the portfolio that fully invests in stocks actually has the lowest failure rate. uh it performs reasonably well when there are big tail risks in a period and it provides much higher upside potential than the other strategies. And so it's again it's this is an earlier paper that's kind of pointing to that same question of is volatility really the right measure of risk if we're talking about funding long-term consumption. And the author does note that the 100% equity portfolio in his analysis does have a higher standard deviation of outcomes. So we could say okay so it is a little bit riskier but the higher standard deviation actually indicates uncertainty about how much better off not how much worse off a retire will be after 30 years because it shifts the whole distribution to just a better place. So even though there's more variability in outcomes the worst ones are still uh are still pretty good in in the overall distribution of the various strategies that were tested. That's one paper using a specific data set and testing those those couple of different strategies and they find that the static allocations so I think it was like a 60/40 portfolio or the 100% equity portfolio and they find those static allocations actually perform better than the the glide path strategies but I mean you know somebody can go use US data maybe they use US bonds and US stocks and they'll find one conclusion then somebody else can use US stocks and US bills and find a different conclusion find any of this stuff is just as sensitive as trying to say, you know, should you have 64% or 68% in stocks? It's like, I don't know, man. We don't we don't we can't answer those questions. We can just do we can just do our best. >> Absolutely. And shout out to Cali Wish from YouTube for asking a question about Glide Pass. So, going back to earlier in our conversation, we talked about the importance of simplicity when investing. I'm curious, what are your thoughts on using all-in-one funds to invest? whether it's a a static stock bond mix or something like a target date fund. I know you've had a guest on previously on your show talked about some of the downsides of higher fee target date funds. But I'm curious to hear what your take is on using all-in-one funds for investing. I'm glad you picked up on that nuance because some people got mad at us about that episode for saying target date funds are bad, but that guest was saying high fee target date funds are bad. All-in-one funds, I'm a big fan. So C Canada's market is different from the US market uh for lots of reasons. It's harder for people to build ETF comp portfolios out of their own components. We don't have the same tools available to us. And so there there's been a lot of product innovation in Canada for that reason. Asset allocation ETFs or whatever you want to call them like all-in-one single ETFs have become very very popular here. We're a wealth management firm. We do have portfolio management tools available to us. We primarily use and people may be surprised to hear this. We primarily use single funds for most of our clients. Now, part of that is simplicity. We used to worry a little bit about like, you know, our clients going to care about having a single line item in their portfolio that makes it seem like we're not doing enough, but that has not been an issue at all. I think probably because we're doing a lot of other stuff around the portfolio and we like to tell clients that we think investing has been solved. So, maybe they're not surprised to see a single solution if it is a solved problem. We don't literally think that, but it's like close enough. Now, I should say part of that is because for reasons that are probably too nerdy to explain to a US audience, too Canadian nerdy, um these funds have been very tax efficient and they would not have been as tax efficient if we had used the individual components to construct the same allocations. Anyway, so all that to say, we do use these funds from Dimensional Fund Advisors. They're just single funds. They've been great. They're simple to implement. Their fees are marginally higher than building the portfolio with the underlying components yourself and they're automatically rebalanced. I think they're great products. If you look at the data in Morning Stars mind the gap research they publish every year, it's measuring the gap between the returns that an average investor in the fund earns versus the returns of the fund itself. And that gap can be attributed to lots of different things, but it's usually attributed to investor misbehavior. And the one of the lowest gaps of any investment product is in asset allocation funds. I would guess that's because people don't tinker. Like they don't have to tinker because they put their money into the thing and it goes and it does its rebalancing. You don't have to think about, oh, do I should I buy us? Oh, but it's done, you know, Trump, whatever, whatever. But the ass allocation funds, you just stick it in there and it does its thing and that's it. So, I think it is interesting that those return gaps are smaller. And as I said, the the marginal fees, the additional fees you pay to own these things instead of the underlying there. Yeah, you could save a few basis points, but like we talked about at the beginning of this conversation. You could save a few basis points, but if it results in a whole bunch of extra work or mental overhead for you, it's probably not worth it. Big fan of those products. I think they've been incredible innovation, and I hope they continue to see adoption. Target date funds, you also asked about those. Those are not as big of a deal in Canada. We have we have just have a much different retirement system and and those products are just generally less available, less common to see in in Canada. But