Comments by "JP 72" (@739jep) on "Ben Felix" channel.

  1.  @chessdad182  if you evaluate investing strategies based on single year performances than you’re doing it wrong. Regardless , small cap value has been holding up quite well this year.
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  2. Excellent video once again Ben. Keep up the good work!
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  3. I’m lucky enough to live in a location with great public transport so that even owning any car is a luxury that’s not really worth it. I know that’s not the case for everyone , but I do get the sense a lot more people would be just fine living without a vehicle. …. More money to throw at index funds ;)
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  4.  @MrSupernova111  it’s not hypocritical at all , no investment strategy is 100% passive , important investing decisions still need to be made if someone is investing passively in etfs. Of course I’d expect someone with an ‘academic and professional background in finance’ to already know this , so you’re either here because you have forgotten everything you’ve learnt already , your employer has brainwashed common investing sense out of you in order to improve the company bottom line , you’ve read a little too much Phil Town , or you’re here just to stir the pot. Have fun I guess 😂
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  5.  @DividendGuy  PWL publish them online. It doenst take long to find and work it out. If you don’t know yours or theirs then you can’t compare them properly. That’s the bottom line. He’s not laughing at divided investors , he’s providing evidence backed reasons why it’s sub optimal to chase dividends. The performance of dividend stocks doesn’t do anything to refute those points. He doenst need to show his own results. That’s some smooth brain thinking. You can evaluate investment decisions based on a sound understanding of financial theory and knowledge of the empirical work done in financial academia. Returns are not score cards. Ignoring that, Ben published a white paper with his proposed portfolios. That’s more than most people do. It’s open to the public for scrutiny. We don’t even know what is in your portfolio. You can flex all you want about your performance , but if you can’t even provide your own exposure to the factors then it counts for nothing. All you do is come across as having no comprehension regarding what was discussed in the video. Ben himself even states that dividend funds have outperformed the overall market , and he explains why. Ignorance truly is bliss I guess 😂
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  6. Was not prepared at all to hear you say ‘Bullshit’ 😂 nearly spat out my coffee 😂
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  7. Yeh I think it helps them stay invested , which is a beneficial behaviour even if it is based on flawed reasoning
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  8. Really churning out the great content now Ben! Thanks again 👍 At a faster rate I should say, it’s always been quality !
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  9. He’s not favouring international securities over American ones - he’s highlighting the importance of international diversification which is very different. I would say he gave a fair representation of where the literature is at regarding this issue. Maybe im wrong though. Have you got your own research that mirrors the quality of the studies referenced here that paints a different picture?
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  10. This analogy doesn’t work, you’re not ‘killing the golden goose’ by selling shares. The ability of the company to generate profits isn’t impacted by how much of the company you own.
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  11. That’s not what he’s doing in this video , and the exact opposite of what he recommends on this channel.
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  12.  @soshityo  ‘S&P 500,’ Warren Buffet on index funds, being wrong yet again
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  13. I’m currently 100% in stocks but always kind of took for granted that I would slowly move into more bonds as I got closer to retirement. Thanks for the video , some food for thought that’s for sure 👍
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  14. Woohoooo!!! Diamond hands!!! 💎 🙌!!!
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  15.  @DividendGuy  if you don’t know then how can you make a fair comparison? I believe Ben doesn’t share his personal portfolio , but PWL has various model portfolios published online and they include the exposure to risk factors at the time of publication. At any rate , you cannot fairly evaluate investment strategies by comparing only returns, especially over a short time period.
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  16. Dollar cost selling / averaging is just another form of market timing. Don’t worry about ‘value traps.’ Just think about rebalancing into a portfolio comprised of low fee broadly diversified etfs with sensible allocations into the broad international market (market weights) , value stocks (weighted by size , value and other fama French factors ) and global bonds. Your allocation should be suitable for your appetite for risk , allowing you to stay invested long term and this allocation should possibly evolve with you as you get older and life circumstances / attitudes to risk change. Be honest with yourself about your attitude to risk , and don’t just use it as an excuse to time the market under the guise of rebalancing due to shifting risk tolerance. Coming up with rebalancing rules or asking an expert to help gauge your level of risk tolerance and think about your future financial goals may be worth while. The decision to move from a more concentrated portfolio into one that’s more broadly diversified may feel like market timing right now because valuations are so high, but ignoring valuations it is still a sensible decision and is backed by the best evidence and theory that exists in the financial literature. Just do it 👍
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  17. ‘Is there nothing about US laws, government, society or geography that gives them an advantage?’ Even if we were to assume that the US is special , this is about investing - youd also have to assume that this perceived advantage isn’t priced into US stocks before not diversifying internationally might make sense. It seems like your comment is just applying the good company good investment fallacy on the national scale is it not?
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  18. The problem with this comparison is that dividends are nothing like rental income … they only feel that way. This is a common behavioural error known as the free dividend fallacy. When your tenant pays you rent the value of your property doesn’t go down. It’s gone from your tenants account to yours. When a company pays you a dividend it goes from their account to yours , problem is you have a share in the assets held in that account. They’re basically paying you with your own money. Dividends and rental income are thus not equivalent. Dividends are a method of returning capital , not creating capital. A fairer comparison would be saying dividends are like the method of payment the tenant chooses to pay you with (cash , cheque or direct debit). ✌️
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  19. The Dunning-Kruger effect seems to me to be particularly rampant in the investing community. People watch a few clips of buffet and read one book and consider themselves geniuses.
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  20. This isn’t even an exaggeration. Just search stock market crash and sort by upload date. Good luck finding a day without many video uploads predicting trouble 😂
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  21.  @johndorian3685  ‘I have no idea what “market efficiency” means’. Well that explains a lot having read your comments. It’s a topic every investor should be familiar with.
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  22. The section of this video where he discussed how empirically dividends don’t explain returns once you account for size , value and market risk. He goes into more detail about this in another video. The problem for dividend investors is that you can target these factors directly , at a lower cost , while remaining better diversified and you would have outperformed the dividend aristocrats through those decades as well.
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  23. ‘Also half of S&P 500 returns are from dividends reinvested’ That’s just a recount of how capital was redistributed in the past , it says nothing about how the S&P 500 return would have looked had those dividends not been paid. It doesn’t add anything to the discussion of whether dividends are relevant or not. If the irrelevance of dividends holds then you could assume that the S&P total returns would have been roughly the same regardless of whether dividends were paid historically or not.
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  24. Maybe have to consider the home bias (if there is one) of the Norwegian sovereign wealth fund as well.
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  25.  @neillamas8929  it’s not my idea , it was discussed in the video . I believe it was when he was discussing a paper called ‘buffets alpha’. That paper explains everything in more detail. The main difference between having an etf portfolio with similar exposure to known risk factors as buffet is that you will have a similar expected return for less risk. (You will have similar exposure to systematic risks but less exposure to idiosyncratic risks.) I believe the risk factors buffet would tilt towards are more than likely (historically at least) value & profitability. To understand this part of the discussion you would need to have some understanding of valuation theory and pricing models, in particular the Fama and French 3 & 5 factor models.
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  26. Merry Christmas Ben and everyone in the comment section merry Christmas 🎄🎁 !
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  27.  @OkaS14A  I think what he’s saying is that buffets returns have been driven by exposure to risk rather than any perceived skill that comes from analysing businesses. That’s very different than saying he got lucky. The key difference is that you could somewhat replicate buffets strategy in a passive way (using etfs) as long as you had similar amounts of exposure to factors such as value/profitability and used similar amounts of leverage as buffet. There’s a paper I believe called ‘buffets alpha’ that looks into this further. This isn’t a knock on Buffets intelligence. He was targeting these factors before they were published in academic papers , which is incredible. But it is a realistic take on exactly how Buffet has generated his returns. You either accidentally or deliberately misrepresented what Dave C said , you’re only saying a straw man doesn’t understand investing at this point.
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  28.  @davec3974  I for one am shocked that somebody who is ‘literate in the economy , finances and market conditions’ doesn’t get what you’re saying or at least won’t address what you actually said😯 😆
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  29.  @davec3974  you made good points , that’s what moving the goal posts means.
