The Canadian Investor - Keeping it Simple with Index Investing and Building a Business with AI

Episode Date: November 27, 2023

In this episode, Simon gives an update on recent developments about OpenAI and the news that Sam Atlman will finally be returning. Braden gives his opinion on the situation as the co-founder of Finchat.io which is built on OpenAI’s ChatGPT API. We then go over some frequently asked questions about index investing. Tickers of stocks discussed: VUN.TO, VFV.TO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Bélanger. The Canadian Investor Podcast. Welcome into the show. My name is Brayden Dennis, as always, joined by the influential Simon Bélanger. Buddy, Friday or Thursday morning, not Friday morning. I can't even get that part right. Thursday morning recording.

morning, not Friday morning. Can't even get that part right. Thursday morning recording. The boys are in a new domain here today. I don't think we've ever done this day. So maybe we'll be fresh with ideas. I think we got a good slate of new, a little bit of news, but lots of good long-term investing type content for you here today. You and Dan Kent talked about this open AI saga and drama, which we think we have a wrap on now. But do you want to give a quick update on it? And I know, listen, I know there has been so much news on this globally. Every newsletter is talking about it. Every LinkedIn bro, every Twitter storm thread is talking about this. But I think that we will have some unique insights about the public companies involved, as well as myself building at the intersection of AI and investing. I think we might have something you haven't heard before during this little segment.

Yeah, I think that's well put. And before I kind of give a recap of what's happened since Dan and I recorded earlier this week on Tuesday, obviously it was just up to Tuesday, the information we discussed. There's still, you know, this is what's mostly been reported. Obviously, there are things that are more sure than others. But I think it's important for people to remember that there may be some more information coming out on what actually went down the next weeks and months. And we might not ever fully know what exactly happened behind the scenes. So I think it's just a good reminder of that, essentially. So there were definitely some more development the last

couple days. I encourage those who didn't listen to the last episode thursday if you want to listen to that if just to understand where i'll be kind of starting from here so more things have happened since and after the events from last weekend early in the week there were reports coming that open open ai employees did not want to work for the new ceo and former ceo of twitchett Shear. And apparently during that time, OpenAI approached Anthropic about a merger. For those not familiar, Anthropic is another AI company. It's actually a rival of OpenAI. It was founded by former members of OpenAI who wanted more emphasis on AI safety while building AI tools. There's been some reporting from both the New York Times and the Wall Street Journal that the OpenAI saga may have started because of a paper written by Helen

Toner, who was a board member at OpenAI. And I'll put the link to the paper so I was able to find it. It's like 65 pages. I did my notes just before we record. I was up at 5 a.m. this morning, so did not have the chance to read the 65 pages since then. But I will put it for those who are interested. And I read a couple of excerpts and definitely there are sections where it sounds like this board member was definitely critical of OpenAI's approach at time and also more favorable to Anthropic's approach. So obviously, you know, when you're a board member, that can create some friction. And it seems like Sam and her actually clash after that research paper came out and Sam was trying to get her off the board. And on Wednesday, so yesterday when we were recording,

it was announced that Sam Altman was back as CEO of OpenAI. And apparently, Emmett Shearer played a big part in Sam coming back because essentially he was asking the board to provide some concrete evidence that there was some wrongdoing from Sam and that was again apparently never provided and one of the biggest sticking points was with the board of director for Sam returning Sam wanted every board member gone for and for himself to be back on the board but also back as CEO now there were some concessions made it appears on both sides Sam ended up agreeing to come back as CEO without being part of the board. The former board is gone with the exception of one board member, Adam D'Angelo, who is the CEO of Quora.

The new board chair is Brett Taylor, who is also on the board of Shopify and former co-CEO of Salesforce. Larry Summers will also be a board member. He's the former treasury secretary during the Clinton administration and former president of Harvard. You'll also be a member there. And obviously, Larry Summers, it probably makes a little bit of sense from, you know, having he must have a lot of connections in Washington. So having that relationship and especially because OpenAI and SAM has been before Congress before, and there's more interest from governments, especially regarding AI regulation. So that makes a whole lot of sense.