if I were to give comments on target date funds, I I think they probably are too generic on their asset allocation glide path over time, like maybe those allocations make sense for whoever the average investor is. I don't know. But kind of like we talked about earlier with static allocations maybe being better than glide paths over time, maybe not having super heavy bond allocations, particularly to nominal bonds in retirement. It's another interesting thing is a lot of the targeted funds allocate to nominal bonds, not tips. Dimensional fund advisors is one of the few that that was a little more aggressive on TIPS, but they've not attracted assets partially because tips happen to have performed poorly and people chase performance, which is just the reality. I think targets funds are fine. They're better than people sitting in cash, but I would personally prefer a static allocation fund. >> I'm biased, but I certainly agree that tinkering is what I often see with do-it-yourselfers. Yeah, it's just so easy. It's so it's it's so hard not to tinker. >> Absolutely. And this will be our last topic for the interview about factor investing. And I shout out to 1973 Ford Mercury on Bocalhead Reddit, Hazel Kut from Bocalhead Reddit, Yozu 2 from Boglehead Reddit, Glenn from the forums, Pinman from YouTube. What would you like to talk about when it comes to factor investing? Ben, >> there a bunch of great questions. So, one of the questions was, might we simply be wrong about factor investing? Absolutely. We may also be wrong about equity investing. These are just things that we that we can't know. But it's a good question. How confident are you that known factors survive postpublication? I mean, confident enough to have moderate factor tilts in my portfolio, but not confident enough to lever up a long short factor portfolio, which I don't really think anybody should be doing. And then so this is the one that I really want to talk about because it comes up a lot particularly on Bogleheads forum but also on the Bogleheads subreddit which is Andrew Chen's research. So Andrew Chen is a financial economist, fantastic researcher. He's got publications in all the top journals and he's got one paper in particular that suggests that post 2005 where there's some kind of structural break for reasons maybe related to just access to information and and the advancements of technology but I don't know I don't think Andrew takes position on what the actual structural break is but anyway post 2005 his paper basically suggests that after transaction costs factor premiums have gone away in the US sample We had Andrew on our podcast. We had a great discussion. I thoroughly enjoyed it. But this is a paper that always gets tossed up whenever someone in the Bogleheads ecosystem says, you know, what do you guys think about factor tilts or what whatever inevitable that the link to that podcast episode with Andrew will get thrown up and say, well, even Ben Felix's podcast says you shouldn't do factor investing anymore. And I'm always like, oh man, okay. I want to talk about it for that reason because it always it always comes up. So the question from the person who sent this in was basically would I still recommend factor investing given Andrew's research. I I think his research is awesome. We had him on our podcast because it was a really really interesting perspective and there's there's definitely a button. I've chatted to Andrew about this too. I don't know if he fully agrees with me but we've at least talked about it. The the factor premiums targeted by firms like Dimensional and and Avantis who are like the I don't know. I consider Dimensional Advantage to be like extensions of Boglehead investing. Maybe Bogleheads will cringe at me saying that. I have no idea. But they they're kind of cut from the same cloth. Like Bogle and David Booth who started Dimensional were friends and did some business together back in the day when they were both starting their companies. They're both super ingrained with the academic community. Anyway, so it's like they they kind of stemmed from the same beginnings. just dimensional took the implications of academic research a little bit further than Bogle did with Vanguard which is which is fine and they were both successful building businesses. Anyway, Dimensional Advantist the premiums that they target through the sample period that Andrew Chen's research measured were still positive. So Andrew's data looked at the US market which as we all know has been dominated by large cap growth stocks basically and anything that is not that has not done well but outside the US over the same sample period the factor premiums have been positive and there is when I chatted with Andrew about this he actually sent me a published paper in the journal of financial economics confirming that to be true so that was interesting and then the other thing is if we look outside of Andrew's sample so he's got his US sample I can't remember when it ends But I I I have looked at the the numbers for it. If you look outside the sample, at least the factors that dimensional advantage type firms are targeting have actually performed well again. So it's like in this specific sample analyzed in the paper in the US market, factor premiums look like they're gone. Andrew has a good case for why they're gone. But if we look outside of that sample, the story changes. So earlier in in the sample, factor premiums are positive. Outside the sample in the time series, factor pres are positive. at least the ones that dimensional and adventists look at and outside of the US market over the same period they are positive. So that all suggests to me it's like Andrew makes a really compelling case but it's probably not like a death blow to factor investing when there's so many out of sample tests