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  30. What you’re saying essentially is that you’re happy about money going from your left pocket to your right pocket just so you can put it back in your left pocket
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  31. What makes it a ‘free lunch’ is that it reduces risk of a portfolio without reducing expected returns.
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  32. They’re systematic
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  33.  @gmk22799898  it’s a little tricky to explain , I’ll try my best. You seem to understand the difference between the two so I guess you’re wondering why value and size are considered systematic because firms have different price to book values and different sizes - whereas with market risk all companies are exposed to the same inflation rate for example (more on that later) ? I think I understand the confusion. There’s maybe two ways to approach it. Firstly I think it might be helpful if we suspend the thought that an entire market (as in the whole stock market) needs to be exposed to the risk in question for it to be systematic. With size and value for example I think it might helpful to think of small cap stocks and value stocks as being their own market. These markets as a whole are riskier than their counterparts (large cap / growth ) in the same way ‘the market’ is riskier than US treasury bills. Now remembering that if we consider small cap and value stocks to be their own market - then If you were to only buy small caps / only buy value stocks , it doenst matter how many small cap value stocks you buy , you would not be able to diversify away the risks specific to those markets. Keeping this in mind you could also look at it mathematically. Just like with the market premium (rm- rf) factors can be expressed this way as well (SMB and HML). This creates constants for which portfolios and/or individual stocks can have their sensitivity to these variables measured against. This might be useful to understand the concept. Take (rm-rf) for example - all companies are exposed to inflation risk for example yet all companies in reality face different rates of inflation - but we’re still able to express each companies exposure to (rm-rf) the same can be done for value stocks even if they all have different price to book values. I hope that helps , it’s kind of hard to put into words - I hope I wasn’t completely out to lunch although that’s possible 😂 let me know if you have any follow ups or if you noticed something I got wrong
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  34.  @thomasd5488  that’s not an easy question to answer, there’s probably no definition of what perfect diversification is (at least it’s up for debate). It’s probably easier to tell when someone is not diversified enough within a specific asset class though. For stocks I wouldn’t consider any of the numbers you used to be good diversification , even if they were held at sensible weights. I would say though that holding individual stocks opposed to broadly diversified/low fee etfs/index funds would leave you under diversified. Some may even argue that even investing in a broad based index fund would leave you under diversified as you’re only exposed to market risk rather than the other know independent systematic risks.
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  35. If you can’t see that those two statements are not mutually exclusive then it may be you who is disingenuous. I mean the whole video was about why both those statements are true. You can have it both ways. The reason the dividend aristocratics have outperformed the S&P500 is due to other factors - not dividends. He began the video by saying one of the biggest challenges to investors is understanding that dividends do not matter to your returns. Maybe you just haven’t understood , and he’s in fact telling the truth. As for stock buy backs being illegal until 1982. He was comparing how companies return capital to investors all the way to 2016. That’s 34 years they were legal to analyse the trend.
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  36. No I don’t think he is.
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  37. GDP growth is irrelevant to the conversation. Your returns are based on what you pay in relation to future profits , not what those future profits are. America could still be successful in terms of economic growth and could still experience mediocre stock market performance. (Changing investor attributes towards risk , increase competitive , share dilution to finance future projects etc ) Nobody knows what any market will do and that’s the point, you shouldn’t pick indexes , just be well diversified across the globe.
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  38. Your statement would only make logical sense if gold was the highest returning asset over the last 100 years - which it wasn’t and it’s not even close. Stocks have outperformed gold in the last 100 years - by a very large margin. It’s therefore a mathematical certainty that any portfolio that includes an allocation to gold would have returned less than a portfolio with 100% stock allocation. I’m assuming you’ve left out some kind of caveat?
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  39. Having broad exposure to the value factor is perfectly reasonable and rational. Picking individual stocks on the basis of value is not - but that’s not what he’s advocating for. He did say that it’s difficult to answer the question ‘are good companies good investment’ because everyone has different definitions as to what a good company is. We need to know what people mean by ‘Good company’ otherwise the proposition is non falsifiable making it useless. Regardless , it all comes back to price anyways , if a ‘good company’ is priced as if it were a ‘good company’ then the investor has no logical reason to expect alpha. For the phrase ‘a good company is a good investment’ you would have to assume the market is systematically undervaluing ‘good companies.’
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  40. Where was he wrong though?
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  41. I’d say the main point is not to pick stocks and instead invest in broadly diversified low fee index funds.
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  42. The money does return to the bank (assuming the loan is paid off of course) but that doesn’t mean that money has left the economy. The bank doesn’t erase that money , it can pay it out to shareholders - pay debt , pay employees etc etc etc
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  43.  @MrSupernova111  Broadly speaking you need to make decisions related to Goal formation , asset allocation , insurance needs , estate planning , product allocation and tax planning. This can involve decisions like how much leverage to use , how much home bias is acceptable , how much of a factor tilt to employ , is it even possible to efficiently target factors given the products available, does it even make sense to target factors based on your individual financial objectives , you need to make decisions related to the tax efficiency of your investment products, how much should you allocate between stocks bonds and other financial assets , when should you rebalance etc etc. And that’s just a start. This is an iterative process as well , people and circumstances change so these decisions need to continue to be made.
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  44.  @OkaS14A  he’s not wrong though. It might feel like he’s wrong to you based on personal experience but this is something that has been researched extensively for years and has a lot of support empirically. Id estimate that it’s about as controversial to finance as evolution is to biology these days.
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  45.  @davec3974  did you try changing your YouTube name to ‘W. Buffet’ yet? Name seems to have a lot of street cred with the YouTube communities financial literates.
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  46. Still irrelevant. Mature profits that produce profits can either pay a dividend or not pay a dividend. Focussing on dividends will exclude companies that are mature / profitable that don’t pay dividends. This leads to under-diversification.
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  47.  @alankoslowski9473  I think there’s just some confusion or disagreement involving the semantics here. I don’t think he’s saying dividends themselves matter to the decision making of investors or that they should be favoured. I made that mistake as well reading the post originally. I believe his point is more a philosophical one - that is, businesses must have the potential to pay a dividend , otherwise the nature of a business would fundamentally change. I would say businesses wouldn’t even be business without this potential. I can’t think of many reasons why anyone would start a business if they couldn’t have the profits distributed to them. What is not being said is that investors should favour dividends or dividend paying companies are preferable - it’s just that if they weren’t allowed or even possible then the very nature of business would be fundamentally different - and that gives dividend some kind of pseudo / philosophical value at least. But it doesn’t make a dividend paying company better than a non dividend paying company. All companies have the potential to pay a dividend , its just that the decision of whether to pay one or not matters nought. But yes. I think we all agree here that dividend focussed investing is irrational and that’s what matters.
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  48.  @jl8252  the key here is if these historical premiums are because these types of stocks are riskier or because investors have behavioural biases. Performance can be expected to continue if the historic premiums are risk based (and therefore there is no alpha). If they are behavioural based then yes we can expect them to disappear post publication, due to the mechanisms you’ve described. Perhaps not immediately however as behavioural biases can be persistent even after identified. This does not mean that the historical premiums are predictive of the future in the way you’re describing. We know that historically these premiums existed , but we don’t know when or by what magnitude they will show up in the future - we just expect there to be a premium over the long term. It’s the exact same thing with the market premium , yet people are always pretty confident that long term stocks will provide a return. By your same logic it’s possible that stocks never again return a premium over treasury bonds - and I agree it’s possible , but I’m not going to invest as if I expect that. We have a strong theoretical basis as to why these historical premiums are risk based and these risk factors are currently included in pricing models that explain approximately 95 percent of asset prices. That’s a pretty useful model I think.
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  49.  @Nasdel  I would say that they have higher expected returns , but not higher risk adjusted returns. Size , value , profitability, market and investment are ‘risk factors’. The reason for the higher expected return is the higher risk. So to increase exposure to those types of stocks you may want to consider your own tolerance towards risk.
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  50. Before considering tax and transactions costs your net wealth would be the same. This is because the drop in share price is due to the business transferring capital to you. It’s not a discounted share price, it’s just what the company is worth considering they just lost a lot of cash on their balance sheet. After considering those things your wealth will likely be less, or at least .. if the company doesn’t pay dividends you can then decide yourself when to incur tax and transaction costs by selling shares.