And the board is obviously not fully built at this time. What I've read is they're looking most likely to have a total of nine members to the board. And the last concession here that SAM agreed to was that there would be an internal investigation into his behavior to, I guess, you know, have an idea of what actually happened here. So that's what we kind of know so far. Anything else you wanted to add for the sequence of events or you just want to give your take on the whole thing and how you see that as, you know, with FinChat.io, but also, yeah, building on top of OpenAI, basically. Yeah, definitely. So this whole saga, right, it's like, at first, it made people like

me very nervous, because as a founder working in this space and building on top of some of their infrastructure, we all can be model agnostic in a way that we don't have to use open AI. It's like a cloud provider. It's like, you don't have to use Amazon Web Services. You don't have to use Google Cloud. You don't have to use Microsoft's platform. But if you're already using it, it's currently the best. And switching all of that over, it's like trying to change the airplane engine mid-flight is a challenge for a team of any size. Now, a lot of founders like myself who are building on top of this infrastructure are thinking, okay, we've always known we need to build redundancy. Everyone should have redundancy in their vendor tech stack. I think that that got pulled forward a little bit because even if Sam's

back, it's like you don't want the will of your company just by one vendor. So people are looking at redundancy here for sure. Now, if I look at who are the winners and who are the losers, the main winners are Sam Altman, because I think 680 of 700 employees signed a petition within 24 hours saying that they would leave the company if he was not CEO. And people might be asking, why is this such a big story? Say you're not in the world of tech or you know what CHEPT is, but you're saying, so what? What's the big deal? Why is this a big story? Well, this is currently the hottest startup, the hottest company basically on earth right now. And every large tech company is trying to find their open AI bet right now.

The open AI bet that Microsoft made was brilliant for a couple of reasons here. brilliant for a couple of reasons here. So I think one winner is Sam Altman. Pending, there's no investigation and there is some sort of, oh man, Sam messed up. Because that Friday afternoon, me and my friends are texting and we thought this ousting, it must be money or sex, right? Those are the two kind of options right now. Yeah. The other thing I kind of thought of, like, I agree with you there. I thought there may have been, and I mentioned that Thursday, like something would providing, you know, either state secrets or information to, you know, adversaries of the US government. That would have been the other option where, you know where it would have warranted such a move,

in my opinion. Yeah. Good point. Good point. And so, one of the unsung heroes here is Greg Brockman. Yeah. Greg Brockman. Yeah. Former CTO of Stripe. He's essentially one of the co-founders with him and with Ilya, who was on the board, who kind of was part of this board coup to remove Sam Altman. He was basically the one that kind of went out on Twitter or X saying, I'm out. If Sam's out, I'm out. And basically, it kind of cleared Sam's name of the, okay, it must be something bad, right? Because he wouldn't be quick to say that if it was that, right? Because he's got to cover his, you know, if it's a bad scandal, he wouldn't be so quick to like, you know, not cover his ass. And so, that's one of the winners. His co-founders are kind of some of the winners, except for Ilya, of like just really having his

back. Here's a contrary one. Twitter or X is a huge winner here. Dude, if you wanted to know what was happening here, it was happening on this platform. If you're looking for the latest tweet from the CEO of Microsoft, Satya Nadella, or you're looking for the latest update on what's happening with Sam and the press releases that these companies are issuing. It was happening there. So I thought that that was kind of interesting. It's like, love it or hate the platform, it's still super relevant. And number three is my boy Satya Nadella. He's got that dog in him. This is the best non-founder CEO in all of big tech. and I don't even think it's close. He has been

such a good leader for Microsoft. He has picked the best partnerships. He's made some fantastic acquisitions, and he's been able to navigate really difficult situations really quickly. I sent out a tweet on Friday and I said, Satya Nadella must be doing everything in his power to undo the last 24 hours events. with some kind of strategic maneuvers. Okay, we're going to get you right now immediately as an employee, the CEO of AI for Microsoft so that we have Microsoft back because this deal that they did was a $10 billion deal for 49% of OpenAI, but it wasn't that big yet of a capital outlay because some of it was in cash, but a lot of it was in compute credits because they know they need so much compute credits from Microsoft Azure that they're willing to take that deal. And so the capital outlay for them to grab one of the the ip the talent the brand recognition everything just really for not that large of a capital outlay is a fantastic deal for microsoft in my view now this thing's gonna burn lots of cash but i think that it's it's the right bet to make right

