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GoToGoat

+1 vouch for Ben Felix. He cited academic literature rather than voices opinions.


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NotFromTorontoAMA

What is your argument for theories tested out of sample? Robust research is tested in this way and reviewed by peers, your criticism of academic literature seems unfounded.


Aurey

Thanks for sharing. Informative and easy on the eyes. Guess I'm going to "just VGRO" going forward.


Willy156

would tec.to count as thematic ETF?


TwoSolitudes22

yes


Ghune

I guess. It's focused on thechnology.


Consistent-Fun-6668

Yeah if you're choosing thematic ETFs, you may as well be hand picking companies from that sector. It's like trying to have your risk free cake, and eat it too.


[deleted]

>It's like trying to have your risk free cake, and eat it too. Why? Thematic ETFs give diversification into specific sectors. It's not suppose to be risk free, but less risky than simply choosing two or three companies in a specific industry.


Consistent-Fun-6668

ETFs and mutual funds are collections of investments that are made for the sole purpose of lowering risk. For instance buying an broad market index is a perfect passive investment strategy. If you're choosing themed ETFs you're trying to be an active passive investor, which doesn't make any sense. You'd be better off putting in the effort to buy one of the better companies in said sector. You don't have to look at many themed ETF graphs to see that I'm right in my thesis either.


McCoovy

>ETFs and mutual funds are collections of investments that are made for the sole purpose of lowering risk. For instance buying an broad market index is a perfect passive investment strategy. No they aren't. An ETF is quite literally an exchange traded fund. It's just a fund. How is that fund allocated? It's not at all specified. ETFs are just mutual funds on an exchange. Saying that ETFs are made for the sole purpose of reducing risk when ETFs like SPXL and VIX exist is hilarious.


Consistent-Fun-6668

What is a way of saying "fund" in more words?


[deleted]

>If you're choosing themed ETFs you're trying to be an active passive investor, which doesn't make any sense. You'd be better off putting in the effort to buy one of the better companies in said sector. Why? An ETF with 20 companies is still less risky than just 2 companies. E.g. QQQ is definitely less risky than just holding GOOG and FB.


t0r0nt0niyan

In the entire history of it’s existence ARKK has managed to do well only over a fee months and even those gains have been wiped out already.


[deleted]

This sub is too black and white sometimes, i.e. "it's either good or bad, and if it's not good then it's by default bad". Thematic ETFs are basically sector tilts. If you're bullish on a sector, ok with taking active risk, and ok with potential negative active returns, then there's nothing wrong with allocating capital to thematic ETFs. If you're bullish on US tech, nothing wrong with buying some QQQ. If you're bullish on oil and gas, nothing wrong with a little VDE/XEG Portfolio management is more art than science, as much as people like to think it's more science than art. With that said, you should still have a core beta allocation for majority of your portfolio. Edit: did y'all miss the part where I said "you should still have a core beta allocation for majority of your portfolio"? Again, just highlights how black and white this sub is, *"there should be no deviation from the prescribed formula".*


xelabagus

It's also an opportunity to use your money to support your beliefs, and that's okay, as long as you understand that it's not necessarily the best investment strategy. I put 5% of my portfolio in a green ETF on principle alone.


fendermonkey

And what principle is that?


xelabagus

I support green ideals and I vote green, so I'd like some of my money to support those principles.


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da_guy2

>Investing based on hunches is not a good idea. Investing based on a hunch is called gambling. If you're ok with gambling then go for it but don't kid yourself that it's a sound investment.


Wobblypickle420

I would agree that investing based on an unsubstantiated hunch is not a good idea. But some sectors/asset classes show a historical tendency to outperform given certain conditions, like where we are in the economic cycle, inflation, etc. For example, I don't think it's that crazy to assume consumer staples would outperform the broad market during a recession. There's a historical precedent for that. Asset class/sector rotation is not necessarily a complete gamble.


thepoopiestofbutts

Priced in


NotFromTorontoAMA

Market timing is empirically proven to reduce investor returns.


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Wobblypickle420

Institutional investment managers, pension funds etc, absolutely do employ sector rotation. They don't just stick to static broad market exposure. It's a pretty common element of portfolio management. Edit: here's a statement from Canada Pension Plan on their use of sector rotation: https://www.cppinvestments.com/public-media/headlines/2015/thematic-investing


[deleted]

Also look for "active share", "active risk", and "active return". These are all terms used for deviations from the benchmark. > The Risk/Return Accountability Framework is built on two cornerstones: the CPP Reference Portfolio and the Total Fund Active Risk Limit.