that suggest there's still something there. When Andrew was on rational reminder, one of the things that we talked about, and this is based on other people's research, not his own, but he brought it up that when you combine factors, which is what firms like Dimensional and Devantis are doing, they're not just buying small cap stocks or whatever, they're buying small cap value stocks with high profitability. And when you do that, it looks like net of cost. There are still some premiums available. Uh, and then the other one is costs. So Andrew's paper and a lot of research in this area models costs a certain way. I think and I think that dimensional and advantist would probably agree although they're conflicted to agree they would probably say that their trading costs are lower a bit lower than what's being modeled in the papers which could again revive that after costs premium. So I I I love that research that was one of the most memorable podcast episodes that we've done. I love testing my own beliefs but I I think that's now used as sort of a tool to tell people they should not invest that way. And I don't think that's the right way to interpret what Andrew's findings are. If you just look at the data, it does not suggest that factor investing is dead. Keep in mind like I I often get accused of selling these products. I don't sell Dimensional Anventis funds. I don't make any money from people investing in them. You can buy them as ETFs. You don't have to buy them through my firm. Like I seek truth and try to learn things and talk about them, but I have no incentive to tell you these things. Naturally, PWL folks are getting factor funds in their portfolio. For do-it-yourselfers who are listening to the show, how should they assess whether a factor approach is right for them? >> The biggest risk is I don't think it's added downside risk. I mean, unless you're going like really hardcore into like a 100% small cap value portfolio, that could be a wild ride. But if you're doing moderate factor tilts, if the market's down 30%, you're not going to be down 50%. like that wouldn't be reasonable because a lot of these funds look very similar to the market with some just very moderate tilts towards smaller lower priced higher profitability stocks and away from the largest highest priced lowest profitability stocks. So you're not like way way different from the market but even though what I just said is true. You could very easily have a 10 or 15 year period which Dimensional Avantis is too new to have done this yet. Dimensional has existed through a very long period particularly in the US market where their factor tilted funds have underperformed the US market like the S&P 500 or VTI or whatever and that can really suck especially if you don't have conviction if you don't believe that this is a good way to be a long-term investor that can be really painful and I think there's a big risk that people end up abandoning the strategy if they did not have enough conviction in it to begin with now how do you build that conviction. I mean, I don't know. You spend thousands of hours reading bogal heads in the rational minder community. And then maybe maybe all the time you spend doing that actually eats into the benefits because you've now wasted so much of your life reading about factor investing that any basis points you get in the future are going to be negated. Unless you love it. I think a lot of people love nerding out about this stuff that it's harder to say it was a cost. I think people have to build conviction. They have to understand what the research says. They have to understand Andrew Chen's research and whether they believe that to be, you know, the truth going forward as I think Andrew does. You have to make a decision and you have to make a decision that you're comfortable sticking with for the next 50 years, even if it ends up underperforming over the next 10 or 15. I mean, it's it's a hard thing to do. So, we explain all this to clients. We explain why we invest that way, why we think it makes sense in the long term. And we've been doing it even over a period. It's turned around recently, particularly in Canada, like the the factory tilts in Canada. We overweight Canada and our portfolios relative to their market cap weights. And Canadian small cap value has just been like wild for the last couple years. And it's one of those cases where it's like you have to stay in your seat otherwise you're going to miss the game. The action shows up. And so we we've lived through that, but we've also lived through years of underperformance relative to a market cap weighted portfolio. But we've coached our clients through it. We've explained why we don't think, you know, the world has changed and it's been fine and our clients have come out well on the other side of it. But as a DIY person, maybe that's harder. I mean, especially when you ask about it in Bogleheads, you know, I invested in this in this dimensional fund 5 years ago and it's underperforming. Should I get out of it? Bogleheads are going to tell you, yeah, you idiot. You should have never invested in it to begin with. So I it's hard to say who is it right for. We we asked Eduardo Repetto, the CIO of of Avantis, the founder of of Avantis, when he was on our podcast a few years ago now. We asked him, "Who should be a 100% small cap value investor?" So, kind of a more extreme version of this question. And he kind of laughed and he was just like, "That's a very special person." So, it's some version of that answer. You have to really ask yourself if you believe in it and if you can stick with it in the long run and accept that hey like maybe it doesn't work out. But I think people investing in the equity market have to have the same conversation. There have been long periods in the US market and