now and and they have the best leader of it has been quoted a lot lately but i'm gonna i'm gonna quote it a lot you know paul graham is the name kind of rings a bell but i don't know i wouldn't know on top of my head paul graham is known as kind of like one of the mob bosses of silicon valley he started what he started y combinator okay it's one of those okay yeah yeah so he started what he's like the original founder of Y Combinator. And for those who are not, I've talked about it many times here on the show, but Y Combinator is the world's most important technology accelerator in Silicon Valley. Companies who want to hit the big time, build that unicorn billion dollar tech company,

a lot of them apply to YC. Airbnb has gone through it. Stripe went through it. DoorDash went through it. A huge number of... There's hundreds of them that have achieved wild success. And Paul Graham and company have touched a lot of these founders. And Sam Altman was the president of Y Combinator for a long time after selling his first startup as a young 20-year-old. He sold one of his companies for a lot of money. He then went on to run Y Combinator and be kind of the mob boss of Silicon Valley. And he had everyone in the tech world come to his vouching during that 24 hour period where no one knew it was happening. I don't know what happened, but I'm willing to publicly say, you know, as Brian Chesky, the CEO of Airbnb, that this is a mistake. And Sam Altman is the best leader I've ever talked to. He ended up doing

extremely well for himself because he was investing in the best deals for YC. Paul Graham in 2009, this is before Sam Altman became the president of Y Combinator. Paul Graham wrote an article. He wrote an essay as he usually does. He used to write them all the time. They're really great. In April of 2009, there are five founders. That's what the title of the article is called, five founders. And he said, here are the best five founders. Who am I finding myself quoting the most? One, Steve Jobs. Two, TJ Rogers. Three, one steve jobs two tj rogers three larry and sergey the founders of google four paul bouquet i'm not really i forget i don't know how to say his last name but he started gmail and five sam altman i was told i shouldn't mention founders of yc companies but Sam Altman can't be stopped by such flimsy rules. If he wants to be on this list, he's going to be. Honestly, Sam is along with Steve Jobs,

the founder I refer to mostly when I'm advising startups. On questions of design, I ask, what would Steve do? On questions of strategy or ambition, I ask, what would Sam Altman do? So this guy's been recognized as just an amazing leader, an amazing visionary for a long, long time now. And he's been extremely influential in the space. Some people are just hearing about him for the first time. But I have nothing more to add. It's been quite a lot of drama for really nothing and dip really happening in the end. But I do think that it made me happy as a Microsoft shareholder to know that the best leadership of all of big tech non-founder leadership is running that company right now. And I think that they're set up to do quite well, even if the stock looks crazy expensive, which I think it probably is.

Yeah. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense, and with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I

need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests.

It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. I mean, I have, so maybe it's because I'm not obviously, you know, you have finchad.io and I'm kind of in different perspective, but what I have a little bit trouble with is how much everyone in silicon valley and with an open ai seems to be essentially backing sam altman and whenever i see something that's like unilateral like that i have a little bit of reservation and i'm thinking back at when svb

bank went down which was also very similar with the discord in Silicon Valley. And especially because we don't have all of the information and thinking, too, about the employees with that letter, I was thinking a lot and I saw a tweet in the last couple of days and it just find I find it odd that like what, 95 percent or close to 100 percent of employees would sign that letter. And such a lot. It's you know, it's, you know, it's not 15 employees, like it's what 600 or whatever it is the amount, like it's a decent seven and 800, I think. Yeah. And I do wonder sometimes if some felt a bit obligated to sign it,

whether they really fully wanted or not, just because of not necessarily peer pressure, but also like, you know, how it might look in the eyes of their colleagues if they did not sign it. So I don't know. I have a little bit of a nuanced take because I do. Something doesn't fully smell right from my kind of standpoint. I totally understand your point of view and what you said. Totally get that. And I think other companies may benefit in the way that those employees, some of them that might have signed it, and maybe the whole debate and the

