More Money Podcast - 333 Reboot Your ETF Portfolio - Dan Bortolotti, Creator of The Canadian Couch Potato blog

Episode Date: June 15, 2022

We’re closing out Season 14 with my favourite topic and a return guest! On the show today is a Canadian investing expert and creator of the Canadian Couch Potato — Dan Bortolotti. Dan is back on the show to talk about his new book, Reboot Your Portfolio: 9 Steps to Successful Investing with ETFs, which you know is right up my alley! Dan Bortolotti is a former journalist, who was a full-time writer for magazines such as MoneySense. However, over a decade ago he switched careers and is now a portfolio manager and financial planner at PWL Capital in Toronto. Dan created his popular blog (then subsequent podcast) the Canadian Couch Potato in 2010 and has become one of Canada’s most trusted resources on index investing. In today’s episode, Dan shares more about the inspiration behind his new book, Reboot Your Portfolio. We dive into where you should start when you want to make a change in your investment portfolio and the downsides to having so much access to your trades. This episode is jam-packed with info for anyone wanting to get started with passive investing or learn how to improve their current investment portfolio for the long term.  Also, I want to say a quick thank you to all the wonderful guests who joined me this season. Of course, another thank you to all listeners, thank you for tuning in each week and I’ll see you for a fresh new season in September after a short summer break! For full episode show notes visit: https://jessicamoorhouse.com/333 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, Lulu, and welcome back to the More Money Podcast. This is episode 333. And I'm your host, Jessica Morehouse. And this is the final episode for season 14 of the show. And I'm sad, but also really happy because I need a little bit of a break. It just, it's always nice to take the summer off, recuperate, get refreshed, and then get back right at it with a new season in September. So I am kind of ending off this wonderful season. I hope you've had a wonderful time. I've had a wonderful time. I feel like this is by far one of my favorite lineups of guests, but I am ending it with a repeat guest and one of my favorite, you know, investing to follow, Dan Bordelotti. Now, if you are a longtime listener, and I know there are a ton of you out there who've been listening to the More

Money Podcast since it started in 2015, then you may remember Dan from episode 83. Gosh, we hadn't even hit the 100 mark there. 83 in January of 2017. Again, if you want to listen to that episode from all those years ago, go to jessicamaraz.com slash 83. But that was, you know, one of my I feel like first kind of episodes, really diving into cash potato investing, also called so many other things index investing, passive investing, index fund investing, whatever you want to call it. It was such a pleasure to have Dan on the show because I was such a big fan for years and years and years because he's run one of like the most successful, you know, passive investing blogs ever called the Canadian Couch Potato. And it was so fun. And that was, I think, one of

the few times, I mean, I did a lot in the first year, but in 2017, I feel like that was one of the few times I actually did an in-person interview with him because at the time he had his own podcast also called the Canadian Couch Potato. Well, now I have him back. Gosh, fast forward to 2022. And he has a new book out, which I absolutely am obsessed with called Reboot Your Portfolio, Nine Steps to Successful Investing with ETFs. If you are Canadian, and if you want to, I mean, even if you're not Canadian, you'll get a lot out of the book. But specifically for Canadians looking for a book that is for you that will go into the nitty gritty of ETF investing and index passive investing, you need to read this book, you need to read this book, it is so so so good.

But in case you also don't know too much about Dan, though you should. Anyways, he of course, still runs the Canadian Couch Potato blog at canadiancouchpotato.com. But he's also a portfolio manager at PWL Capital. And interesting fun fact, before he made this, you know, huge career change to work in, you know, become a portfolio manager and be a CFP, he was a full time writer for magazines such as Money Sense, where he won a National Magazine Award and has twice been named as a Financial Journalist of the Year by the CFA Society of Toronto. And he actually launched that Canadian Couch Potato back in 2010. So he's been passionate about really kind of pushing forward the message that passive investing is a great

strategy for most investors for over a decade. So we have so much great stuff that we're going to talk about in this book. I know you're going to love it just as much as I did. And I honestly do think it's the perfect kind of episode to cap off this season. So before I get to that interview with Dan, here's just a few words I want to share about today's podcast episode sponsor. This episode of the More Money Podcast is sponsored by TD Direct Investing. Every June, TD Direct Investing celebrates Options Education Month with the goal of helping investors learn more about options trading. Throughout the month, they are hosting a number of free virtual events for beginner and intermediate investors alike. Want to learn

about some of the things people wish they knew before they began or build on some of the knowledge you may already have on options? Visit td.com slash options education month to register for one of the many live webinars TD Direct Investing will be hosting. Or if you're more interested in getting an introduction to options in the first place, there are a number of on-demand video lessons available too. To learn more and to check out the list of free events, just visit jessicamorehouse.com slash options. Once again, to find out what webinars, masterclasses, and on-demand video lessons are available to view for free, just visit jessicamorehouse.com slash options. Welcome, Dan, back to the More Money Podcast.

It has been like years and years and years since you've been on this show and i am so thrilled that you're back to kind of close out my season you're my last episode of the season but also to talk about your new book reboot your portfolio nine steps to successful investing with etf specific for us canadians i literally like i emailed you i devoured it in a weekend. I was obsessed. I love it. It's my favorite topic and I love how you write and what you write about and can't wait to share all some nuggets from your book in this episode. So thanks for joining me. Well, thanks again for having me. It's good to be back on the show.

Yeah, yeah, yeah. So, so, so what I love about your book, and we were kind of talking about this before I hit the record button, is it is a specific guide for people that are, and believe me, there are so many people looking for this. So I think a lot of people are going to be like, oh, there it is. Thank goodness. Telling people this is, these are some things you need to know foundationally, but also this is how to actually be an index investor in Canada. I think you can scour the internet and read it for hours and hours and hours, and you will not get a straight answer or a specific, this is how you do it in this sequence. And these are some things that you need to consider because really when you get, I feel like into kind of the weeds, so to speak, that's where people get kind of tripped up. They're like, okay, great. I understand the

overall theory, but then how do I choose the right portfolio? How do I choose the right ETF? How do I choose how much of each ETF? And then you go in circles and kind of drive yourself a bit crazy. So I really love that you don't shy away from some of those topics and address them. And I think I'm assuming most likely it's because you've heard every single question under the sun about this kind of stuff as a portfolio manager likely it's because you've heard every single question under the sun about this kind of stuff as a portfolio manager, but also because you have a blog that is one of, you know, the best resources I think in Canada about this topic and also your popular podcast. So I'm curious, why did you want to write this book and publish it right now?