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  51. What are you talking about ? It aged really well?
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  52. I’m in the EU also. I was lucky to be able to get access to Avantis products. I would recommend the ‘small cap value’ products offered by SPDR instead. The problem with investing in small caps is that if you include small cap growth stocks then the size premium appears to take a big hit. SPDR doenst as good a job managing for this but they do better than vanguard in my opinion (at least in Europe)
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  53.  @fuufii2300  I’m not denying that it outperformed VTI. But to point it out as if it’s some gotcha moment is laughable to anyone who paid attention to the video. Did you just read the title or did you fail to understand the content? He acknowledged this very point and went into detail as to why it was the case and backed it with theory and empirical evidence. He explains very clearly why dividend funds have outperformed the broader market , and it’s not due to dividends, it’s due to exposure to other risk factors. Dividend funds may in fact be in inefficient filter for targeting these other factors , but it’s much more effective to target these directly. If this is still unclear there are several other videos on this channel you can look into for more detail. For these reasons AVUV (which does target these factors directly and ignores dividends) Vs SCHD laughs at you sir 😂
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  54. You forgot one part of the Warren Buffet quote. Everyone is ‘ignorant’ of what the future is bringing. Therefore we all should aim to diversify. Diversification is also a way to capture higher returns not just to lower non-systematic risk. Individual stock returns are positively skewed , as jack Bogle famously said , don’t look for the needle - buy the haystack. There are a small minority of investors and funds that beat the market. The important question is how they do it. If they do by being exposed to more risk like Buffet did then it’s nothing extraordinary, if they did if because they were lucky it also isn’t extraordinary. With the research we have on luck vs skill , you will find that hardly anybody beats the market based on their skill. Etfs create mediocre results? I guess it depends on the etf , not all etfs are created equal. But if you just wanted to keep it simple and invest in a broadly diversified, market weighted index tracker with a low fee and you held that asset long term you would have outperformed almost everybody who didn’t do the same. And that’s without any extra tilt towards individual risk factors! I wouldn’t call that mediocre results.
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  55. For example?
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  56.  @m.tt.m2500  it’s the opposite of anecdotal, he’s referencing peer reviewed research and empirical data. Referring to buffets portfolio is what is anecdotal.
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  57. That’s not an argument against international diversification unless you believe that this info isn’t priced in.
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  58. Why is retiring without having to sell a single share of stock preferable to dividends? This is the fungibility issue that was discussed in the video , money is money , the source of the return should not matter to the investor, the size of the return however should matter. Put in other words. I care what my salary is , not whether my employer pays me via cash, cheque or a direct deposit. Do you have an explanation why investors should care about the source, id be curious to find out?
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  59.  @BTx933  those conditions are maybe required for the markets to be perfectly efficient , but nobody has ever claimed they were - not even Eugene Fama. Market efficiency isn’t an on and off switch - it’s a dimmer switch. It’s about how much information is reflected in prices - not whether every participant processes the info rationally and perfectly. If those assumptions were required for a financial theory to have any relevance then we would have to throw out almost every theory we have in finance and economics - even simple laws of supply and demand. As it stands the weight of the evidence would suggest markets are pretty efficient - it’s the best model we currently have for explaining the market. To use terms such as ‘obvious myth’ is more what I find laughable.
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  60. Bold statement to make immediately following being shown evidence that the narrative surrounding the poor performance of declining industries is historically inaccurate.
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  61. It’s not that you need a single fund to replicate it - you could do it yourself using a portfolio of funds at the correct weightings. You would also need to use the same leverage as buffet. Which not everyone has access to. The point of the research referenced in this video isn’t to instruct anyone on how to copy buffet - it is merely to explain his performance. We shouldn’t copy buffets strategy. He’s not a messiah - we all have our own personal risk tolerance levels, stages of our lifecycle , financial goals and financial needs. We should tailor our own portfolios according to these variables rather than what someone else is doing.
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  62.  @tman458  causation is different from correlation, there was a lot of stuff going on in 2020 that could explain inflation , not just QE. The pandemic , shocks to supple chains , war , large govt fiscal deficits. If you want to cherry pick this specific time in history to establish a correlation then you’re going to have to find an explanation for decades of QE in Japan , who actually had deflation. You also need to explain why qe has been ramping up in many countries since the gfc unaccompanied by significant inflation until now.
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  63. You also have to consider why a dividend fund like schd may have performed better. This video partly about what explains stock returns , is it because of the dividends that schd held up better this year , or is it because it has more exposure to other risk factors like value and profitability. Take AVUV for example. A fund that targets value size and profitability directly and ignores dividends. Only down 2.96 % this year and up 56.87% since it’s inception in 2019. During the same time period SCHD is down 5.62% this year and is only up 40% during the same time period. It may just be that the perceived benefits of dividends have nothing to do with the dividends themselves , and everything to do with the other risk factors Ben mentioned. You’d like to better of you targeted them directly.
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  64. I believe I saw in the RR community that he plans on releasing another video related to this , although not sure when. Regardless , this video was not a prediction that inflation would not occur. This video can both be correct (I think it is) and inflation can occur at the same time , they’re not mutually exclusive. There are a lot of variables that impact inflation , for example fiscal policy and supply chains. There’s a YouTube channel called money and macro that delves into this topic a little more if you wanted to check it out.
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  65. He can’t provide specific advice without knowing a lot more information about you. But you can read his model portfolio papers and it may give you a very good idea how he invests , even though it may not be what he is personally invested in. That doesn’t mean you need to copy the model portfolios , but you should weigh your own attitudes to risk and decide what would be best for you.
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  66. Perhaps - but wouldn’t it make more sense to target those factors directly? After all companies that don’t pay a dividend could have good exposure to those factors , and some companies that don’t pay a dividend may have limited exposure to those factors. You also run into problems of diversification investing this way.
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  67. I like your final thought. In my mind I’d go a step further though. To me ignorance or lack thereof when it comes to investing would come down to knowledge of future events and how the market will react to them. As none of us can accurately predict the future , especially not all the time - we should all consider ourselves ignorant investors. Even buffet himself !
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  68. Those things may make them ‘good’ companies but they don’t make them good investments.
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  69. Do you have evidence that QE caused inflation? Genuinely curious. This video isn’t predicting that inflation would not occur, just that QE isn’t likely to cause it. Not sure it can be claimed the video aged poorly.
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  70. Margin of safety is a non starter I think. It’s either referring to value , which is a systematic risk - but shouldn’t be targeted by picking stocks anyways. Or it’s referring to the miss-pricing of stocks against their intrinsic value , which in efficient markets shouldn’t happen often. If someone thinks that something is trading at a margin of safety they need to ask themselves why they’re right and the market is wrong. You’re right in your initial thought as well. If you’re sitting around waiting for a stock to begin trading at under what you perceive to be its intrinsic value then you’re spending time out of the market. Time in the market beats timing the market. As usual , people are most likely better off with a broadly diversified low fee index fund.
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  71. We actually don’t know that at all.
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  72.  @whateverrandomnumber  to be honest it sounds like you’ve missed something important in the dividend videos. I’m not sure how you can make this statement otherwise. ‘You want to become the owner of a businesss shares because you want a share of its profits. Not because you think you’ll sell it for a higher price later.’ The problem with that statement is that you will share in the companies profits regardless if they share it via dividends or not. Dividends are only one way to share profits with investors. That is why they are said to be irrelevant. Returns have been explained by a variety of factors. It’s true the models are not complete but they’re the best we got so far. Dividends are not included as a factor when explaining returns. At least not in any model I’ve seen. It’s true they are important for simply calculating total returns, but that doesn’t mean they drive returns. Edit: and of course when you focus on dividends you may still be exposed to these factors. You may also be more likely to stay invested during volatile markets, which is also important. But if you ignore other stocks that also have exposure to these risk factors you will reduce the diversification of your portfolio and thus the reliability of obtaining your expected returns. That’s how I’ve understood the argument from those videos anyways. Happy to be corrected or have someone point out something I’ve missed.