whole power structure was relating to AI safety, right? It's that theme that keeps coming back, who knows. But you know, if it is that maybe there are some employees that will say, Okay, well, my place is probably not at OpenAI, we will go to Anthropic or any of the competitors that may be a bit more focused on the AI safety. And I think this whole thing for me is probably as a society, I think we need to have an open debate on, you know, the benefits, the potential benefits, but the potential downsides. Because it's always I've my perspective

is it's been like either you're really like on the safety camp or on the accelerationist camp. And there's sometimes a bit of a lack of a kind of discussion on the topic. So that's kind of I don't know. That's where I stand from. Obviously, I'm not involved just like you in building on top of their api and the last thing for me it's definitely shown me that i need to learn more about these tools and actually use them so i've actually signed up for like these crash courses for like a month not a very expensive

course but uh for to kind of get to know to use different productivity tools that will help also with the podcast and the business and making us more productive as well. So that kind of is, that was kind of a wake-up thing. I've used ChatGPT before. I used FinChat.io. But this definitely made me realize I need to put more time into this because it's basically investing in myself and knowing this technology better. I think that's a smart move, right? And on the safety piece, I agree. I think the

largest working theory, look, people are giving all this high praise to Sam. I'm just reporting the news here. I don't know the guy personally or anything. Yeah, yeah. If something really bad did happen that we're going to find out later that he is not such a good guy, then we'll react to that if that were to happen. I don't think that's what it is. I think it is the safety piece. I do believe that is the working theory right now, whereas OpenAI's roots was supposed to be a lot different. It was basically Sam, Elon Musk, that Ilya guy, and Brock, who were working on this research project. And Elon has been very critical about the

accelerationist movement of open AI without any safety. And look, it's become a different company now. And Sam Altman is the capitalist of all capitalists. He ran Y Combinator. Y Combinator is capitalism. Y Combinator is the exact definition of capitalism. It is pooling a bunch of companies together, showing them off to venture capitalists, and hope they become billion dollar moonshots. That's what Y Combinator is. This is the Olympics of capitalism. And so there is a clearly a friction of incentives that has happened here. And I do think that we need to think about safety. The working theory right now, based on his Dev Day demo before he brought out Sayanadella, was basically saying,

there's been three times where I've been like, AI has changed everything in my career working at OpenAI. One of them was last week. We'll tell you about that in the future he didn't and he just he just kind of said that and then you know presentation went on nothing you know nothing was spoken about it oh yeah i just have a killer robot in my room at home but i'll tell you about it later yeah exactly and then next thing you know this this board this board crew and safety issue comes out you know a week later and so one of the working theories right now is that they've had like resemblances of AGI of artificial general intelligence, like created. And a lot of people are concerned thinking, okay, whoa, whoa, whoa, whoa, whoa, whoa,

this has gone really far really fast. And this is very risky to not understand all the you know kind of complexity of of working with artificial general intelligence for the safety of humanity and so i i think that that's probably more likely than not based on him just saying there's been a third wow moment in my career and it happened last week all right next up sign this up from microsoft you know like they just kind of threw it under the rug there so we'll see what happens yeah it'll be interesting like i said it's developing so quickly and we still like this a lot of it is just reporting it's what like you know we've seen on twitter some of the employees some of the actors involved right and who really knows what happened behind the scenes but it'll be i'm

sure we will in the next weeks and months a bit like i know it's completely different situation but a bit like ftx right remember during when it was happening and then in the next weeks and months we just like found out so much more stuff at the time there was a lot of reporting was hard to know but then hard evidence started coming out so maybe it will be similar to that but i i think we've talked enough about it at this point have the episode i don't think we'll be able to do all our segments but that's okay that's all right it was a fun discussion and i think just different perspective i think people will definitely appreciate that now we'll move on i think you have a really interesting segment here obviously on ets but before that i think you

wanted to just let people know for fin chat yes absolutely so this episode is coming out on monday monday november 27th okay so we're recording this on thursday the 23rd. On the 29th, we have Stratosphere and FinChat merging together. I've been hinting at this. I've been talking about it. We're two days out if you're listening to this. So if you're listening to this before Wednesday, the 29th, so if it's the 27th or the 28th, Monday or Tuesday, this is your last curtain call to subscribe to Stratosphere and get grandfathered into the new platform. Just think of it as Stratosphere plus the AI chat on top of it.

