The Rational Reminder Podcast

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Podcast Notes Key Takeaways

• If people only saved the money they earned, then they would lose purchasing power over time due to inflation 
• Buying bonds is investing in a company’s debt and is relatively safe because the company is obligated to make its interest payments 
• Bond investors have fixed returns and equity investors have uncertain returns to the upside and downside
• The discount rate that investors apply to the expected cash flows of an asset is the way that differences in risk are expressed in asset pricing
• A higher discount rate implies a riskier asset; it costs less to buy the future cash flows of riskier assets  
• No single investor can have access to all the information that will affect the price of a stock or bond, but the aggregate of all investors – the market price – is a pretty good representation of all information
• Unexpected returns are generated from new information that was not previously reflected in the price of the stock
• The vast majority of active traders on Wall Street fail to outperform the market
• Understand what your investing objective are; different objectives will have different levels of priority in your life and they will have different optimal portfolios to fund them  
• By the time you are worried about something, it has already been reflected in market prices
• Owning too much of your employer’s stock may overexpose you and your portfolio to one centralized entity, given it is the source of your human capital and now a sizeable percentage of your investment portfolio  
• Having an emergency fund all the time is one way to prepare for a recession
• Direct exposure to real estate doesn’t offer anything special over publicly-traded REITs once adjusted for sector exposure and the valuation lag in private markets
• Financially fragile households have lower financial, emotional, and physical well-being; they have less satisfaction at work; and they report less social connection   

Read the full notes @ podcastnotes.org

Today is our final episode featuring just the two of us before our annual wrap-up show, and we thought we would use this opportunity to cover some important foundational aspects of rational investing. Ben goes over some of the most fundamental concepts about market prices, risk, and actual returns before answering five common questions that relate to this level of information. From investing in an employer's stock to predicting the future and real estate comparisons, these five touch-points are always worth returning to, and should even interest the more experienced of our listeners. For the second half of the show, we offer a quick book review of The Culture Playbook by Daniel Coyle, and have a brief and illuminating conversation with Professor Amer Kaissi about his book, Humbitious, and some of his thoughts on the part that reading plays in rich and progressive life. Press play to catch all this and more on the Rational Reminder Podcast.

 

Key Points From This Episode:

 

• Picking up a thread from our discussion on the 2% Rule. (0:06:05)
• Getting to grips with investing basics. (0:10:45)
• How market prices work in response to traders' actions and risk. (0:17:59)
• The main determinants of actual returns and starting points for your portfolio. (0:23:15)
• Unknowable futures and the eternal doom and gloom predictions. (0:35:43)
• Assessing the value of owning an employer's stock. (0:38:21)
• Holding stock picks in Tax-Free Savings Accounts. (0:42:07)
• How to prepare a portfolio when a recession is predicted. (0:43:49)
• Comparing investments in real estate with the stock market. (0:45:14)
• Weighing the value of building and emergency fund. (0:47:11)
• A thirty-second recap of our episode with Cliff Asness. (0:50:06)
• Today's book review focussing on the lesson from The Culture Playbook by Daniel Coyle. (0:51:48)
• Professor Kaissi shares a quick summary of his book, Humbitious. (0:58:40)
• The potential to develop characteristics and the role that reading plays. (0:59:38)
• Professor Kaissi talks about his reading habits. (1:02:12)
• Application of ideas from books and how Professor Kaissi captures and organizes information in his own reading. (1:05:15)
• A few of Professor Kaissi's favourite book recommendations and how to increase your reading habit. (1:08:52)

 

 

Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-231-investing-basics-and-common-questions-plus-reading-habits-w-amer-kaissi-discussion-thread/20716

Books From Today’s Episode:

Humbitious: The Power of Low-Ego, High-Drive Leadership — https://amzn.to/3WjHjry

Mindset — https://amzn.to/3Wzl7Kr

Quiet — https://amzn.to/3htlN4X

The Five Dysfunctions of a Team — https://amzn.to/3YmKqRv

The SPEED of Trust — https://amzn.to/3UWCljq

Top Five Regrets of the Dying — https://amzn.to/3uQcUWf

The Assertiveness Workbook — https://amzn.to/3VVDVUf

How to Raise Your Self Esteem — https://amzn.to/3BDM33p

Ego Is the Enemy — https://amzn.to/3BAyCkZ

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/

Follow us on Twitter — https://twitter.com/RationalRemind

Follow us on Instagram — @rationalreminder

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

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

Amer Kaissi on Twitter — https://twitter.com/amerkaissi10

Amer Kaissi on LinkedIn — https://www.linkedin.com/in/amer-kaissi-ph-d-38258919/

Amer Kaissi — http://www.amerkaissi.com

'The Value of Goals-Based Financial Planning' — https://www.financialplanningassociation.org/article/journal/JUN15-value-goals-based-financial-planning

'Excessive Extrapolation and the Allocation of 401(k) Accounts to Company Stock' — http://independent401kadvisors.com/library_articles/ExcessiveExtrapolation.pdf

'The Agony of Ecstasy: The risks and rewards of a concentrated stock position' — https://assets.jpmprivatebank.com/content/dam/jpm-wm-aem/global/pb/en/insights/eye-on-the-market/agony-ecstasy-2021.pdf

'The financial resilience and financial well-being of Canadians during the COVID-19 pandemic' — https://www150.statcan.gc.ca/n1/pub/75f0002m/75f0002m2021008-eng.htm