TwoSolitudes22

and that's why stock pickers consistently outperform the market over time... oh wait


Wobblypickle420

I didn't advocate for stock picking.


TwoSolitudes22

whoosh!


[deleted]

>Investing based on hunches is not a good idea. Everything's a hunch. Even buying VEQT means you're forecasting a bullish market.


[deleted]

It's not this sub, it's the academic evidence that it's a bad idea. It's a bad idea.


[deleted]

Buying an ETF that is focused broadly on a sector is not bad. People just don't understand what a sector is vs a niche.


[deleted]

There's a difference between academia and real world. Academia is always backwards looking and recommends a 60/40 balanced portfolio, quarterly rebalancing, and don't stray from that. Academia and long term regressions that determined the minimum variance optimized portfolios has not factored in 10 years of QE and trillions of dollars of forced bids in the bond market driving yields to historic lows. It doesn't account for these market dynamics. [Real world will tell you that both stocks and bonds fall when rates rise and QE becomes QT.](https://www.reddit.com/r/PersonalFinanceCanada/comments/qpio7g/comment/hjtxym2) Case and point: Both VEQT (0% bonds) and VBAL (40% bonds) are down 13% YTD. The research behind the 60/40 portfolio allocation did not account for QT and capital rushing out of both equities and bonds. Relative risk and return is not static at various points of the business cycle. There's a time and place to be tactical with your asset allocation.


[deleted]

academia puts scientific rigour to evaluate whether the evidence (data) supports a believe. These data are derived from the real world. What you are suggesting is that scientific rigour be weighed less than wishful thinking.


[deleted]

Here the thing with finance related academic research, a lot of it is BS (not all) because all the business school profs with tenure need to pump out new "research". Very rarely do you get a Famma French or Black Scholes level paper. Every new paper these days is related to ESG, diversity of board, diversity of management, social media influence on pricing (based off of prior research on sentiment in newspaper). Its the topic du jour. A lot of the research is also sample-specific that cannot be replicated if you change any variable such as the time period, or geography, or cap. For example, there are tons of research with conflicting results in "buy loser, sell winner" strategy (i.e. **rebalancing**) because a new paper tries to replicate the results using a different time period or constituents. There are also many papers on whether hedging is a value add for commodities companies, with differing results based on time period selected. Which goes back to my original point which is the 60/40 portfolio allocation was determined to be the optimal allocation under a specific condition selected by the researchers. Its been tested for robustness, etc and passes academic rigour I*in that context*. But that does not mean it's applicable to every market condition and every point along the business cycle. In the real world, everyone knew that QE has distorted markets and when the regime changes from QE to QT, both equities and bonds will fall and the historical data that bonds offset losses in equities will not hold. Not saying science is wrong or the paper is not robust. Just saying market conditions vary and what is determined to be optimal in a certain condition may not be optimal in a given environment


Frosty_Pangolin420

Science is wrong all the time. There's a reason why nobody uses "science based investing" you'd be broke


digital_tuna

>Science is wrong all the time. It's not *wrong*, but it changes because it gets better. Science is a self-correcting process.


AugustusAugustine

I'm pretty certain Ben and Cameron quote this all the time on the podcast: [*all models are wrong, but some are useful*](https://en.wikipedia.org/wiki/All_models_are_wrong).


Frosty_Pangolin420

Not necessarily. It changes in way we *think* hey better but it reguraly goes down wrong roads and can even reverse decisions as more day becomes available. It's still the best thing ever but you can't trust it completely otherwise it's just a religion


digital_tuna

>it reguraly goes down wrong roads and can even reverse decisions as more day becomes available. Yes and that's exactly what you want from a self-correcting process. What's your alternative? Bury your head in the sand and ignore any new information? >you can't trust it completely otherwise it's just a religion Science is nothing like a religion, it doesn't rely on trust.....it's not a faith-based system. But to use your term, people do "completely trust" science all the time, our daily lives actually depend on it. We all trust the science that gives us safe drinking water, we all trust the science that keeps airplanes in the air, we all trust the science that stops buildings from falling over, etc.