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  73. ⁠​⁠​⁠​⁠ @trumpthelegend6357 ‘you forget that governments heavily cut spending during deflationary periods’ You forget that they commonly do the exact opposite. Saying deflation is simply too little money chasing too many goods is reductionist and not necessarily correct. Periods of deflation in the past : - the great depression - Japan’s lost decade - the great financial crisis - eurozone crisis - Asian financial crisis During these periods of deflation, governments were not the only ones worst off. Many periods were severely affected. Your post is simply incorrect.
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  74. Sometimes gambles pay off. Doesn’t mean betting on unexpected returns wasn’t a gamble.
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  75.  @pbinsb3437  don’t get caught basing investment decisions off past returns, that is not basis to evaluate an investment decision.
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  76. Why does there need to be a safe haven?
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  77. The message I got from this video wasn’t that returns are all that matter. He covered many points , but the main one seemed to be that driving change through investment decisions or otherwise is very complex and it’s probably not as simple as just buying stocks in green companies on the secondary market. I don’t think one needs to have the answers as to what’s best for climate change in order to post videos. Nobody on this planet has all the answers to that problem yet. The concepts discussed here help move the conversation forward however. This video wasn’t a directive on how to invest to improve climate change. I found it thought provoking. It doesn’t matter whether you’re investing to affect climate change or achieve a higher return - the points covered in this video should be relevant for both. 🤷‍♂️
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  78.  @cemdursun  the algorithms are written by humans sure , but they are rule based and certainly not ‘emotional beings’.
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  79.  @cemdursun yeh ok I think I get what you’re saying but not quite sure how it means that dividends are relevant to stock returns?
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  80. You’re assuming people get no fulfilment or value from their jobs. Also passive investors outperform day traders over all meaningful time frames. If passive investors have to wait 20-30 years for their returns then traders need to wait even longer - or more likely , never receive it at all.
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  81.  @royjohnson9043  maybe , but I suspect its not working itself that’s the problem , just the specific job they’re in. Many people feel that way as well and then when they stop working find that they miss it. Regardless day trading clearly isn’t the solution for most people. Im sure if you surveyed day traders you’d find that most don’t make a living from it. In fact the video here points out studies that discovered that very thing.
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  82.  @royjohnson9043  the lottery also works for some especially if they don’t want to wait 30 years to make their money. But most people with that objective will be worse off in the attempt. Taking the time to learn how to day trade (which is what I assume you meant by being serious?) just increases costs and is about as useful as taking the time to learn how to pick lottery numbers.
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  83.  @royjohnson9043  you don’t know anything about me. But if you don’t want to continue the discussion then that’s fine.
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  84. Day trading is a zero sum game though - before considering costs like transaction costs and tax. So overall a net loss. Gambling at a casino isn’t a zero sum game because there is an edge favouring the house.
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  85.  @marthvader14 the cash on the companies balance sheet is finite too. As are its retained earnings.
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  86. False equivalence fallacy
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  87. Yes but you’re forgetting about skewness. There is a very very very small amount of traders that earn alpha long term, and a smaller sample still of traders who earn alpha that isn’t explained by luck. The skewness in trading is far greater than sports - and there is little benefit of engaging in the activity if you don’t succeed - which isn’t true for failing to make the Olympics. Also in sports you’re not competing against very high powered algorithms. And I guess while we’re talking about money. Your expected returns would certainly be more reliable if you didn’t attempt to make the Olympics and instead got a good education and a good job.
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  88. Holy moly this is silly 😂
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  89.  @dakotadak100  it’s silly because ‘share price volatility being greater than dividend volatility’ isn’t evidence that dividends are relevant in the slightest. It’s basically the same argument (just a different metric) as saying ‘dividend stocks have historically returned more therefore dividends are relevant. ‘ Both these arguments confuse correlation with causation. What matters is if dividends themselves affect risk adjusted returns. There is no evidence that they do which supports the generally accepted theory. It’s even more silly if you use this kind of reasoning to justify picking individual dividend stocks , or even dividend funds because then you become under diversified and exposed to more unsystematic risk.
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  90. What do you mean? Everything stated in this video is still true?
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  91. That’s always a possibility , same holds true for the market premium though.
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  92. Would you not just work out the exposure buffet has to known risk factors by running regression analysis - then compose a portfolio using etfs that achieve the same exposure? And then use the same amount of leverage as buffet? Shouldn’t take that much skill - there are online tools for this stuff? Ps. Not saying this would be a good idea, just saying if you wanted a buffet like portfolio that was passive this would be an option. He’s not saying you need to pick index funds you think will do better. It’s about constructing a portfolio that has similar exposure to factors such as market beta , value , size , profitability etc
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  93.  @ramzib.1092  I don’t know what to tell your really. At 6.20 in the video he does compare small value and large growth directly. He shows a graph comparing the FamaFrench small value research index Vs the FamaFrench Large Growth research index. He presented another chart comparing the returns of the MCSI small value index vs the MCSI large growth index. I’m not even sure why you think it’s a problem that he looks at the data and research we have on the size and relative cheapness metrics individually. It’s all relevant. He also mentions the research done by Fama and French , which you admit. Out of it the Fama and French three factor model was born. Large cap growth stocks by definition, have less exposure to the size and value risk factors - and all else being equal this means they have a lower expected return. You say that it doesn’t account for people moving in and out of stocks as growth prospects change. I’m not sure how you deduced that from their paper , but let’s say i granted that , what evidence do you have that employing that strategy leads to excess returns? Now for your comments on aiming for average performance. Informed investors , who have read the research and looked at the data , actually recommend investing this way. So called self proclaimed informed investors who recommend stock / sector picking , marketing timing and other forms of active management (a lazy term i know as all forms of investing are active in some capacity) are actually turning a blind eye to the evidence and unless they gain utility from investing in assets with highly skewed outcomes then they’re investing strategy has no evidential basis. They’re just handing the ‘informed investor’ trophy to themselves. There’s no research that supports the idea that ‘informed’ active managers outperform. This isn’t because they’re not intelligent or hard working, it’s just how the market machine is built. It prices assets extremely efficiently. Add to that that ‘average’ doesn’t seem to appear what you think it does here. This isn’t a story of picking yourself up by your bootstraps, doing the hard yards in order to be better than the pack. Ben Felix , Fama/ French and countless others in their space don’t make these recommendations because they’re lazy , or because they’re uninformed. They’ve come across all the same information about investing that you have - plus a lot more I think it’s fair to say. Individual stock returns are positively skewed , extremely so! That means most stocks earn less than the market average (and I really mean most). 96 percent of all stocks collectively only matched the one month t-bill return (an essentially risk free asset). ‘Average’ in this sense is anything but. It’s a better return that the significant majority of active investors make. Earning average is to be above average. Or to use a better term , well above the median stock return. More so, this channel doesn’t necessarily tell people they should aim to do ‘average.’ If that’s what you’ve taken away from the videos then I’m afraid you’re not paying attention. There are evidence based strategies for earning premium returns in excess of market returns , if you’re willing to stick to the strategy and it suits your attitude towards risk. None of this is distorting anything , this is all fairly non controversial within financial academia. Whenever he mentions something that is less clear , he says as much. What did he say that was actually incorrect?
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  94.  @ramzib.1092  I don’t think you know what average means in this context. Historically it’s always outperformed stock picking , until the market breaks it always will. It’s just how asset pricing works 🤷‍♂️
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  95. You not being able to understand the financial literature doesn’t mean that it is ‘mental gymnastics’. Also Ben has never referenced his personal portfolio. Nobody has any clue how it is performing , nor does it matter. The performance of a single portfolio isn’t basis for anything.
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  96.  @SpaceTravel1776  it isn’t equivalent diversification though, that’s my point i guess. Americans companies are subject to American laws , economic shocks to the American economy , the US dollar , to war etc etc etc. Diversification of revenues is only diversification of one variable as well. Returns don’t come from future revenues , they come from what you pay for those revenues and what you pay is influenced by all sorts of factors. Just look at Japanese companies and their returns over the last few decades. They were also exposed to a lot of international revenue.