It looks fantastic. I'm going to show you a couple, do a little screen share for you after this. You're going to love it. But if you sign up before the 29th, you will be grandfathered in to the new platform. You'll have your price locked in, and then you can take an additional 15% off because you're a podcast listener at checkout with code TCI. So this is a last curtain call, highly recommended. All right, ETF rapid fire time. I wanted to do this segment. I've been thinking about it for a

while. I've had it kind of in our list of topics. And it's meant for us to both just kind of think about certain things here. These are like the FAQ, the frequently asked questions of ETF investing. We've been talking a little bit about the passive versus active, ongoing, never-ending debate here on the podcast. And so I figured, let's do some kind of frequently asked questions that I get all the time from people who are maybe new to the markets and for the first time ever, maybe buying exchange traded funds. So I'll give a kind of a background and then we'll just kind of rapid fire through these questions. I'll give my take, then you give my take and we'll go to the next one. So exchange traded funds have become extremely popular investment vehicles

for those looking for a more passive, low cost exposure to the markets. You can often buy baskets of thousands of stocks in one broad-based index ETF, or of course, the very well-known S&P 500, which is give or take around 500 stocks at any given time. You and I both know they're brilliant for the most of the population, these types of investment vehicles. You, correct me if I'm wrong, own like a third of your portfolio in low-cost indexes? Yeah. Yeah, that's correct. Yeah. Not all ETFs, but with my pension fund, yeah. Same thing. They're not traded, but same kind of thing. Same thing. They're covering the same exact investment strategy, but different vehicles. I used to own 100% of my portfolio in just one or two diversified low-cost index ETFs when I was like 18, 19, 20. I think it's a great place for 99%

of the population to at least start and probably keep going with. Now, today I own a very concentrated portfolio of individual businesses, but I still use index ETFs as instruments when markets face massive drawdowns. For instance, in March of 2020, when the market crashes 30% from February 14th to March 20th, maybe I haven't decided on an individual name I want to add to or add to the portfolio. And in the noise of drama of crash like that, your boy isn't sitting on the sidelines. There's money to be made when people are running for the exit sign. So I might dabble with some market exposure by buying one of these low cost index funds via exchange traded fund. As do-it-yourself investors, we want to keep our fees low. That's

why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support

rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality

co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. We're going to play a game of ETF rapid fire. None of this is investment advice. Always do your own research. This is just our opinion. Always do your own work. All right. our opinion. Always do your own work. All right. First one. Should I own an S&P 500 ETF or a total market index fund? I get this so often, right? And the answer for me is always don't sweat it. It doesn't matter. Pick one and stick with it. And the reasoning for that is they

are market cap weighted. Unless they specify equal weighting, specifically in the name of the fund, they're going to be market cap weighted. So the very common VFV, which is the TSX listed S&P 500 ETF has the exact same 10% holdings from Microsoft, Apple, Amazon, NVIDIA, Alphabet, Meta, Berkshire Hathaway, Tesla, UnitedHealth. Those holdings are identical in VUN, which is the total market US fund. And it would be the same, very similar, even if i did a all world fund they'll just be slightly less weighted like well the weighting will still be high but they'll be the percentage will be just slightly less yeah exactly to give you some context the top three names are microsoft apple and amazon which are respectively seven percent seven percent and 3.4%. In the total market, those three names respectively are 6.2, 6.15, and 3. So it's not materially different. In five years, the difference of

your performance will be very, it'll be a rounding error. They're tracking the same equities with a very similar percentage because their market cap weighted. Of course, there's going to be a slight difference in performance. I typically just pick the broad-based like VUN in this situation, but my answer is don't sweat it. Don't sweat the small stuff here. Yeah, I'm the same. I tend to pick the broad base. I mean, I've talked about it before. I talk, which is just the U.S. total market listed in the U.S. and U.S. dollars. I think I've been pretty vocal that I like to have as many of my investments and my cash in U.S. dollars as I can get. That's a reason. But that's more of a personal preference.