Well, I mean, it's interesting that you mentioned that, you know, one of the advantages of it, I think, is it goes into kind of the practical specifics, because that was really my goal. You know, for people that don't know, my background is as a journalist, and that's the way I made my living for many years until I transitioned into becoming a professional portfolio manager almost 10 years ago now. And so when I first started writing, and in fact, back when I was writing with Money Sense magazine, which is when I really first started to get into this stuff, so this would have been around 2011, 2012, I actually did publish a modest little book that we sold on newsstands with the magazine called The Money Sense Guide to the Perfect Portfolio.

And it was essentially the same scope as Reboot Your Portfolio, the new book. But the difference was that I was writing, you know, as a journalist. And as I understood a lot of the theory and some of the practice about this stuff too. But I just didn't have the day-to-day experience that I did or that I do now in terms of managing portfolios and also just working with clients directly. So I know what the behavioral challenges are firsthand now because this is what I deal with every day. So, you know, that book, I mean, it did very well, and I think it was quite popular. It's hopelessly out of date now, but not just that. I wanted to sort of take the idea of that book,

not only update it, because goodness knows the landscape is different now with robo-advisors and asset allocation ETFs and no commission trading and all of those things, but also to try to layer in the wisdom that I've gained over the last decade or so doing this every day, working with clients directly. And so, you know, I think about things that weren't in the original book that are in the new one are just things like, you know, questions I get all the time, like, okay, I agree with everything

you're saying here. I want to open a brokerage account and transfer my assets over, you know, I have a mutual fund advisor. How do I do that? Right? Simple questions like, well, it's very easy to kind of have great intentions, but if you literally don't know how the transfer process works, then you've stopped before you've started. And so I was finding that there's a lot of people out there who had these good intentions, but then they run into a roadblock or two. And that makes them just, you know, it throws enough of an obstacle in their way that they just lose the drive to do it. And then they move on to something else. And that's the end of it.

So I was really hoping I would be able to walk people through the whole process. So they wouldn't stall along the way, they'd get the portfolio implemented, and then they'd learn how to maintain it. Absolutely. And like you said, so much has changed in the past 10 years. It's crazy. I mean, I think back to some of the early books I read a decade ago about self-directed investing, and it's completely different. I mean, at the time, it's like, oh, well, you need at least $10,000 to start, and then you have to call up your broker and all that. I'm like, what? Now, I mean, you just download an app and you're good to go, which is good and bad. And you kind

of address this in the book. There's now so many options and platforms. So it's great. There's, there's, it's never been more easy or accessible to get started. But also then that comes with another problem. Where do you start? And I don't know if you get questions like this all the time, but I sure do, which is great. I want to use a robo advisor, which one or I want to do self directed investing, which brokerage should I use? And that is similar to, you know, moving your money. If you're using an advisor at a bank or investment firm and you want to move it, that can stop you in your tracks. And then you again, get the analysis paralysis, get scared, then you don't, then you leave your money with that advisor for another year. So with that, I guess, what would be some of your advice for someone who

knows, you know, they've, they've listened to like my show and your show and they know this is what they want to do, but they just don't know actually what the first step would be to actually make some change. Where should they start? Well, I think, you know, what I try to argue in the book in terms of a place to start is the first thing that you need to do is invest a little bit of time in understanding why you're investing in the first place. And I know maybe this seems like an obvious point, but it's amazing to me still how many people approach investing as a question of what do I buy, right? So people say, you know, I'm interested in index investing. What do I buy? What ETF do I use?

And I'm like, well, why don't we take 10 steps back and ask, you know, are you saving for a down payment or are you really investing for the long term? Because a lot of people, you know, again, I'm talking about sort of beginner investors, you know, make simple mistakes like they want to save for a goal that's two or three years away, and they buy stocks with that. I mean, stocks are not a two or three year investment. So you need to figure out basic questions like this. You need to figure out what your risk tolerance is. And frankly, most people don't know that until they're truly tested. I can ask you how you might feel if your portfolio fell 20%, but I won't trust your answer unless you've lived through a 20% decline, because you really don't know until it happens to you. So I think you need to set the stage. And then I think the next piece

of advice I would give to the investor getting started in that way is, please don't overcomplicate things. One of the biggest changes, we've talked about changes that have happened in the last decade or so, and one of the greatest ones, I think, has been the launch of asset allocation ETFs, which are single ETFs that hold a diversified portfolio in one wrapper. When I started writing about this, I had to have model portfolios that had sometimes six, eight, 10 ETFs, because in order to build a diversified portfolio of stocks and bonds, you had to hold multiple ETFs. Well, you don't need to do that anymore. The portfolio design has been done for you extremely well by companies Vanguard, iShares, BMO. They all have versions. They're all very similar. They're all excellent. And so just with

a single fund, you can buy a very diversified portfolio that you can hold for decades without making any changes to it because it manages itself. It's never been easier. And these funds have been extremely popular, but there's also a lot of people out there who still feel that's too simple. I need to do something more customizable. And, you know, I get that if you're a very experienced DIY investor, but for somebody just starting out, if somebody is serving it up to you on a platter, why do you want to make things more difficult? Why do you feel that you can design a better portfolio, right, than these professionally designed ones? So, you know, try to resist the urge to make things more complicated than they need to be. If you could just embrace the simplicity, I think you'd be better off in most cases.