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  97.  @BenFelixCSI  oh no! don’t paper hands your title!! 😂 Thanks for all the content Ben, both the podcast and YouTube- keep it up!
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  98. ‘An expansion of the money supply IS inflation.’ No , that is only how it is defined by some economists , most of whom probably subscribe to the Austrian school of economics, but t they’re certainty in the minority. Respectfully it sounds like you’ve maybe fallen for either Friedman/monetarist theory or Austrian economics. Their view on the monetary system has no support in the empirical data. I think your error is two fold. First it seems you’re treating the relevant variables as independent when they are in fact interdependent. ‘More dollars chasing the same or fewer goods…’ for starters why couldn’t the increase in money supply lead to more goods? Also why does the increase in money supply have to ‘chase’ anything? Second it’s not clear where causation lies. Increases in money supply are caused mostly by commercial banks via lending. Why does an increase in bank lending have to ‘cause’ a rise in prices? Could it be that rising prices causes an increase the demand for loans and hence money supply? Could new technology and emerging industries (increasing the amount of goods) result in businesses demanding loans in order to capture market share in the new industry? If it was so simple that raising money supply leads to rising prices you would expect it to show up empirically. However if you look at average global inflation levels over the last 120 years it’s not at all easy to identify which periods we saw massive expansion in monetary supply. It is however easy to spot periods of war and economic shock such as the end of the Bretton woods system. Heck even just take a look at Japan , who has expanded their monetary supply like crazy for decades and has struggled to even avoid deflation.
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  99.  @willryan5508  First of all doubling the supply of money on a monopoly table wouldn’t make the prices go up , those are fixed according to the rules (unless the rules of changed since I was a kid?), it would however increase the amount of hotels being built. You need a better analogy. Regardless that’s not how changes to the money supply happen in reality , what you’re describing is the treasury printing new dollars (which has happened historically and led to inflation i grant you) but that is not what is happening now in the west. your position sounds purely ideological and not backed up by data at all I’m afraid. Friedman monetary theory of the price level no longer holds much stock at all in economic academia for that very reason , the model wasn’t supported by the data. Could inflation be a monetary phenomenon? Sure , but it hasn’t been for some time now , and there’s little evidence to conclude it is currently. Only speculation and a reliance on 50 year old theories. More modern fiscal theory of the price level proposes that inflation is caused by rising govt deficits and a decreasing likelihood that they can be paid back? Couldn’t that explain the current environment? Keynesian economics is indeed flawed but not the only school of thought that considers inflation not purely a monetary phenomenon. Current inflation is most likely caused by fiscal policy and supply chain issues. Why is it silly that more dollars could create more goods? If I’m a business , and borrow from a bank , is it not reasonable to assume I will use those funds to finance production? And for the record I’m not saying it has to lead to an increase in production, I’m just saying it can’t be ruled out. The reason QE failed wasnt because it caused inflation - it failed precisely because it didnt increase production or inflation. It’s strange you suggest deflation could be a good thing. Deflation historically has been associated with economic hardship , not increasing wealth. Just look at the Great Depression. This is one reason why most developed nations aim for a controlled/moderate level of inflation.
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  100. This video is gold and by the sounds of it may benefit you if you watch it again and understand what’s actually being said. Dividends don’t matter when it comes to selecting stocks. That doesn’t mean that they arnt an important component of total returns - it just means that the dividends arnt responsible for driving returns total returns. They’re just a method that capital is distributed to the investor and which method is chosen ha no bearing on the amount of capital that can be returned to you. I’m not sure how you argue against that if you’ve actually seen the data. This is pretty strongly supported in the academic literature. It’s hardly bullshit. Although I could understand why you’d think so if you hadn’t come across the data or the theoretical papers. Dividends can feel like free money and there is a lot of room for cognitive basis - but in fact there are five factors that explain most of the total returns of stocks - dividends are not one of them. This video even states that dividend paying stocks are an important part of an investors portfolio. It’s just that a dividend focussed portfolio is less less diversified , tax inefficient and less able to capture the risk adjusted returns of the market. This video is not saying that, for example , that there arnt behavioural implications of targeting dividends that may benefit the investor - such as they may be more willing to hold long term and avoid market timing. But after recognising this couldn’t an investor simply correct for this behavioural bias. Then they could invest more broadly (focusing on dividends reduces diversification) and target factors that actually drive returns such as market beta, size and value + others.
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  101.  @scottiebumich  dividends are irrelevant to total returns , that doesn’t change during ‘times of undervaluation’
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  102. Just because inflation occurred does not mean it was caused by the FEDs policies. Lots of stuff has happened since this video was made including a longer than expected response to the pandemic and war in Europe
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  103. The existence of inflation doesn’t mean quantitative easing or an increase to the money supply caused it.
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  104.  @Shemdoupe  I did. I think it holds up well. I often come back to it.
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  105.  @Timbone07  not what I would do personally, hope it works out for you though.
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  106. The existence of inflation doesn’t mean quantitative easing or an increase to the money supply caused it.
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  107.  @Oddly-SatisfyMe  you’re going to have to explain why injections of trillions of dollars in other countries , or even within the states at different times didn’t lead to inflation ? In fact despite extensive quantitative easing easing Japan still experienced deflation. I hope you’re not seriously about to argue that inflation is simply a money supply issue.
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  108.  @Oddly-SatisfyMe  The trend youre referring to doesnt necessarily indicate a direct relationship. While money supply has consistently increased over time in most places, inflation has also been relatively stable, and often low, in many of these same regions. This doesn’t prove a causal link between the two. I mentioned Japan just as an example (I’m not ‘so’ reliant on them 😂) but they’re not an outlier. Many countries, including the US, have implemented large-scale quantitative easing while maintaining low inflation rates. Most of Europe has had similar outcomes. Together this covers a significant portion of the global economy. Ignoring Japan, which has pioneered quantitative easing, just wouldn’t make sense. I get why it’s inconvenient to your argument though. As for asset inflation, I recognise its importance, but typically when people discuss inflation, they refer to the erosion of their money’s purchasing power. Asset inflation impacts this differently compared to the rising costs of goods and services. I’m pleased with the appreciation of my portfolio, but less so with the increasing cost of my grocery bill 😅 You mentioned ‘economic shocks’ as a factor in the US’s low inflation rate. By the same logic, we could point to several economic shocks that coincided with the recent uptick in inflation. Perhaps these shocks, rather than the increase in money supply, are driving the current inflationary environment???? 🤔
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  109.  @Oddly-SatisfyMe  I’m not denying there’s a correlation. I’m talking about causation. If you want to ignore inconvenient cases that go against your narrative then that’s on you. I don’t think it’s just a case of whether or not inflation existed during periods of expansive monetary policy. Periods of low inflation , albeit positive, during these periods are also significant. And those are easy to find , and are not short in duration.
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  110. Yes and in the same manner that doctors bashed smokers 60 years ago. 😂
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  111. He picks those stocks based on risk factors whether he realises it or not. He just does it in a more concentrated way. As was mentioned in the video , his over performance is risk based , not skill based. How has he done lately compared to the market? He’s underperformed. Just like the value risk premium as lagged the market in recent years.
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  112. If you’re only pointing to 2022-2023 as your evidence then you’re guilty of cherry picking, but even so - 2022-2023 doesn’t even serve as good evidence that QE causes inflation. I think you would need to explain why we had years of QE with many countries around the world with no inflation problem , in fact inflation was quite low. You’d also have to explain why Japan , the champions of QE , have had problems with deflation. 🤷‍♂️
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  113. The funny part was I’m pretty sure I remember her making an ad dunking on index funds. 😂
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  114. Nope. Past performance is not an indicator of future performance - in either direction. And although you’d expect actively managers portfolios to underperform after costs over a long time period that doesn’t mean they’ll return a loss.