Like you said, I mean, and I've talked to people before that asked me because what few months ago I sold my all my big tech and I redirected most of that money towards an index fund which was I thought and people were like oh you know you won't get as much upside and you know that's true but with Microsoft and Apple still being like six percent plus i mean i'm still gonna benefit quite a bit if they perform well and that's the way i see it and again the time commitment so those are the reasons i sold totally makes sense and if you're wondering there's a lot of talk about u.s funds what about canada what about the options in Canada? And should I own them in CAD or USD? All right. So my response to this is for greater context, there might be the exact same fund,

but traded in CAD and traded in USD. There'll be different symbols. Sometimes there's even the CAD hedged one. I think those are stupid, but that's not- Yeah, I mean, they haven't performed well. They've underperformed the normal one. Yeah. They have. So should I own them in CAD or US? First of all, the more important discussion here is to actually have US exposure regardless of the currency. So let's get to currency in a second. But I see Canadians with only Canadian stocks and only Canadian covering ETFs in terms of the coverage of the equity. So like a TSX-60 or a Canada all like TSX composite, which will hold like 250 names. This is silly. You're buying banks,

telcos, materials, mining, oil, and gas. Sprinkle a little bit of Shopify. You're underweight quality. You're underweight global scale. You're underweight pricing power. you're overweight, materials, telcos, banks, mining, oil and gas, and heavily underperforming as of lately, which we've been very vocal about. So if you've been concentrated in Canada, and this does not mean not owning Canadian stocks. It's not owning only Canadian stocks that have very little exposure outside of the US. For instance, there are a lot of Canadian listed companies. Let's use Brookfield or Shopify as an example, or Constellation as an example. They have most of their business outside of Canada. You make your money in Canada. You're probably getting paid in Canada in Canadian dollars. Don't be super, super concentrated on home country bias. I do think

it's a mistake. The entire TSX universe is a lot of junk that I wouldn't touch when some of the greatest businesses in the world are available three you know, at your, you know, three clicks away on the internet. So that's my take. Yeah, yeah. I mean, I don't have too much to add here. I think that's the biggest thing. I know people will say, oh, a lot of Canadian companies have global exposure. And while that's not wrong, a lot of them, even if you look at the banks, a lot of their business is still in Canada. Even a TD, for example, that has a lot of US exposure, it's still more than half their business that's in Canada. So you're still going to be impacted by what's happening here. And again, you live here, your everyday life is here, your income is most likely as a result of your employment here

your business may be doing the business you get income from maybe doing business in Canada or elsewhere but regardless I think it's really important to diversify that and you know what you said like an ETF is just an easy way to do it whether you own it in USD or CAD it's not the end of the world because unless it's hedged you're still going to benefit if the US dollar gains in value. Because the holdings you have in Canadian dollar will actually rise as well quicker because of that extra boost from the exchange rate favoring the US dollar. currency diversify beyond the CAD is, you know, whether that's buying individual stocks that are traded in USD on US exchanges or buying the actual US dollar listed fund. All right. Is it normal? I'm going to throw this one right over to you, actually. Is it okay? Is it normal for me to do some of my portfolios in these passive index funds? And there's some companies I really like. I got 80% of my portfolio in these passive S&P 500 fund. It's super low cost. It's great.

But I really like these six, seven businesses. Is that okay to kind of mix and match? No, only weirdos do that. Just kidding. No, I think it's fine. Obviously, that's what I do. I like to be able to get some diversification. So a big chunk of my portfolio is in index ETFs or index funds, should I say in general, and then I will have some individual companies to complement that for more exposure on those because like you've discussed, these indices are heavily weighted towards the largest cap names. So even if you have like a 1% or 2% allocation in a smaller company, it's actually a much bigger allocation than you could ever get with one of these index funds so

i don't think there's anything wrong with that i'm always you know i've been a big proponent for me the time component of it is really important because if i'm gonna own some individual companies i realize that there's more time commitment and if i don't have time to follow them closely then that's a sign that I should probably think about selling that company, even if it's performed well, just because at the end of the day, if you're not following the company, a good investment could turn bad pretty quickly if something happens and you're not aware of it. Agreed. I wrote my notes for this answer as, heck yeah, why not? Very descriptive. What about withholding taxes?