Yeah, no, I think that's the hard thing when it comes to DIY investing is simple doesn't make sense. It seems too simple. And when we think things are too simple, it sounds like we're doing something wrong. And I think possibly it was because, yeah, at the start of it, there weren't many simple one fund solution,

there wasn't anything, your option was to build your own thing. And I think a lot of people still have the mindset that will to be a true, you know, self directed investor, you have to do, you know, your individual ETFs and rebalance yourself and organize it all on your own. And also remember the fees, you're paying higher fees for those asset allocation ETFs, even though it's very, very minimal. But you know, like I said, I kind of do both. I have my TFSA and asset allocation ETF. I do individual ETFs for my RSP. And that was honestly just to get the feel for both to see what do I prefer. I wanted something passive and easy. And quite honestly, I do love having the asset allocation ETF. It's great. And but one thing what i hear often you do address this in the book is for again those hardcore people like oh i'm doing the individual etfs like uh you know kind of the the traditional way of uh doing it um you know

then you can really get you over complicate it and think about things like should i incorporate us listed etfs and what about the taxes? And how do I minimize fees to the smallest basis point? You can really go crazy. And I kind of feel like that's counterintuitive to the whole kind of philosophy of index investing, which is simple, easy, passive. What do you kind of think about some of that? You know, it's so interesting you bring that up because I feel in some way responsible for creating the problem. You know, it's so interesting you bring that up because I feel in some way responsible for creating the problem. I mean, obviously inadvertently. But, you know, over the years, like especially the early years when I started writing, I was always looking for these

kind of optimization techniques. You know, if you hold U.S. listed ETFs in your RSP, you reduce your withholding tax on dividends, etc., etc., right? And it's all true, right? I mean, in a strictest sense, if you do those things, you can theoretically save a few basis points in either taxes or fees or whatever. But what I've learned from experience is that there's theory and there's practice. And in theory, if you do all of those things optimally, you can save fees and taxes. In practice, very few people do them optimally. They do them in a ham-fisted way or they do them in, frankly, ways that are incorrect just because of misunderstandings, for example. I mean, just to give you an example, it's true that if you hold U.S. listed funds in an RRSP,

they can be more tax efficient. But if you are purchasing those U.S. funds with Canadian dollars and your brokerage is converting the currency, you're getting killed on the currency exchange, and that is outweighing any benefit you're going to get from holding those funds. So that's one example. And so I guess what I have learned over time is that there are a number of things that erode your returns.

One is fees, one is taxes, but a third one is mistakes. And mistakes can be a lot more costly than modest amounts of fees and taxes. And I would, for the vast majority of people, recommend that they accept slightly higher fees and potentially slightly higher taxes in order to avoid much more costly mistakes. So that's not going to apply to everybody. Again, if you're a very experienced investor and you get all of this stuff, then for sure try to use some of those optimization techniques. But that's a small minority of people. And I know from the emails that I've received over time, a lot of people misunderstand some of those techniques and their mistakes end up being a lot more harmful. So I say for the vast majority of people, start with simple. Remember, these asset allocation ETFs are not the absolute cheapest, but they're pretty cheap. And you're

not going to reduce your fees by more than five or 10 basis points by choosing individual funds. And you can easily wipe that out by making a bunch of too many trades, forgetting to rebalance, whatever it is. So I've come to accept that optimization is probably not the goal anymore. It's build an excellent portfolio. It doesn't have to be a theoretically optimal one. And another thing that you talk about in your book,

and I think this is so important because this is something I've been, you know, always talking to people for a while is, you know, when you are, say, at the stage and you want to do DIY investing and choose your brokerage, so many people are focused, again, on the fees. Oh, I'm going to go with this, you know, well, simple trade, let's just say, because there's no commissions. That's great. There are some downsides to that. And for me, again, people are just focused on like, I'm saving so much money on those commissions. But if you're an index investor, really, you shouldn't be making that many trades in the first place. But also, there are some downsides to having too much access to your investments,

being able to make those trades so easily. And for me, what I've heard from so many people is because of, you know, these apps that allow you to trade so easily and freely, they are trading a lot more and buying things that are maybe outside of index funds, stocks, just because they think they should because they can and it's cheap, which again, it goes back to the whole idea of like, but you could be losing money with all the mistakes that you're making. Well, you know, what would you say to someone, you know, trying to decipher which, you know, is the right brokerage for me? And what are some of the benefits to maybe having some of those?

I always kind of think they're barriers to your money with those fees. Like I use Questrade personally because it's free to buy, but not free to sell. And so I always have to, you know, think about why are you selling? And it makes me kind of stop in my tracks and rethink maybe trading too much. Yeah, no, I agree with you. I mean, I would say that if a $10 trading commission is a real obstacle to you, you're trading too much, right? I mean, I would say that if you're a DIY investor, whether you pay $10 a trade or $0 a trade should not have much more than a trivial effect unless you're trading too much, right? And so now this is going to be, I mean, that's

certainly true of people with large portfolios, right? I mean, if you've got a half a million dollars in your portfolio, 10 bucks here and there to make a couple of trades a year is not going to have any effect at all. If you're getting started and your account is more like 10 or $15,000, then for sure that's going to eat into it. But again, the same point, if your portfolio is 10 or $15,000, you should be using an asset allocation ETF and making one or two trades a year, right? You should not be in there making multiple trades with a small portfolio like that. Even if the commissions are free, you know, as you point out, you might not be losing on commissions, but you are probably touching the portfolio too much. And that's going to lead to more mistakes. And those mistakes are going to cost you more than those $9.95 commissions.

So I also agree with your point about a little bit of a barrier to the money. You know, I think, frankly, that's one of the ways we add value just as advisors, like for our clients, right? Because our clients have the same emotions as anybody else, right? They have the same tendency to panic when markets go down. But the fact that they can't log into their accounts and just do that, you know, they have to call me and then I have to talk to them and then usually I can get them to reconsider and then we make a better decision. You then usually I can get them to reconsider and then we make a better decision. You know, I think that as much as almost anything else helps people stick to their long-term

plan. It's like having a coach or, you know, somebody who can walk you through those difficult times. And I think it's true. Imagine if you, you know, maybe you have a workplace plan or something and you have your investments in a plan that you don't have immediate access to, and you probably forget about it too, right? A lot of people have group RSPs and pension plans and that they don't think very much about. And in many ways, those can be great for that reason specifically, because you're not in there tinkering all the time.

And so sometimes just having a bit of a buffer between you and your emotions, whether that's a commission, right, or an advisor, or, you know, a requirement to log in and do something with some kind of delay, that is probably a good thing in the long run. Absolutely, absolutely. And another thing I hear often for people, you know, besides choosing the platform is choosing the product. And I know sometimes that is where people start. I hate, honestly, when people ask me, what's your favorite ETF? I don't have one. Who has a favorite ETF?