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  115. There is a huge difference between these two methods of evaluating performance. Historical evidence is always used when investigating the world - it can then be used to make predictions of the future and it can then be tested. Historical premiums have been widely tested in and out of sample and have been shown to be robust and persistent. Not only that there is a strong theoretical basis to support why this empirical evidence exists and why we can expect it to continue (it is not based purely on returns) . This does not exist for all types of investment strategies , in fact , a lot of popular strategies have been demonstrated to be ineffective AND also have a strong theoretical basis as to why nobody should consider these strategies when investing. For example stock picking has been shown to be an ineffective strategy , but it’s obviously possible to pick stocks and get a good outcome. That does not mean the decision to invest in an individual stock was a good one. Likewise you could have invested in a market cap weighted index etf prior to the covid crash and experienced an immediate and significant loss. That didn’t mean the decision to invest in a market cap weighted index was a bad one.
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  116.  @theWebWizrd  thanks for the added thoughts. Yes I’m aware that some investors , and some particularly well known ones as you mention, hold a different view point. I simply disagree with them. I also think Buffet might not be has ardently opposed to EMH as he has vocalised in the past. But not sure 🤷‍♂️ ‘…. unless you personally bring something of value to the investing game you shouldn't expect your decisions to add value, in which case clearly some sort of index and DCA is the best way to go.’ I think here I might have to push back a little - I don’t think DCA would be a ‘theoretically’ correct decision even in this scenario - although of course , when you personally have to deal with the stress of investing a large amount of money at once - perhaps what is theoretically optimal isn’t always what is realistic when considering the emotions and other factors involved in such a situation.
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  117.  @theWebWizrd  yes I would say that it is better to invest it all at once. I view DCA as a other form of market timing. That said , I don’t know if I’d have the intestinal fortitude to invest it all at once. I’ve had the good fortune of never had a large lump sum to worry about investing all at once ;). I just put away a bit of my paycheck each month depending on what I can afford.
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  118. ⁠​⁠​Wow! If nothing else this comment took guts to post on a Ben felix video 😂
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  119. Video was not a prediction that deflation would occur, just claimed (correctly) that when quantitative easing measures are being used that deflation is usually the bigger concern. QEs failure was probably more that it was ineffective at increasing inflation , not that it drove inflation. What happened since this video was the war in Ukraine, Chinas zero covid policy , subsequent variants of covid - to name a few.
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  120. Yes , but that’s missing the point, and it doesn’t mean dividends are relevant. Just because returns did come from dividends historically does not mean the same returns wouldn’t have occurred had companies decided to instead distribute capital via means other than dividends.
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  121. If you ever manage to understand what is being said in this video - you will be embarrassed by this comment 😂
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  122.  @ananditagangwar9988  I feel fine because I know that you have no clue who i am, what level of education I have , what my occupation is etc. I also feel fine because all you seem to have is insults, and you certainly don’t have any comprehension regarding this topic.
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  123.  @ananditagangwar9988  how about you tell us why you think dividends are relevant or what you think I don’t know about FCF. You havnt actually said anything of substance yet , get some skin in the game champ 😉
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  124. Thanks Ben! Now please do a video on how I can get myself a lump sum 😂
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  125. I would say you’re not as well diversified as you think. Don’t think you’ll find much support here for investing in individual stocks. You are likely far better off investing in a total market index fund.
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  126. If you honestly think this , then you either didn’t watch the whole video - or you didn’t understand it.
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  127.  @jvarszegi they may not call it free money but their behaviour suggests that that’s what they’re treating it as. What many people do call it however is ‘income’ or ‘passive income’ and it’s a mistake to treat dividends that way for the same reasons as outlined by the ‘free dividend fallacy’.
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  128.  @gmk22799898  haha well thanks for the compliment although I’m not sure I’m worthy of it 😂 no not a professor , but i did study finance and econ at uni. I remember this first year or two only doing capm as well but the curriculum expanded after that. I recommend checking out Fama and Frenches website - it might explain it a little better. I can’t share the link here but if you Google Kenneth French data library you will find it. Ben’s channel is also an excellent source for covering all the major topics you will be studying btw. It’s also more fun!
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  129.  @andreachello94  no that’s not quite the case. Although small caps and value stocks may have been thought at the time to have highlighted problems with EMH - all they really did was reveal the problems with the CAPM pricing model. Pricing models now include size and value factors , and while perfect market efficiency is only an ideal state that real world markets can approach- the model is currently the best we have for explaining market pricing. Even if markets are not perfectly efficient, it’s evident that they are efficient enough that investors should behave as if they were efficient. Size and value premiums do nothing in relation to leading us to reject the efficient market hypothesis. In addition , emh doesn’t imply that you will never be able to beat the market. It’s just that if you want to beat you will likely need to be exposed to extra risk.
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  130. If you need cash ‘now’ then why convert your cash into shares at all in the first place.
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  131. ‘Performance of dividend paying stocks out performs non dividend paying stocks’ This is true historically, but it’s not because of dividends. It’s due to dividend paying stocks as a group being more exposed to certain risk factors. The problem with focussing on dividends is that you will ignore non dividend paying stocks that are also exposed to these risk factors which in turn will make your returns less reliable as you will not be as diversified.
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  132. It’s not clickbait. It’s the name of a well known theory in finance - which was exactly what was discussed in the video. Dividends are included in the calculation of total return , but actually they are irrelevant to total returns as the theory states that should the dividend had not been paid , then that component of the total return would have simply shown up as capital gains. So dividends are indeed irrelevant to the total return.
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  133. Tell me you didn’t watch the video without telling me you didn’t watch the video. 😂
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  134.  @fuufii2300  true but not many funds available to the public have targeted risk factors that well until very recently. Regardless that does nothing to take away from the main point of what was in the video. When you run the analysis on dividends and control for known risk factors they simply do not have any explanatory power in relation to returns. It’s that simple. Pointing out funds that have beaten the overall market is pointless and betrays a lack of understanding about valuation theory. Nobody is denying that dividend funds can beat the market , there just using theory and empirical evidence to arrive at the true reason why they have outperformed, and propose a better solution than targeting dividends directly. It’s just good science. You can either take that on board or ignore it.
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  135.  @thomasd5488  best of luck to you ✌️
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  136. My dude , he was literally listing many possible ways to ‘measure’ what investors perceive to be a ‘good company’. He contradicted nothing. The whole point to begin with is that there is no objective way to determine what a good company is , and that everyone has their own definitions , hence why there are many ways to attempt to measure it. The point still stands , a good company does not equal a good investment. How the market prices in the ‘goodness’ of the company matters to returns. If a good company is priced as if it is a good company why should investors expect a higher return simply because it’s a good company?
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  137. No. Picking stocks is not rational because you will be under diversified , dividend investing is not rational because you will be under diversified. The same reason for both - they are not in conflict with each other. Investing in broadly diversified low few etfs is rational because you will not be under diversified. If is the investing path most likely to allow you to achieve your financial goals. Not pessimistic at all. Good common sense. I’m also not sure how you could say that someone who regularly says don’t time the market and stay the course is fear mongering.
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  138. This video aged well. VUG (large cap growth fund) returned 35% since this video was published. AVUV (small cap value and etf used as an example in bens model portfolio) returned 97 percent. If buffet has a problem with academics it’s probably because they keep explaining away his alpha and it hurts his ego. I doubt he’s that petty though. But never mind the results. The results don’t matter. Nothing said in this video was incorrect and was backed up by evidence. When analysing stock returns over short time periods (such as since this video was posted) literally anything can happen and it wouldn’t prove anything.
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  139. How’s it ageing now? 😂
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  140. I’m not sure if there’s much theoretical consensus on why they’re riskier , but an explanation I like (which is a long run economic concept) is that profitable firms are known to be profitable , so they attract more competition to the industry and this will eat away at profits / margins.
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  141. Your best video yet. Thanks again!
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  142.  @Green__one  I think your mistake is failing to see that MV=PT tells us nothing important about each of those variables and how they’re related. You’re treating them like independent variables when they are interdependent. If M increases the formula tells us nothing about why it increased or what it will do to the other variables in the equation. This is one reason why economics abandoned monetarism long ago. I understand the confusion, I used to think the same thing , it is even what is taught very early on in econ courses. But economics students often joke about econ degrees just being a progression of classes that teach you why everything you learnt in the previous class is complete bs. Expanding money supply = increasing inflation is one of those things. There are many factors at play and many theories that attempt to explain inflation , even the best ones we have now will probably not explain inflation well at some point in the future. Until economics improves our inflation models I think the best thing we can do is be nimble in our thinking and in our policy and diligently keep an eye on our economic data.