We get this question quite a lot when it comes to individual names, but it's also relevant for ETFs. So this is definitely a consideration when you're thinking about where to slot these in. Should they be in my TFSA? Should they be in my new FHSA or my RRSP? That whole debate on efficiency of tax and which vehicles these ETFs should sit in. Rule of thumb, we're not going to get into individual tax implications, We're not going to get into individual tax implications, individual situations. None of this is advice. Personally, I would prefer to hold US equity ETFs in my RRSP over a TFSA or FHSA for this reason of withholding taxes, if my TFSA is maxed, sorry, well, of course, if it's maxed, I don't have a decision, but sorry, if I don't have a lot of room, that's kind of what I'm thinking. Generally, if I know I'm going to be using, what I'm trying to get with this,

if I know I'm going to be using my RRSP anyways, I'm going to throw those in there for the benefit of avoiding withholding taxes. I had to look this up because I was like, oh, I had to remind myself how withholding taxes are dealt with for the new FHSA, the first time savings account. And so I looked it up. US dividends earned in an FHSA are subject to U.S. withholding tax. In this context, withholding tax is a tax placed on dividends from U.S. securities paid to Canadian investors. While RRSPs are not subject to such taxes, TFSAs and FHSAs have a 15% withholding tax on US company dividends. So this is just a discussion around the withholding tax on the dividends. But if you're owning these broad-based US equity funds, a lot of those top 10 names we even just talked about pay small but growing dividends. And as

you go longer down that list, there'd be a lot of dividend payers. Yeah, yeah. And usually it'll be like 1.5% or so the yield, it kind of fluctuates around there for those kind of ETFs. So yeah, it would definitely impact the returns. I always say though, obviously, if you have a lot of room in your TFSA and there's other tax considerations to take into account. Sometimes it's also like people kind of overthink it, just the withholding tax, because at the end of the day, any capital gains, those are tax free. So you have to keep it in mind. It's just 15% of the div. So it's really quite small. Yeah, exactly. So clearly, obviously, if there's a bigger dividend where bigger part of your total

returns are actually coming from the dividend, then clearly that will impact you even more if you have it in TFSA or FHSA. And not surprised for the FHSA because it is not considered a retirement account. And that's why there's an agreement between Canada and the US for retirement accounts where the withholding tax is not applied. So that's why, you know, for locked in RSPs or regular RSPs, you don't have it or even Liras, which are locked in retirement account. So yeah, my perspective is pretty, you know, similar to you. Definitely, I'll try to hold in my RSP for the most part, especially if there's a bit more of a higher distribution and dividend. But if not, for the most part, TFSA is fine because I do like the certainty of having all the withdrawals being

tax-free when and if I do need the money. Yeah, I totally agree. And you touched on an important part there. Where I'm going with this is if you plan on using your RRSP, because it's not going to sway my decision on where to put it in if I'm just rocking that TFSA or FHSA and I'm trying to max those out. If I'm like a Gov employee and I'm like, you know what? It actually makes no sense for me to have an RRSP. It's not going to sway my decision, this 15% on the withholding tax for, yeah, something paying a percent and a quarter in terms of yield, that's not going to sway my decision. But if I'm already using both, it's going to swing that decision to throwing it in an RRSP. Last one here on the slate, Simone. Should I own

an all-in-one ETF fund of funds, or should I own a collection of them? Like maybe four or five that give me, this one gives me international exposure, this one gives me Canadian exposure, this one gives me US exposure, all this stuff. My response is keep it simple. The two or three basis points that you might save from 0.06% to 0.09% is not going to be a material difference in your wealth, but it might be a material difference in your brain damage consumed during that time. So you can optimize for lower fees. And if that's really what you want to do, then yeah, pick four or five of those names, get all your exposure. But with these things, you are optimizing for simplicity with a passive index approach. So optimize forward accordingly. And simplicity is my preference when it comes to

these kinds of set it and forget it type equity strategies. My answer is sure to any of those. But no, I mean, I think it really depends, right? So the all in ones are great for just having one option, even if they're like 20 basis points. I mean, we're not talking about huge fees here. I think they might be 24 basis point doesn't matter. It's still very, very attractive compared to the options you would have as mutual funds with a lot of financial institutions. I think that's really what you have to think about where I would say the main decision for people versus these all-in-one ETFs and doing four or five different ETFs is if you want to target some exposure to different geographies, different sectors. There's a whole bunch of different indices where you want to