in other markets where the equity risk premium has been zero. People are somewhat familiar with the lost decade in US stocks from sort of 1999 or 2000 to 2009 2010 depend depending on how you measure it. That sucked. But there have been longer periods going back like 1968, stock returns were positive. I think it goes to like 1984 or something. Stock returns were positive nominally but barely above the risk-free rate and below inflation. And over that period, small cap value stocks did well. And so it's like, yeah, we can worry about factors underperforming, but I think we probably don't worry enough about equities underperforming because we haven't seen that in a while now. kind of have a generation of folks who grew up with just whatever 12% a year equity returns from the US market or whatever it's been and uh it's hard to imagine that turning around but it's it's it's possible and historically that's when factor tilts have paid off >> with respect to all right I've decided I want to do factor tilts it's right for me 100% probably isn't clients on at PWL how do you allocate their portfolios what percent of the equity slice is tilted towards factors >> we use 100% dimensional funds so that a tilts are built into the product. I built a model portfolio years ago that was designed to sort of approximate what our dimensional portfolios look like. But that was a combination of market cap weighted plus small cap value which is probably not how I'd actually suggest implementing it. Like it's probably roughly equivalent to I don't know 25% in small cap value, but I wouldn't actually use small cap value. So it might be a higher proportion in a different total market tilted fund, but it's a moderate tilt. Like we're not telling people to go super aggressive into factor tilts cuz I mean people do care about tracking error. They don't want to be very very different from the market. It's kind of like the social comparison thing like people just they can't help it. They know what the market does because their friend talked about it or they see it on TV and if their portfolio is performing very differently, people just don't like that. So we have moderate tilts that we we expect to deliver slightly higher returns in the long run. We're not trying to knock it out of the park without a ton of tracking error because we know people care about that. So ju just to clarify in the 25% small cap value that was 25% of the US equity allocation and and the international equity allocation was in small cap value and 75% was in total market. So it was a moderate factor tilt and in that model Canada didn't actually have factor tilt because the products weren't available at the time. Avantis has actually launched products in Canada very recently. So that old model portfolio that I made in my opinion has been replaced now by an asset allocation ETF launched in Canada. >> Ben, anything else you'd like to share with the Bogleheads community before I let you go? >> I hope people like the conversation. Show up in the Bogleheads forum every now and then. Usually when people are talking about my videos, it's it's an interesting place. It's a good place to have a a fun discussion. Hopefully, if people haven't checked out my YouTube channel, which is just my name, Ben Felix, my podcast, Rational Reminder, and I don't mean to to poach Bogleheads users, but we do have a pretty good discussion forum attached to our podcast called the Rational Reminder community. It's at community.rational reminder.ca where people are very nerdy about financial topics and have good discussions. So, I I spend a lot of time, probably more than I should, reading the posts in that forum. There's definitely major cross-pollination between Bogleheads and the Rash Minder community. I know there are lots of people who post on on both forums, but yeah, it's a it's a nice place to have a a thoughtful discussion about stuff. >> This was such a treat to be able to interview Ben. Let's talk about some of the takeaways from the interview. >> For me personally, I can tell you that I place a lot of weight on Simplicity. My public market investments are all in a single fund. I can't say enough how much I love to hear this. For anyone who's familiar with me and my work, they know I'm a huge fan of simple investing. Using all-in-one funds are a great way to invest. And if you want to nerd out a little bit more on that subject, check out my presentation at last year's Vocal Conference on all-in-one funds. I'll link to that in the show notes. But I want you to think about just how smart Ben is. This guy pours over the research on investing and personal finance. He knows so much on the subject and for everything that he knows. As intelligent as he is, he has the wisdom to invest in just one single fund. Now, let me tell you about a terrible story that I hate to share about the importance of investing simply. I had a one-year follow-up engagement with someone recently that I work with one year ago initially. And during that initial engagement, I told them, "Hey, you're in your peak earning years. You need an individual disability insurance policy. You're making close to seven figures a year with your income. That is worth protecting. That's worth insuring. You need the right insurance product to do that." So now we met one year later, and the reason why we're meeting is because he was forced into early retirement because of a health condition. Did he buy that individual long-term disability insurance policy to protect that future income, that income that he's no longer going to be able to earn because of that medical condition? No. But what did he do instead? He added all sorts of non-index products to his investment portfolio. In the meantime, he had a managed futures fund. He had an ETF that combined different strategies. It