Come on. I know. But, you know, come on. But, you know, people are always just like, I want, again, I think it goes back to that idea of I need to optimize or do the right thing. I don't want to make a mistake. And I think a lot of people still think that when it comes to things like investing, there's a right or wrong. It's very black and white, but it's, you know, there's lots of options.

And I always tell people, it's like, there's a lot of robo advisors. They're all pretty much the same. There's lots of asset allocation ETFs. They're all pretty much the same. There's a lot of index ETFs. They're all pretty much the same. There's a lot of index ETFs. They're all pretty much the same. So when someone is thinking of maybe building their own index ETF portfolio from scratch and now they're stuck, they're like, oh, okay, well, we've got BlackRock here and Vanguard

and BMO. Which ones should I choose? How do you know how they're really different? And I'm just talking about the broad market index because, of course, these companies also have a bunch of other ones that to confuse you. That's an important point, right? Because you're correct that the, you know, the sort of let's call them traditional index funds, whether you're buying them from Vanguard, from iShares, from BMO, they're very, very similar and they're interchangeable, right? Like if somebody says to me, do you prefer, you know, Vanguard's Canadian Equity Index to iShares,

it's like they're not exactly the same, but they're essentially the same. However, as you point out, those traditional ETFs now are only a small portion of the overall ETF marketplace. You know, way back, I remember when I first started working at MoneySense, literally the only index ETFs available were the iShares products, right? I mean, this is going back 20 years. But there was nobody else. And so if you decided you want to be an ETF investor, boy, you didn't have very many decisions to make. Now there's hundreds and hundreds of ETFs just listed on the TSX, let alone the ones that are available on the US exchanges. So I do spend some time in the book on this exact question, which is,

okay, I'm overwhelmed with ETF choices. How do I, what's a good one? And, you know, obviously your opinion about what is good varies, but I start from the assumption that if we assume the goal is to get as broad of diversification as we can at the lowest possible cost, here's what to look for. And I just walk people through a few steps. I mean, you're going to want one that covers the broadest swath of the market possible. So not just the biggest 30 stocks or the biggest 50 stocks, but one that holds almost all the stocks in the market, right? One that doesn't have a whole bunch of embedded strategies like, well, we give higher weight to ones with dividends or we give higher weight to ones with some other characteristic, right?

And then you look for ones with the lowest fees once you whittle them down, you know, based on those basic criteria. And that's usually you're going to end up with a traditional cap weighted index ETF. And that is usually the best starting point for the vast majority of investors. And so it is worth spending a little time learning that because you certainly can fall into this trap of thinking that all ETFs are good, right? ETFs, good, mutual funds, bad, right? Like this kind of simplistic argument that you see a lot.

And it's important to understand that the strategies and the fees are what make ETFs so useful. It's not just the fact that it's an ETF. And I think what I've also seen in the past year or two is it's so important to really understand how these products are built because there's so many products coming out that are marketed as if they're something else. Like a prime example is a lot of financial institutions are releasing what they call ETF portfolios, and they're actually a mutual fund wrap of ETFs. And a lot of people think that they're investing in ETFs, but it's a mutual fund with ETFs inside it that are more expensive. So that's exactly playing into the idea, you know, this idea that ETFs are good and mutual funds are bad. Everyone

in the financial industry knows that that is the general perception of the public, right? Because ETFs get such good press and more and more people, you know, equate mutual funds with very high fees for good reason in the past, for sure, and still in the present but when you break it down right like i would rather have an index mutual fund that costs half a percent right than an actively managed etf that charges one percent right this mutual fund versus etf doesn't make much of a difference in fact i would argue that in many ways the mutual fund structure is better in a lot of ways. So it's really about strategy and it's about fees. It's not about structure.

But because the financial industry knows that, you're exactly right. There's a lot of companies now who create mutual funds. The mutual fund holds a number of underlying ETFs, adds its own layer of fees on top of it, and calls it an ETF fund or something, you know, which is confusing for investors, for sure. And I wish they wouldn't do it, right? I mean, if it's an index fund, call it that. If it holds underlying ETFs, great, but don't try to piggyback on the halo or that's a bad metaphor, but don't try to, you know, capture that same sort of glow that ETFs have,

even though you've created a product that's not much different from the old school type. No, absolutely. Absolutely. Now, you know, besides choosing, you know, the right products for your portfolio, the other, I think, you know, key thing to figure out is your asset allocation. And that's something that, you know, a lot of the students in my investment course are always asking, like, okay, great. I know my overall asset allocation, let's say it's, you know, 80% stocks, 20% bonds, but how do I know how much should go towards the US and Canada? And that's, again, where you can be like, there's so many options. There's so many ways you can kind of build your asset allocation. I mean, again, why I usually say, well, maybe an asset allocation ETF

would be the right strategy. But, you know, when you're at that point and trying to figure out, again, what is the best, you know, organization for all of my ETFs? For me, you know, where, again, where would you kind of look to find the answer? Yeah, so that's a good question. It's a popular one, right? If once you start accepting, like if you start from the premise that it makes sense to hold Canadian stocks, US stocks and international stocks all in your portfolio, you know, what is the proportion that's, you know, quote unquote, correct? Well, there's no correct asset allocation. I think you can make a decent argument for a few different strategies, but let's consider a few of them. The first one would simply be weight each of those in proportion to their weight in the overall market. So to give you an example,

right now the U.S. is roughly 60% of the global stock market. So you could make 60% of your equity allocation U.S. And Canada is only about three. So you would put only, you know, you'd have 20 times as much U.S. equities as Canadian equities. And that would not be an unreasonable starting point. I would argue I wouldn't necessarily do that way, and we don't with our clients. And the asset allocation ETFs that are marketed to Canadians don't do that either. So I would tend to look at a different option. One would be to just simply hold all three of those in roughly equal proportion. One-third Canada, one-third US, one-third international. And there's some good evidence

behind that too. I mean, there's some reasons why you might want to overweight your home country. It's not about patriotism. It's not about, I want to support Canadian companies, or I love living in Canada, and I want to, you know, or I think that their market is going to outperform. It's not that. It's currency risk is one thing. If you live in Canada, you may want to keep the most of your investments in Canadian dollars, whereas foreign investments are denominated in foreign currencies. Right. Tax preference. Canadian equities tend to have lower fees.