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  143.  @Green__one  your perception of what is occurring in reality is deeply flawed my friend. ‘as has happened every time in history when the money supply has drastically increased , inflation skyrocketing can’t be far behind’ How would you explain Japan then? If you look at the global average inflation rate of developed nations over the last 100 years , you actually cannot identify periods where money supply expanded rapidly based on the inflation data. What you can easily identify are periods of war , supply shocks and other economic shocks. The reason economists come out with new theories is becuase inflation isn’t caused by the same things over and over again. It is not ‘always and everywhere a monetary phenomenon‘. When new data comes in that challenges a model you need to fix the model. That’s just basic science as I’m sure you agree. Some of these new theories , explain the current inflation phenomenon much better. You must surely accept that correlation doesn’t necessarily mean causation? That seems to me to be the error you’re making here. What else has happened recently other than money supply expansion ? Heck what’s happened even just this year. There’s a war , new covid strain coupled with the covid recovery , supply chain shocks, expansion fiscal debts ….. could it be that perhaps inflation is a multi variate problem? To deny this would surely demonstrate your reasoning is purely ideological. I fail to see how inflation existing in an environment of rising money supply proves me wrong. The amount of teams in the nhl is expanding pretty rapidly as well, using the same logic you could conclude the size of the nhl rather than the feds balance sheet is what’s causing inflation? 😂 ‘There’s no way you can accumulate wealth with a mindset like that’ Only a sith deals in absolutes 😈
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  144. No such thing as over diversification. Investing in Apple would be an easy way to beat the market IF there was such thing as earning historical returns 😂 how do you know which stocks will outperform the market long term before it happens? Remember that the market does a pretty good job of pricing in all available information. Individual stock returns are positively skewed, it’s like finding a needle in a hay stack.
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  145. You’re forgetting that you can leverage stocks as well
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  146. And pay higher commission costs. Not to mention you’ll likely have a significant tracking error.
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  147. He’s not saying that there are no individual companies that have had huge returns. We know who these companies are now , because we have the benefit of hindsight. We don’t know what the next Apple stock will be. He’s saying it’s extremely difficult to know ahead of time which will be the performers. Trying to pick them is demonstrably a losing battle and akin to trying to pick the winning lottery numbers. And buffet says that most people shouldn’t be picking individual stocks. The problem is everyone thinks they’re not ‘most people’ . In recent history Buffet likely would have been better off investing in a broadly diversified index fund himself.
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  148. I see a bunch of people who can read academic papers and understand data.
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  149.  @fatrat92  he does explain that dividends are an important component of total returns, pointing that out is hardly a gotcha moment. His point is that they are not a useful indicator in determining which stocks will have good future returns. Just stating that demonstrates you haven’t paid enough attention. If you’re holding on to the assumptions of the dividend irrelevance theory (which he talks about simply to say where the argument starts and provide context - it is not his main argument) then I think there is a flaw in your thinking. The theory is there merely to explain what we see in the data, the argument isn’t hanging on the thread of whether its assumptions are true, what truly matters is the evidence. If you see a problem with the theory, that doesn’t mean the default position is to say dividends are in fact relevant. They need to be shown to be relevant which many have tried to do. Unfortunately when regressions are run and dividends are analysed as a potential factor for explaining returns they don’t have explanatory power in the data. It’s that simple. 🤷‍♂️ the dividend irrelevance theory is just a way to explain that, no academic claims that the assumptions are true in the real world. Bens argument isn’t hanging on the dividend irrelevance theory , it’s relying on the empirical data which has shown other factors such as size, profitability and value are what drive returns - not dividends. Knowing this , and ignoring the dividend irrelevance theory , how would you respond to this data and that argument? What is your own dividend theory to explain why dividends have low explanatory power (R squared) when running regressions for stock returns?
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  150. VT for the entire world Or a mix of VTI + VXUS . Which gives you a little more holdings at a slightly lower fee. Will increase your trading costs buying two instead of one.
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  151. This is just another way of saying ‘but this time it’s different’
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  152.  @johndorian3685  I’m not so sure that it’s difficult to ‘define’ at least basically. In a perfectly efficient market prices should reflect all knowable information and prices should trade at their fair value. However you are correct that it’s difficult to measure/prove outright as it faces the joint hypothesis problem. That does not mean it is irrelevant to the investor. It may be impossible to ‘prove’ but we can still empirically test predictions of the model , and after testing them the general consensus in academia is that markets are at least efficient enough that investors should behave ‘as if’ they are efficient. Note that this does not mean that markets are efficient , not even Eugene Fama claims they are perfectly efficient - but what really matters is how investors should act. You are of course free to outright reject the hypothesis , a collection of academics do. But they, for the most part, still recommend people invest as if they’re efficient. I think most of the disagreement stems from whether to classify certain variables as ‘risk’ or ‘anomalies’. If the anomalies are expected to continue I see no reason why the labels matter all that much anyways. Thjs evidence includes the random walk of stock prices , the speed at which prices react to news, and how difficult it has historically been to beat the market long term on a risk adjusted basis (you can of course beat it by being exposed to more risk). Buffet for example has beaten the market long term by investing with leverage and having extra exposure to the value risk premium. Without a decent understanding of the efficient market hypothesis, a lot of Ben’s positions may seem wrong to you especially as they are at odds with a lot of views you will find in trading courses , investment books and even advice from advisors. I would say that those sources positions are unsupported by the empirical evidence and are likely biased in their position. You may in fact reject it yourself (and it would likely be to your own detriment in my opinion) but at least you will understand where Ben is coming from and we can discuss the literature and the evidence to identify exactly why we’re in disagreement. Btw - loved you in Scrubs 😜
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  153. True, the dominos pizza example is anecdotal but that was simply an example for illustrative purposes , this is a YouTube video not a academic paper. Importantly he did also mention studies that backed up empirically what he was suggesting with the dominoes pizza example. I see no problem with sprinkling in real life examples to keep the video light and to help support the data and research that is discussed.
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  154. You’re not wrong but you’re mentioning things that the market knows and this should be reflected in prices. A good company is not the same thing as a good investment and a bad company is not the same thing as a bad investment. At any rate Ben never advocates for investing in individual companies or targeting specific sectors - he was merely using historical fact to highlight a point here. As always you are probably better off in broadly diversified index funds and if you have an appetite for more risk perhaps you can consider overweighting small cap value stocks within thjs well diversified portfolio as well.
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  155. Dividends are not like salaries though. This is a common mistake, common enough to be given a name. It is called the free dividend fallacy.
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  156.  @lorenzo121191  I’m not sure the indexes being market weighted was really relevant to the arguments for and against the possibility of an index fund bubble. It was more the passive nature of the funds , which would indiscriminately purchase stocks if they were in the index - the same type of thing happens with five factor investing just in a slightly different way. Small cap value funds , although perhaps slightly more active, still purchase stocks based on a simple set of rules and will hold them simply because they meet a certain set of criteria. Also people investing in small cap value funds 1) likely still hold a market weighted fund 2) likely don’t know much about the individual stocks within the small cap value funds they’re investing in. I could be wrong though. 🤷‍♂️ I doubt the the arguments in favour of their not being a index bubble have changed though. It is still relevant how much trading is being done by the funds and the grossman Stiglitz paradox still holds here.
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  157. How so?
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  158. This doesn’t inform us that dividends are relevant. It informs us that investing is relevant.
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  159.  @junkequation  replicating his results is different from explaining what drove his returns. But yes you could gain similar levels of exposure to the relevant risk factors fairly simply using etfs and (provided you could get similar leverage as buffet ) you could get similar ‘expected returns’ for even less risk than buffet. This is different from actual returns which include unexpected returns - but as they’re unexpected I think it makes sense for investors to simply focus on expected returns. This wasn’t possible in the past , nor do we have a Time Machine so the exercise of trying to mirror buffets performance historically is purely theoretical but still relevant for investors making decisions today.