was a lot of unnecessary complexity. It was a lot of investment tinkering. Now, as we touched on in this interview, investing tinkering in and of itself is not great because you're going to dilute your investment returns. That's what the data shows. But what's worse is that it served as a distraction. He was doing stuff to his investment portfolio he simply didn't need to do. And with that same amount of time, he could have gone out. he could have purchased that individual disability insurance policy protecting that future income that he now is not going to be able to earn because of the onset of this disability in the midst of his working career. So that's another reason why I like these all-in-one funds. It's not just about better investment performance. It's not just about tinkering, but it's about letting you use your limited time, your limited energy to do those things that really matters, that really makes a difference. And for most folks that means making sure you have the right insurance coverage, doing your estate planning, >> and then on tax loss harvesting, I think you have to be really careful about running the numbers for your specific circumstances as opposed to just kind of taking the sales pitch about those types of strategies at face value and considering the costs of of implementation. >> It's no surprise that once again, I'm agreeing here with Ben. Now, taxes are a pain point for practically everyone and probably their grandmother, too. But to repeat Ben's point here is that we've got to be careful about the sales pitch. Yes, maybe you'll save taxes, but those costs are guaranteed. So, we need to be really careful about what we sign up for. In a previous episode of the books on Investing podcast, I interviewed Shawn Melany and Cody Garrett. we work to debunk some of the myths about tax planning. And then also Rick Ferry interviewed Philip Demuth in a previous episode that does the same thing, talking about how yes, there are some tax planning strategies out there, but that doesn't necessarily mean that you're guaranteed to have lower costs over your lifetime. I'll link to those in the show notes for folks to check out. Might we simply be wrong about factor investing? >> Absolutely. You have to really ask yourself if you believe in it and if you can stick with it in the long run and accept that hey like maybe it doesn't work out. >> As fans of factor investing know, it's the prospect of higher returns at the expense of greater risk. But I think it's that second point that gets often overlooked when it comes to deciding whether to invest in factor funds or not. Yes, you might earn a higher return, but you might earn a lower return, too. And I think that's the part that folks should be more focused on when deciding if a factor investing approach is right for them. Consider you're going to hold this part of your portfolio that could underperform your entire life. Generally, I argue that if you're not really excited about that prospect, if you're not comfortable with the possibility that part or perhaps even all of your portfolio could underperform the lowcost alternative, then perhaps factor investing is not right for you. And because factor investing is such a popular topic, we've done a lot of episodes and have had conference sessions on this already. So I'll link to those in the show notes for folks who want to check out more. [music] Thanks for joining us for the Bogalheadeds on Investing podcast. For more things boleheads, be sure to check out videos from the 2025 conference, all of which are now available on YouTube. Also, you'll find countless shorts from both the conference and this podcast. If you're still looking for more, visit bogalcenter.net where you'll find a treasure trove of personal finance resources designed specifically for do-it-yourself investors, all available for free. This podcast is made possible by the John C. Bogle Center for Financial Literacy, a 501c3 nonprofit organization dedicated to building a world of well-informed, capable, and empowered investors. To support our work, visit boogalcenter.net/donate to make a taxdeductible donation. And thank you to the many people who make this show possible. Michael for help with transcriptions, Ross, our video editor, and Glenn, [music] whose work helps produce the many shorts you'll find on our YouTube channel and across social media. Lastly, this podcast is forformational and entertainment purposes only and should not be construed as investment, tax, or legal advice. Super Ben, th this is fantastic. You know, I I love everything you do. I just again I I just love how you know you take all all the research and bring it up as points and in all your content. Man, the guests you have are are phenomenal. Keep up the great work. >> Thanks, man. Appreciate it. >> We need to get you to uh the Bulls conference uh one of these years. >> Yeah, I'd be down to do it for sure. >> Awesome. I don't know what the lineup looks like this year. I'm not part of that committee, but um if not this year, then we'll certainly have you in a future year. Yeah, man. Uh you're uh great to have your name uh on among the list of speakers. That'll be amazing. >> Super down to do it. I think it'd be a lot of fun. >> Yeah, it's it's the only conference where we don't pay it where you don't get an honorarium. >> That's okay. I'm I'm I'm used to it. I I usually pay my own way to go to stuff anyway. >> Then you you'll fit right in. >> Yeah. No, very down. I think it'd be awesome. >> Fantastic. Right. Yeah. We'll we'll definitely keep you up on that. I'll I'll let the uh conference organizers um know. >> Hey, >> I'm on record, but we're still recording, so it's uh you can give >> Yeah. Oh, that's right. I need to I need to stop recording so we can do the the upload. Thanks for reminding me.