So there are some reasons. And then the other one is just if you weight them all equally, there's some evidence to show that that provides actually a little less volatility in the portfolio without giving up anything in returns over the long term. So that's our usual starting point is roughly one third to each. With the US being so big now, it's pretty common now to see something like 30% Canada, 40% US, 30% international. So giving a little bit more weight to the US and that's perfectly reasonable as well. At the end of the day, those small details don't really matter that much. The point is that you

pick a reasonable allocation, you stick to it over the long term, and you rebalance from time to time. So if the U.S. is running hot, don't pour money into it and chase that performance. Do the opposite, right? After a period that one of those assets has outperformed the other, rebalance by selling some of it and buying what's done poorly. That is, you know, that's the essence of rebalancing right there. So, you know, it's really more important to come up with a reasonable plan and stick to it than it is to try to design something optimal. Absolutely. And I think what I often see is, you know, you talk about this in the book, is performance chasing. We looked at the past and be like, oh, well, I should have done that,

so I'm going to do that now. You know, we've seen so many people be like, oh, I wish I invested more in the U.S. because it's had a great time the past decade. I really wish I had more exposure to the U.S. But like you talk about, well, that's the past, we don't know what's going to happen in the future. And so if you're just going to make your decisions based on what happened in the past, I mean, you're not necessarily going to get the exact same results. And I think that's, again, another thing I see often is people just analyzing too much and regretting what they didn't do and trying to do it now, even though it may not work out in their favor? Yeah, it's very, very easy to do, right? I mean, emotionally, that's what we all feel. And this is where it helps to have some experience. I can remember very distinctly, like when I started writing my blog, which would have been right around 2010. Between 2000 and 2010, US stocks were a disaster.

They barely broke even in Canadian dollars over the decade, and Canadian stocks did much better. And it was not at all unusual. And I can dredge up the old blog posts where I had to try to argue people who said, why would anyone invest in anything other than Canada, right? The US is yesterday's guy. And, you know, the future belongs to Canada. Because we had just gone through a decade where the US was a gong show. And that seemed like a reasonable thing to say at the time. Of course, we now know over the next 10 years, it was the exact opposite. Not that Canada was a gong show, but that the US crushed everything. And so it's so easy to look back. And remember, after 10 years of negative returns, it's sort of

reasonable for an investor to be frustrated and feel like, I don't want to stick with this asset class anymore. But I think we're seeing the same thing now with bonds, right? I mean, bonds have had a dreadful start to the year. They had a bad year last year. And I mean, it is so easy. Pick up a paper or read a blog and people are, bonds are dead. Don't buy them. Yeah yeah i honestly wrote that down as a note to ask you it's like i've been seeing so many conversations online being like i don't hold any bond i'll be honest i don't hold any bonds but it's because i know my risk tolerance and i'm fine with that um but so many people like bonds are dead i'm not gonna add anybody i'm like i'm eventually gonna have bonds in my portfolio i don't think they're dead but so many people think oh no

they're old news and it's exactly what you're saying. It's the exact same thing. Well, I mean, but people, they wait until something falls in value dramatically, and then they say, don't include these in your portfolio. And it's, you know, I would have been great if you had made that call 16 months ago, right? And then they fell. Then I would have been impressed. But it does not take an investing genius to look back at what has done brutally over the last year and say, yeah, that was a bad buy, right? So, I mean, and if we take this the next step is, let's think about the US. Remember I said earlier that people in 2010 were saying don't buy U.S. equities

because they've performed so poorly. Had you done the exact opposite and bought U.S. equities in 2010, you would have made out like a bandit over the next dozen years, right? Today, you know, when, now, I mean, people have been bearish about bonds and a lot of people have been reluctant to buy bonds for a very long time. So I'm not suggesting this is the first we've ever heard of it. But people who happily bought bonds a year and a half ago when they were yielding, you know pushing three and a half percent in some cases because the prices have fallen so much. And people are saying, don't buy them or worse, they're saying, sell the ones you

already have. I mean, I'm trying to figure how that's good long-term advice because you were buying bonds when they were yielding 1%, but you won't buy them when they're yielding over three. So, you know, it's usually, and maybe I'm being a bit contrarian here, and I don't mean to suggest that, you know, you should always do the opposite of the consensus view, because I just mean to suggest that the consensus view is right 50% of the time, maybe even less. And so your best bet is not to make forecasts like that. Nevermind this, you don't need US equities, you don't need bonds, don't, you know, just hold all of the assets all the time in some sensible proportion that is suitable to your risk tolerance and rebalance from time to time. No forecasts involved, right? It's just a systematic

way of sticking to a plan over the very long term. And I know you discuss in your book that I think the hardest part, and this is what I see too, is people not giving it time to work. Because it is so simple, which is beautiful. This is why I was attracted to passive investing. I'm like, oh, this is so simple. Even I can do it. I don't have to learn all this complicated stuff and become a portfolio manager in order to figure out how to retire one day. And I don't think anyone should have to learn all of that, you know. But the psychology part always kicks in. The second guessing, the am I actually doing it right? Did I miss a really important step?

And I see so often people will like sign up with a robo-advisor or, you know, do their own thing with their index funds. And six months later, oh, this isn't working. Or this is a terrible robo-advisor. They have terrible returns. I get this all the time on my YouTube channel with a few video tutorials I've done. And I'm like, well, how long have you been investing? Just a few short months. I'm like, well, what are you comparing it to? You can't just say this robo-advisor is trash and this one's good. They're honestly, they have the same products. They're just selling index funds. I'm not really sure what you're comparing your experience to. Like for me, what the best thing that I've learned, you know, and you talk about this

all the time is you have to give it time, you know, you've got to stay. And that's what the whole point of this type of investing is for long term. You're not going to get your 12, you know, million percent overnight. I mean, do crypto if you want to make that gamble. But it's about sticking with it and seeing it through. But so many people do not have that patience. I mean, it's very difficult, I think, to be patient. That's the hardest part of investing. I mean, it's a natural human tendency, right? I mean, and I think we have to recognize that it's hard for all of us to have a long-term focus because it's not even about, you know, three to five years. I mean,

it's 20 years. And if you look at stock market data, for example, the only time that stock returns start to even out is when you go over like rolling 30-year periods. So in other words, like let's say going back as far as stock data goes back, if you pick any 30-year period, the returns are not that different. But if you start, once you start going less than that, I mean, even down to 20 years, right, which is a long time for most of us, your experience is going to depend on which, when you started and when you ended. And one of the things I've really noticed about this over the years writing, because, you know, I've been writing through bull markets and bear markets, and the time that you, you know, your entry point, if you will, has a huge impact on your satisfaction level, right? So if you learned about index investing in like 2009, right, and you started then, so this is right after the great crash of 08, right?