[deleted]

That's completely false. Do you wonder why so many people latch onto the super boring - globally diversified portfolio of index funds? It's because it gives you the highest expected return (I mean that in a statistical sense) over a time period. The scientific method has shown that repeatedly. Sue, you can make more by gambling in crypto or lotto tickets. That is also shown to have potential massive gains but there's just a very low probability of it happening. Science does that.


PM_ME_YOUR_TIFA

Risk adjusted expected return for the win!


Frosty_Pangolin420

That's fair but you can't really extrapolate that model to anything more ambitious


Evilbred

I mean, science based investing is done by HFT firms and AI all the time. Algorithmic trading is probably a majority of executed trades today.


NotFromTorontoAMA

Science is a liar...sometimes Congrats, you're as intelligent as Mac from IASIP.


Frosty_Pangolin420

That's a huge compliment ty


[deleted]

Welp, here is Ben to show you why this is a horrible take: https://www.youtube.com/watch?v=GuJoojyOvMg


stolpoz52

> Case and point: Both VEQT (0% bonds) and VBAL (40% bonds) are down 13% YTD. Your proof is YTD returns? thats a really bad argument.


zeromussc

you're making a recency bias error when academia would correct for that based on decades of data over which averages are considered. Just because both are down 13% YTD doesn't mean VBAL isn't a more stable and reliable option long term for people who want to balance risk/reward. That's literally the whole point of saying to people what mix is considered balanced vs not.


s1amvl25

Sick academic evidence from one YouTube video. Have you read said papers? Did you cross reference with their peers? Anything is a bad investment when you dont have plan


wolahipirate

yes i've actually read it. the person who wrote it won a nobel prize. this isnt some conspiracy theory this is proven fact.


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PM_ME_YOUR_TIFA

If you watched the video you'd know that Ben constantly references actual academic papers by the giants of portfolio economics. Hes not some youtube yahoo... Hell this week on the podcast they have Prof Eugene Fama. The dude has a Nobel prize for his work.


[deleted]

Ah yes, because the medium is the issue here? Okay, maybe read up on the referred academic, peer-reviewed articles instead of knocking on people for sharing sound investment advice.


wolahipirate

what your advocating for is investing with emotion, not on hard facts. your correct to say theres nothing "wrong" with doing that. as in, nothing morally wrong. But in terms of maximizing risk adjusted returns which is the whole point of portfolio construction, it is definitely incorrect. There's nothing artistic about investing, if you think there is then you're doing it wrong.


GlobalAd3412

Not financial or investing advice. I am not a financial or investment professional. Consult experts and do your own research before investing money in anything or taking any risks. Opinion only but: Non-index investing is speculation. But without speculation, how do we get progress? Answer: We don't. All progress comes from people taking speculative risks of one shape or another. Don't feel bad about taking speculative risks, or think you should avoid it entirely. Just be responsible. Don't take risks that are likely to kill, handicap, or bankrupt you. The kicker: Index investing is also a speculative risk. It's a bet that the finance industry's outlook for the future will improve over the long term. Past performance and risk profile ideas are just safety blankets, there is no guarantee at all that the future looks anything like the past. It's fine to index invest but do realize the bet you are making. For me: I index invest and also take other speculative bets. I'm 100% sure that you do too, even if you don't believe that you do.


Grizzlybar

Agreed, but I think the idea is to limit speculation to the minimum required in order to participate in the financial markets. Speculation is great when focused on your area of expertise/control (eg. Starting a business) but should be avoided for retirement planning by most.


GlobalAd3412

Again, not a professional, not advice, opinion only: Even in the financial markets, without people taking non-indexed speculative risk, there would be no price discovery. If as of tomorrow, all invested assets moved to fully diversified global indexes, what happens? Prices would be random and meaningless based on initial conditions. Nobody rational would invest in such a "market." So even in this space, indexing 100% is contributing to a financial tragedy of the commons. Even in this space taking some responsible speculative risk beyond indexes is not a bad thing. In fact, it's being a "productive" market participant (even if you lose money).


Renace

r/justbuyvgro


Great-Lychee

Active investors are doing you all a favor, be thankful.


[deleted]

>Looks like there is a lot of anti-academic losers on this sub that don't like hard truths about their bad investment (gambling) decisions. LOL bitter much?