target your allocation a little bit differently than that all-in-one ETF, then I think that should be the biggest consideration. Not, you know, saving a few basis points on fees. The allocation will make the biggest difference. So if that's something you want to achieve, maybe you want more exposure to India than, you know, what you can find in that all-in-one ETF, or maybe to South America, or maybe I have the Invesco small cap ETF, which follows an index of small caps tech ETF, sorry, tech stocks. And I wanted some more exposure on that. So maybe that's something you want. So I think it does give you a little more flexibility, but definitely towards the allocation. That's how I would view it. And the last thing I'll mention, I don't know if you ever thought of that. I saw

someone post that on Twitter for the FHSA, especially since we're coming close to the end of the year. For those interested in using the FHSA next year, you may want to open the FHSA now this year, even if you're not planning on contributing because you have up to $8,000 that you can carry over to next year and you don't get it unless it's open. So that's something to keep in mind, especially if you think that next year you might have more than $8,000 to contribute, then something to consider. And I think now all the big banks offer fhs says i think they must do with their self brokers i think a lot of brokers do as well now including questrade that we both use so something to consider you still have time to do it before the end of the year

by the time you open you listen to this so just food for thought for those wanting to leverage that account. That's a great reminder. We should continue to kind of pepper in sprinkles and reminders of those who are eligible for making the account. And we'll do a little segment next week on just reminding people who are eligible, kind of a reminder of the account because it's still new. And a lot of people, I know a lot of people still have not created them if they're eligible. And even if you don't have intentions of putting in money this year, open it up. You're right. That contribution room carrying over, it's like finding money in your pocket next year or 10 years down the line. You know what I mean? So it's get it open in your pocket next year or or 10 years down the line you know what i mean so it's get it open set it up if you never use it you convert it to an rsp so that's not the end of

the world either if you never end up buying a home with it then you just convert it to an rsp i think it's we'll have to yeah we'll have to do an episode top of my head i think you have 15 years to use it is that it 15 yeah that's it huh okay my memory yeah i believe like i said i think this early in the morning my memory is still good for my own purposes and for the benefit of the listeners we should do a little recap on it because there i was having a conversation with someone the other day about like the differences and like you know it is a bit of a hybrid of the rsp and the tfc and i was stumbling over the details because i had completely forgot many of the details based on the last time we discussed it

yeah and so for my own purposes and for the purposes of the listener we should do a little recap of it yeah no i think that's good i think today well i think we're good because this uh we're running long on this so we can keep our good segments for next week along with that well that made next week a little bit easier didn't it because we got some we got some great stuff so make sure you keep tuning in on the monday releases for more content last final reminder you have two days before november 29th to subscribe to stratosphere to get grandfathered into the FinChat merge. It will be glorious. You'll love the product. And it's already come such a far, far way during this short

period of time. You'll get that AI chat experience as well as the traditional Stratosphere research terminal. So you could be like, you're messing around and you're looking up something from Apple. You're looking at their iPhone sales over the last 10 years. And then you just reach over, you press the Ask Finch app button. You're like, build me a chart that compares the services business to the Apple iPhone businesses. Or build me a chart, summarize the last quarter of ASML and you'll get all that stuff in one place. Don't forget to use code TCI for 15% off at checkout.

We'll see you in a few days, Simone. You're off to the US for our American friends, American listeners. Happy Thanksgiving. No, I'm not. Unfortunately, there was some last minute developments where my family, where I was going to stay over, their furnace broke.

Oh, no. So, yeah, we ended up making, I think now it's repaired, but we ended up making other arrangements for the baby and all of that. Got it. So, unfortunately, we'll have to probably go see them potentially during the holidays. So, it'll be pushed a little bit. Yeah. Yeah.

Yeah. There you go. Well, enjoy. Oh, we got some good football on. That's one thing as a Canadian, I appreciate American Thanksgiving for us, giving us that football. All right. We'll see you in a few days to our American listeners. I know there's many of them listening right now. Happy Thanksgiving. We appreciate you. We'll see you in a few days. Take care. Bye-bye. The Canadian Investor Podcast

should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.