Your returns over the next few years were great. And, you know, you probably looking back at your portfolio now and say, wow, this has worked so well because, you know, you kind of bought in at the low point and you enjoyed a very long bear market, or sorry, bull market. If your experience was different and you, you know, you bought in at like, I don't know, 2019 or so, and you had a pretty rough ride in the last couple of years. And we had the COVID crash in 2020. I mean, last year was a good year. This year, everybody's struggling again.

So your experience is very different, even though you're using the exact same strategy as the person who started in 09. And, you know, you're right, you cannot possibly evaluate the strategy with any timeframe shorter than, you know, at least several years. And you always have to remember too what indexing is, right? Indexing is a strategy designed to capture the returns of the market. So in any year where returns are negative or returns are disappointing, your returns are going to be very similar to that, right? And that's the whole point, right? Not to get disappointing returns, but to mimic the market. So you have to believe that the market return will be satisfactory over your entire investing horizon, which is probably 30 years or more. But it's so hard.

I mean, to me, it's like planting a tree in your backyard and then three months later pulling up the roots and having a look and seeing how it's doing and saying, this thing isn't growing, right? It just takes a lot longer than that. And we're not programmed to think in 20, 30 year timeframes. Nope. That's the hardest thing. What would you say, and this is what I see a lot with, especially new investors, young investors, they set up the system, you know, either RoboAdvisor or ETF, or asset allocation ETF. And the whole point is really to let it do its thing. Don't touch it. Live your life. Don't touch it.

People can't help but touching it. And that's why I feel like I get so many questions about, but I also want to pick stocks. What about cryptocurrency? What about NFTs? What about something else? What is this desire for humans just to feel like this isn't enough? It needs to be difficult, or I need to do something on the side? And is it okay to do something on the side? Or should you

just stick to what the original plan was? Yeah, you know, that is a question that I have considered over the years, and I have changed my answer. I would say years ago, I used to say, sure, as long as you kind of do something responsible for with the most of your portfolio, and, you know, presumably, that's an index portfolio, it's fine to carve off five or 10%, you know, of your portfolio, and do something fun with it, pick stocks, or, you know, do something speculative. And I think for some people, that's probably fine. But what I've learned over time is that for a lot of people who do that, they end up focusing all of their investing attention on the 5% or 10% play money. And a couple of things can happen. One is, because they're so concerned about the stocks they picked or some other alternative asset that they bought,

they're reading a lot of financial media. They're following a lot of day-to-day market moves. They're spending too much time, frankly, thinking about what was supposed to be fun money, right? And it's a huge distraction. And instead of focusing on what they should be, which is kind of, you know, diligent saving and sticking to a disciplined long-term plan, they're fussing about their side hustle, right? And what can also happen is it's very possible, just like people who go to the casino and play the slot machine sometimes win, right? You can have a bit on the side that does really well in the short term. And when that happens, it's not at all uncommon for you to undermine your own long-term strategy, right? Hey, I picked a couple of stocks. Look, this one

tripled, right? Maybe I'm really good at this. Why am I wasting my time with index investing when I can be a stock picker? Because obviously I have some talent for it, right? And obviously that's short-term success and it's probably going to lead to long-term disappointment. So, I mean, look, if you have to do it, you have to do it. But when people ask me sort of, you know, what's the right amount of the portfolio to carve off to do something fun? I say zero, right? If you can do zero, then you should do zero or as little as you can possibly manage in order to scratch that itch. No, I completely agree. I mean, this is coming from someone too, who has a little satellite portfolio, the fun money. And I think

sometimes it's important for people to have that just for the experience to sometimes show, yeah, this is why maybe this isn't good for you. I mean, for me, again, I like to try different things to also test myself and my own, you know, what I think my risk tolerance is compared to what it actually is. I've learned a lot. They are expensive lessons sometimes, but they're lessons nonetheless that I like to share with people like, okay, this is why, you know, but yeah, I think one thing I did recognize was when I did start, you know, having that satellite. And I really started it back in maybe 2018 or 2019, just with a few little stocks. And I spent too much time thinking about this minuscule part

of my overall portfolio. And why would we want to spend more time worrying about our investments? Again, the reason I became interested in passive investing is I wanted something simple and easy that I didn't have to spend all my time thinking about. And now I'm kind of doing the opposite with this 5% of my portfolio. What happened here? So I, I kind of agree with what you're saying,

but sometimes I feel like people, they just need something to do and whether they want that to be an expensive hobby like that's what it kind of is it's a little bit of a hobby it's not really investing is it yeah and you know if you compartmentalize the two uh in a healthy way then that's that's completely fine um so i mean i would say crypto is probably the most common example that I hear and see these days. And, you know, I've been adamant, certainly with our clients, we don't include it as part of our portfolios. And if people ask me what I think about it, you know, I give them my two cents. But I would say that, you know, if you're going to be paralyzed with FOMO because you don't own any, and that's going to make you frustrated, right, then okay, dabble in it if you want, right?

Keep the amount small. Expect that, you know, you're not going to get rich overnight. It might go to zero, whatever, as long as you're prepared for all of those things. And if doing that, I mean, again, I was arguing that for a lot of people, it distracts them from what's important. Perhaps for other people, it's the opposite. It distracts them enough that they are not tempted to tinker with their serious money, right? So if you, you know, you've got 90% of your investments in an index portfolio, it's in an asset allocation ETF, you never look at it. And you know, you contribute regularly, and you want to fuss over your investments on the side.