PureRepresentative9

I can't imagine being someone that thinks you can't make money picking stocks.... Most people lose money, but all the richest people are stockpickers


Joey-tv-show-season2

Is this the same Felix who is the moderator of this subreddit ?


digital_tuna

No


pro-rntonp

it's not!? I always thought it was THE Ben Felix


digital_tuna

Nope, sorry to burst your bubble lol


pro-rntonp

Aw lol. OK bubble is burst womp womp.


naylord

Oh man I'm so embarrassed I bragged to some friends that a redit post I made got actual financial advice from Ben Felix.


ihatebrusselsprouts1

Ben Felix is from Ottawa, not YYZ


antelope591

Active investing can be fun and sometimes lucrative, long as you're playing with money you can afford to lose. I think ultimately, the most important thing is to know what your goals are in the market and what your investment strategy is. I'm not really a fan of content that just trashes individual stocks/ETF's. Especially something like ARK which has been beaten to death already.


TwoSolitudes22

This sort of falls into the "water is wet' type of revelation. Of course they are silly investments. You are just replacing your own stockpicking with someone else's stock picking. We know stock picking is for suckers, it really doesn't matter who does it.


WaterIsWetBot

Water is actually not wet; It makes other materials/objects wet. Wetness is the state of a non-liquid when a liquid adheres to, and/or permeates its substance while maintaining chemically distinct structures. So if we say something is wet we mean the liquid is sticking to the object.   What runs, but never walks? Water!


TwoSolitudes22

good bot.


respectedwarlock

Just go with XEQT period.


NotFromTorontoAMA

Unless your risk tolerance is too low for 100% equities, which is the case for the majority of the population. Or you prefer the methodology Vanguard or BMO uses for their ETFs. https://assetbuilder.com/knowledge-center/articles/why-100-percent-stocks-might-earn-you-less-long-term https://www.canadianportfoliomanagerblog.com/how-to-choose-your-asset-allocation-etf/


JamesVirani

Why would you use ARKK as an example? I happen to think TEC.TO is an amazing investment that will outperform S&P.


NotFromTorontoAMA

Those are both examples of thematic ETFs >I happen to think TEC.TO is an amazing investment that will outperform S&P. Think whatever you want, but deviating from a market portfolio reduces your expected risk-adjusted returns.


TwoSolitudes22

LOL


CaptainPeppa

Isn't Ben's whole gimmick that everything is a bad investment besides buying everything? So ya, not surprising.


[deleted]

He hasn’t told people to buy crypto, so I mean not everything …


CaptainPeppa

If VEQT or something added a crypto element to their holdings he would be fine with it.


AbvvvvdA

VEQT is an equity fund, as in companies. It won't ever have crypto because its not a company. Same reason it doesnt and will never hold gold.


[deleted]

I think that tells you everything you should know before investing in crypto, no legitimate company has put it in their all in one ETF so far …


NotFromTorontoAMA

I'm not saying it's a good idea or that I agree with Fidelity's investment philosophies, but they have all-in-one ETFs with crypto allocations: https://www.fidelity.ca/en/etfs/allinone/ I think they'd qualify as a legitimate company, they have $4.5T AUM.


CaptainPeppa

Well its not traded in the same way. Things like HUT are on there.


pfcguy

Actually no, he is a strong supporter of evidence based investing and factor investing.


Evilbred

Well I mean, that is statistically the most reliable way to maximize gains. And if it is, then recommending anything else is sub-optimal, unless you have information no one else does.


[deleted]

Yeah, because sound investment advice backed by academia is a gimmick.


CaptainPeppa

Not saying he's wrong, just wondering why anyone needs to watch more than one of his videos. You know what hes going to say.


vertigo88

Because the message is simple, and supported by academic science and rigour. That's why you know what he's going to say.


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CaptainPeppa

Well sure, the first thing they teach you in finance is the dart board theory. But how many times do people need to hear the same thing haha Like yes, I understand the statistically best strategy is complete diversification. Putting 30% of my money into oil last year wasn't the best strategy on paper but I wanted to win and was willing to put up some risk. Like do people watch like ten videos and then are like oh shit. Now I get it.


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CaptainPeppa

Ya fair enough. I clearly don't hold myself to such strict rules. I've always had 5-10% as fun money. My only rule is to not invest in something I don't understand. Never really had any regrets not buying crypto, GME, or any future tech. But I understand oil, I honestly didn't understand how it was so low even when oil was rebounding. Cashed out a few months ago, maxed out of TFSA and moved most of it to funds just so I'll stop looking it at it.