Maybe that's a good thing for some people. I've seen kind of both over time. And, you know, I'm not convinced that there's a perfect answer for everybody. Yeah, for me, it's just I prefer to avoid it altogether. But other people might have a bit different experience. Well, what I definitely see, especially with the new young investors that are getting a lot of their investing information from like social media is the focus is on that kind of what should be just a satellite portfolio instead of really having a good think about, well, what's your overall strategy for like your retirement? It should not be 100% maybe in speculative stocks or crypto,

but that is kind of the information that they're gaining, which is why it's funny. The longer I do this podcast, the more I'm just like, am I just getting, am I that old person just talking about the same thing over and over? But I'm like, I don't care because I feel like someone needs to keep on saying this because everyone on TikTok is just talking about meme stocks. And we need to have some balance in that situation. I'm curious, though, since you mentioned, and I get asked this all the time,

what is your perspective on crypto? Because that seems like I thought it was going to be old news. People were going to get bored of talking about it. And it just keeps on, especially as these big institutions are like, oh, we're integrating this into our portfolios now or we're buying a big bunch of Bitcoin now. What are your kind of thoughts on that? Well, it's such a big question and it's kind of a loaded one, you know. But I mean, again, clients ask me all the time. And so my answer is typically this, right? We don't hold gold in clients' portfolios either,

right? It's not because we think gold is worthless, right? We don't hold, say, euros, right? Just, you know, just the currency in client portfolios not because we think the euro is worthless we don't hold those assets because we don't really know what their expected return is right we hold stocks because a stock is a business and a business makes profits and when it makes profits it grows its price goes up and or it pays a dividend to investors. We hold bonds because when you buy a bond, it pays you a yield and then you get your principal back at maturity. And we know what the expected returns are on those.

We can't forecast them in the short term, but we have an expectation of future returns for stocks and bonds. Real estate, same thing, right? When I hold a gold bar, right, what is my expectation? I mean, this is Warren Buffett's classic analogy, right? If I owned a lump of gold, then 10 years from now, I still own a lump of gold. It's the same size, and it hasn't paid me any yield. So my expectation is it will go up in value. And why is my expectation that if it's still a lump of gold, it didn't pay me any yield. So I guess I look at crypto the same way. It's like, if I'm buying it, what is

my expectation? Why do I think it's going to go up in value by some huge amount? And I can't answer that question. I have no idea how to value cryptocurrencies. I have no idea why a certain price is ascribed to them. I can't make the argument for that. So that's the first thing. Again, it's not because we think it's a ridiculous fad and it will all go to zero. It's not that simple. It's just we don't really understand what the investment characteristics are of this other than that people are trading them in the short term and making or losing lots of money. And then the second thing I would say about this is, you know, I don't know, nobody knows how crypto is going to integrate itself in our lives over the next 10 or 20 years, say, right? The technology is fascinating. I mean, if you read

about blockchain technology, for example, behind it, it's amazing, it's fascinating, and it will almost certainly have become a major important part of the economy. The problem is, we don't know how. And I think the best analogy I can think for that one is the internet, right? I mean, in the early 1990s, right, when the internet was new, everybody knew it was going to be big, it was going to change our lives. But I think the way we thought of how the internet was going to change our lives in 1991, right, didn't turn out to be the case. I don't think people anticipated smartphones, right?, are we all going to be spending Bitcoin 20 years from now? I have no idea. But we are almost certainly going to have some exposure to blockchain. And when you hold a broad market index ETF, you know, and you hold all of the companies in the economy, some of those companies are going to be winners. And some of those companies are going to

be losers as a result of emerging technologies. And when you hold a broad index fund, you hold them all. So you're going to hold the winners, right? You're going to hold the next Google. You're going to hold the next Amazon. You're going to hold the next Netflix because they're already in your portfolio. They're really small now, but they're going to grow. And when they grow, so is your index fund. So you're already getting exposure to the technology,

even if you're not getting exposure to the currency directly. Yeah, no, I think that's a great argument. I mean, that was very well spoken. I completely agree. Well, I know I can probably talk to you for a whole other hour, and I will not do that to you. I just encourage everyone to grab a copy of your book, Reboot Your Portfolio. Where can people grab a copy and, you know, check out lots of your amazing free resources that you still have online? Yeah, so I mean, the book is available at all the usual suspects. Amazon and Indigo online are probably the easiest places to get it. If you buy books the old-fashioned way, please support your local bookseller. I'm a big fan of that. And then just for broad resources, canadiancouchpotato.com is

the blog. And even though I'm not posting a lot of new material there, I do still answer questions and comments. So people are welcome to come and leave a question or send me a note and I respond to all of my email. Amazing. Well, thank you so much for coming back on the show after all these years. It was a pleasure having you on and talking about one of my favorite topics, index investing. It was thanks for inviting me. I really appreciate it. And that was episode 333 of the More Money Podcast with the wonderful Dan Bortolotti. Make sure to grab a copy of his brand new book, honestly, highly, highly recommend called Reboot Your Portfolio, Nine Steps to Successful Investing with ETFs. And again, you can check out Dan at

CanadianCouchPotato.com. And he's got his wonderful blog. Honestly, even looking at his old blog posts are still so good. You can still listen to old episodes of his podcast. And of course, I'm going to be giving away a copy of his book and so many other books. So stick around for more information about that. And for me to kind of just, you know, wrap up this season of the show. So stick around just a few words I want to share about today's podcast episode sponsor. This episode of the more money podcast is sponsored by TD Direct Investing. June is Options Education Month, and TD Direct Investing is hosting a number of free virtual events throughout the month to educate both beginners and more advanced investors about, well, their options with trading options. Or if you want a full walkthrough of options trading for beginners,

there are also a number of on-demand video lessons that will walk you through what options are, common option terms such as calls and puts, and what the difference between in-the-money and out-of-the-money options are. To learn more and to find out what free events you'd like to check out, visit jessicamorehouse.com slash options. Once again, to find out what webinars, masterclasses and on demand video lessons are available to view for free, visit Jessica Morehouse.com slash options. Okay, so first and foremost, your final reminder, this is your final reminder about my big book giveaway for season 14 of the show. So I'm giving away, let me I'm just going to run through it just

in case you don't know anything about it. So I'm giving away copies of every single book that's been featured on this season of the show. And I'm just going to give you all the titles and you can, you know, get excited and enter to win. I'm going to be wrapping up this contest by the end of the month and announcing some winners in early July in my email newsletter. So I'm giving away a copy of the Black Girl's Guide to Financial Freedom by Paris Woods, The Rule of 30 by Frederick Vittisi, Financial First Aid by Alyssa Davies, Foolish by Gil Baumgarten, A Homeworthy by Sandra Rinomato, Destroy Your Student Loan Debt by Anthony O'Neill, Money Like You Mean It by Eric Eleni, Elmer's Nine and Dine by Ryan Goldsman, Get the Hell Out of Debt by Aaron Sky Kelly, The Financial Mindset Fix by Joyce Martyr, The Revolution That Wasn't by

Spencer Jacob, Houseporn No More by Romana King, My Money My Way by Kumiko Love, Financial Adulting by Ashley Feinstein-Gersley, Cashing Out by Julian and Kirsten Saunders, and of course, Dan's book, Reboot Your Portfolio by Dan Bortolotti. So make sure to go to jessicamorehouse.com slash contests to find all of those books and easily enter all of them. And good luck because honestly, there's a good chance you will win one. I think a lot of people listening to the show assume a ton of people enter these contests. And sometimes no, sometimes some books are not as popular as others. And so there's like, I don't know, 100 people that entered. That's like pretty good odds, pretty good odds. Also, I personally mail you the book. That's how nice I am. And also,

I just like mailing people things. So it's nice little fun thing, you'll get a personalized note for me. It's just a good time. So make sure to enter to win. Now, one last kind of reminder, because I will be off the air for a few months. If you are interested in learning a lot of things that we discussed in this episode in depth, well, I've got an investing course specifically about this that really goes in depth. And I think Dan's book is such a great companion to it. So it is called Wealth Building Blueprint for Canadians. It is an investing course specifically built for Canadians. We dive into all the things that are super relevant to us and talking about TFSAs and RRSPs and RDSPs and RESPs and taxable accounts and taxes in general and the fundamentals of investing,

but also some really important key practices. And also just important things that when you get to that later stage in the course, how do you build your own index ETF portfolio? How do you figure out what is the right asset allocation for you? And how do you choose the right ETFs? And how do you rebalance your portfolio? We go through every single thing that you can think of that you would have a question about, because again, I've had this course for over a year. I've been talking about this stuff with so many people for years and years and years. Believe me, I got you. I know exactly what you want to know. And all the answers are in this course. So you can find more information about it at jessicamorehouse.com

slash course. Again, there will be a link in the show notes for this episode, jessicamorehouse.com slash 333. And also you can check out any episode that has ever aired on my website, JessicaMorehouse.com slash podcast is where you can find that information. Now, since I will be off the air for a few months, you know, don't be a stranger, we can still keep in touch. I will be on social media, you know, got my Twitter account at just see what is it at J-E-S-S-I underscore Morehouse. And my Instagram is at Jessica I Morehouse. And of course, I've got my YouTube channel. So I'll be hopefully having some more time to kind of ramp up some of that. I mean, I've got like a YouTube room, I've got like lights, I've got a better

lens, I'm ready to go. I just really haven't had time to honestly make any videos because of, you know, making so many updates to that investing course, and working with some other work projects and the podcast. So excited to kind of get back into the YouTube space. That'll be exciting. But yeah, I'm still getting around. Another way to that you can keep in touch with me is signing up to my newsletter. Honestly, I probably only send out one newsletter a month at this point. But you can sign up at jessicamorehouse.com slash subscribe. Again, you can find I think on pretty much every page on my website, there is an easy way for you to sign up. Also, a reminder, I do have a free resource library with a lot of freebies

jessicamorehouse.com slash resources will take you right there. But also I have so many other things that I wish I could share with you, but they're not quite ready. Like budget spreadsheets are almost there. That will be a big thing that I will announce to my newsletter once it's fully done. But I'm doing a big overhaul of all my budget spreadsheets and I'm so excited about it. And some other things that will happen that I'll be able to announce, not on podcast, but on social media and my newsletter. So exciting things to come exciting things to come. But yeah, I guess that's kind of all I got for you. And I'm kind of sad to say goodbye because I love this podcast so much and I appreciate you listening so much. So I hope you really enjoyed this season. I hope you really enjoyed the podcast.

If so, don't be afraid. Don't be shy to tweet at me or, you know, you know, tag me on Instagram or share a story. I always, you know, share them back if I, you know, I'm not, sometimes I feel like so bad when someone like, I get like a notification that someone's tagged me in their Instagram story, but it's already expired because I just hadn't checked Instagram for a few days. I'm sorry if that's happened to you. But yeah, please, please let me know what you think of the show. Hopefully good things. If it's something bad, I don't want to know. Just keep that to yourself. It's not not of interest to me. I just want praise. All I want is praise. So thanks again for supporting this show year in, year out, or even if you're a new listener, welcome. And hopefully you found something

valuable from this show and learned a thing or two. But yeah, I'm gonna, you know, let you go. I hope you have an amazing summer. Enjoy yourself. Treat yourself. Pamper yourself. And we'll be back here in September talking about money, as always, and leveling up our money, building our wealth, doing some smart money moves, all that good stuff in the fall. So thanks for listening. Big shout out to my wonderful podcast editor for editing. He's now I think, helped me out with a full year of shows. And gosh, has it been a miracle to not do all this stuff myself? Why did I think this was a good idea to like, oh, I'll just edit and mix my own show or get my husband to do it? Why would I do that? That's stupid. Thank you,

Matt, for all of your, you know, amazing help. So yeah, that's it. Thank you. And yeah, that's it. I should have something fun to sign off with, but I cannot think of anything clever. So I'm just gonna say goodbye, goodbye, goodbye. Because I always say hello, hello, hello at the beginning of my episode. And yeah, just leave you with that. And I'll see you back here in september this podcast is distributed by the women in media podcast network find out more at women in media.network