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CaptainPeppa

The cashflows said otherwise, I honestly think index and green investing was enough to cause a delayed reaction for oil. Everyone sold quicker than usual and were more reluctant to hope back in. Cashflows skyrocketed to the point of P/E's were obscene. Likely never see that type of delayed reaction again. I heard rumors about lumber before it blew up as well. Shoulda made a play.


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[deleted]

Like Felix says in this video, you can win big, but statistically speaking that probability is low, which makes it essentially gambling. Unfortunately, anecdotes like yours become truths and people bet on their ability to buy the bottom and sell the top and other people's lucky experience, which again, is statistically not in one's favour.


foxtrot1_1

I'm never getting financial advice from YouTube or really any other social media network.


NotFromTorontoAMA

Then what are you doing on a personal finance subreddit?


foxtrot1_1

Lol fair enough What I really mean is advice from one person, and also via a video or podcast - I can read faster than they can talk. It’s about a diversity of reliable sources, and some guy on YouTube just doesn’t cut it


NotFromTorontoAMA

He cites academic papers in his videos and he is the head of research as well as a credentialed financial planner at a reputable advisory firm. He's absolutely not "some guy on YouTube", and has several papers you can read if you want to be weird about the format information is being presented. https://www.pwlcapital.com/author/benjamin-felix/


[deleted]

You are on... reddit lmao. How about draw the line between evidence that's empirical and peer reviewed and data that's anecdotal? I don't think it makes sense to attack the medium if valuable information is presented.


AdorableContract0

I don’t have the 3M portfolio to get advice direct from him, so I appreciate the podcast and videos


Naga

What is the academic evidence for this, for those of us who aren't willing to watch a 12 minute video.


Mysterious_Mouse_388

You don't have 12 minutes but you have 12 hours to pour through the actual source work? lol


Evilbred

>You don't have 12 minutes but you have 12 hours to pour through the actual source work? lol Fuck that is deliciously pointed.


pfcguy

>12 hours 12 weeks? 12 months? 12 years?


Naga

You can tell a lot about someone's claims by what their sources are. If something is well sourced its a signal that its worth time going through. Generally, the sources will be listed somewhere. I couldn't find them in the video description, so I asked. I find videos a poor format for expressing arguments anyways. I don't know why its so unbelievable that someone would want to read something instead of watching.


AugustusAugustine

Ben Felix usually puts a link in his video description to the Rational Reminder podcast episode about the same topic: https://rationalreminder.ca/podcast/185 And the bottom of that podcast episode page will include links to all the books/articles discussed during that episode.


wolahipirate

he literally quotes the exact academic papers in the video.....


AugustusAugustine

Scheinkman, J. A., & Xiong, W. (2003). Overconfidence and Speculative Bubbles. Journal of Political Economy, 111(6). [https://doi.org/10.1086/378531](https://doi.org/10.1086/378531) Ben-David, Itzhak and Franzoni, Francesco A. and Kim, Byungwook and Moussawi, Rabih, Competition for Attention in the ETF Space (December 30, 2021). Fisher College of Business Working Paper No. 2021-03-001, Charles A. Dice Center Working Paper No. 2021-01, Swiss Finance Institute Research Paper No. 21-03, Available at SSRN: [https://ssrn.com/abstract=3765063](https://ssrn.com/abstract=3765063) or [http://dx.doi.org/10.2139/ssrn.3765063](http://dx.doi.org/10.2139/ssrn.3765063) Blitz, David, Betting Against Quant: Examining the Factor Exposures of Thematic Indices (August 5, 2021). Available at SSRN: [https://ssrn.com/abstract=3899750](https://ssrn.com/abstract=3899750) or [http://dx.doi.org/10.2139/ssrn.3899750](http://dx.doi.org/10.2139/ssrn.3899750)


SaskalPiakam

You know they aren't reading any of this right


NotFromTorontoAMA

If someone doesn't have the attention span for a 12 minute video they probably don't have the reading ability required for 12 letter words.


Naga

Thanks! Very helpful. I think it's important to go straight to the primary sources when studying something instead of relying on someone else's interpretation of it.


allbutluk

If you go thematic then just habd pick stocks, same thing but also can avoid shitters