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  160.  @junkequation  additionally , this video never claims that an investor will be able to replicate buffets returns by having similar exposure to certain factors. What this video does say is that if you want to replicate buffets returns then you would be far ‘more likely’ to if you maintained diversified exposure to the relevant factors over time - compared to trying to replicate his results by skilfully picking stocks. I think it’s more ridiculous to argue that this isn’t the case.
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  161.  @junkequation  ‘this video definitely says factors explain Buffets returns. And that’s stupid’ - this video refers to a study that analysed buffets returns and reached that conclusion. What is stupid about this ? What issue do you have with the paper? Or do you just think it must be stupid because you perceive it as some kind of slight against your hero? Factor investing might be slightly more active that investing in the market at a market cap weighting that’s true - but it’s a bit of a stretch to call it stock picking. You’re not picking individual stocks when factor investing , or at least you shouldn’t be, all you’re doing is holding the market but instead of having it weighted by market cap - the weightings of its holdings are influenced by the other factors and not just the market cap. Other than the stock picking comment I mostly agree with your final paragraph 👍 but it’s not an argument against factor investing. The more efficient markets are the more it makes sense to build a portfolio with a factor tilt. These are risk factors so they’re reflected in stocks prices. Factors such as value were discovered becuase they did in fact beat the market. That’s why there’s a rational argument to be made that you can beat the market return by taking on these risks. Will they last forever ? Maybe not , but if you’re being logically consistent you have to ask the same question about the market premium as well. Will the value premium persist? If you don’t think so then why would you expect the market premium to persist?
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  162. What are the more salient points?
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  163. Yep and there’s sufficient evidence and a theoretical basis to support that position
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  164. He believed in at least one factor. The market factor - which also comes and goes. That’s why tilting towards several could be beneficial as it provides a diversification benefit
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  165. He’s not recommending you buy individual stocks from international markets. Mungers Alibaba investment is irrelevant to the discussion
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  166. Not necessarily. Market cap of industries is also related to the number of companies within the in industry. As more competition enters an industry , the industry can grow but the profits / margins of individual companies can lag. It’s a similar story when you look at countries gdp growth and compare it to stock market returns for that country.
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  167. What you’re describing has been analysed extensively and, for the most part, has reached a very different conclusion. I think one of the best papers addressing this is the paper written by fama and French called ‘luck versus skill in the cross section of mutual fund returns’ . You could easily find many papers that demonstrate something similar however. Ultimately it all comes back to how efficiently markets priced assets. If prices reflect the information that a skilled investor could learn by analysing the company (as you’re describing), then their skill would not be reflected in superior risk weighted returns.
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  168. If you disagree with him on this issue you’re basically disagreeing with his entire investment philosophy - not just one issue 😂 As for ignoring information - the reason for choosing index funds over individual stocks is because of the available information on this very issue. There is no quality empirical data I’m aware of that would support picking stocks over being in a broadly diversified index fund.
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  169. I wouldn’t say his philosophy is ‘you cannot beat the market’. A lot of his channel is about how exposing your portfolio to known risk factors might help you earn significant premiums. This video alone acknowledges that dividend funds have outperformed the market , but this is due to other risk factors rather than dividends themselves.
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  170. It’s the data that does that
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  171.  @dakotadak100  ‘if an owner never took dividends and never sold their shares….’ Here you seem to be missing the main point of the dividend irrelevance theory. The point of the theory is that receiving dividends has the same affect on shareholder capital as selling shares does. You havnt discovered some smoking gun by effectively saying ‘if no capital is returned to a shareholder then they will receive no return’ 😂 You havnt pointed out a flaw in the theory in your made up scenario at all , you’ve only misrepresented it.
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  172. Studies that looked at a cross section of fund manager performance were discussed later in the video.
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  173. Infinite money glitch? 😂 they’re not free money.
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  174. You failing to understand something makes you the imbecile.
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  175. The details would differ based on the individual. But he’s been quite clear about the main points this entire time? He has even published a couple white papers with model portfolios included.
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  176. Sure …. All those periods in history involving deflation never bothered the little people 🙄
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  177. He said that dividend stocks have beaten the market , its just that dividends are not the reason. The factors that explain why dividends stocks have outpaced the market can be targeted directly without the need for dividends to enter the conversion at all.
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  178. I don’t believe Buffet was mentioned once in this video? But if you’re referring to the segment surrounding luck vs skill he does say that since outperforming funds are no more likely to continue to outperform than a fund that has underperformed this indicates that many performances are based on luck rather than skill. But he also clarified that it’s not necessarily luck , it could be because they retained exposure to stocks with certain characteristics that are known to outperform the market because they are riskier (such as small cap value stocks). Ben has a seperate video on Buffet where he suggests exactly this , that Buffets performance is explained neither by skill or luck , but by maintaining exposure to riskier stocks over a long period of time. This is also supported by the data.
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  179. Not considering this myself , but still curious what everyone here thinks - Are rolling leaps an effective way to leverage a position in broadly diversified index etfs?
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  180.  @OurNewestMember  thanks for the thought out response. 👍
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  181. Here’s your medal 🥇
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  182. To reduce overall portfolio volatility , and as a consequence perhaps make you more likely to stay the course during a market downturn.
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  183. Efficient markets means known information will be reflected in prices. New information, not previously known and thus not reflected in prices yet, can be random and extreme and thus when it gets priced in it can lead to volatility.
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  184. A significant portion of daily trade volume is actually executed by computer algorithms
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  185. He’s made a video about investing with leverage that examines these products
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  186. They don’t define everything that outperforms the market as risky. To be a factor it has it be persistent and robust - because theoretically if it wasn’t a risk factor then it would just be arbitraged away. These factors also allow the building of models that have predictive power. That is also important to remember. But if it makes you feel better , you can call it whatever you like , perhaps you think the market is just slow to learn and hasn’t arbitraged away the ‘alpha’ associated with value , size etc yet. If you believe it will still persist then what you label it changes nothing in terms of the practicality of how you invest. If you don’t believe it will persist that’s fine too, but to be consistent you should probably question also whether market returns/risk will persist as well.
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  187.  @BenFelixCSI  a leafs fan would say that 😂
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  188.  @IAP_mkt  I was actually wrong here , when a Loan is repaid then that money is ‘destroyed.’ The reason money supply continues to expand is because the rate of lending is exceeding the rate at which old debts are repaid. This doesn’t have to be the case however , so money supply can contract if debt repayment exceeds the generation of new loans.
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  189.  @utubethumbsup  care to reference any papers that back your claims up?
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  190.  @utubethumbsup  if I had to enter a contest where we had to communicate to people that we had no idea what we were talking about (without explicitly informing them that was the case) I would just hand in your comments word for word.
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  191. Those countries have many other factors that led to their economic problems. Look at a chart of global average inflation rates over the last 100 years and you cannot easily identify periods of expanding money supply , what you can identify are periods of war and economic shocks (unrelated to money supply.) Looking at your list of countries it’s hard to imagine factors such as those didn’t have a large impact on their economic problems.
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  192. It’s no different to saying , if a company keeps paying dividends - won’t they eventually run out of money?
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  193. This still remains the best comment I’ve ever seen on a finance video
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  194. If you’re the owner of the business - your income has already been earned by your business before a dividend is paid. When a dividend is paid you’re taking money out of your business and putting it into your private bank account. Hence the pocket analogy. A dividend is not extra income , you have a claim to the assets on the businesses balance sheet as a part owner - so it’s irrelevant to your total return whether a dividend is paid or not. What’s relevant is the amount of money the business makes.
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  195.  @dakotadak100  there’s a very large difference between saying: ‘volatility matters’ and ‘dividends are less volatile therefore they matter.’
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  196.  @dakotadak100  again you’re confusing correlation with causation. Just because dividend stocks generally have less volatility , does not mean that reduced volatility is caused by the dividend policy of the firm. If dividend paying firms generally have other characteristics that actually cause the reduced volatility that means that those characteristics are what matter - not dividends. If you mistakenly attribute the causal factor as being dividends , when it is another factor responsible for the reduced volatility , then you will mistakenly focus on dividend and ignore stocks that don’t pay a dividend BUT still have the characteristic responsible for the lower volatility. Correlation does not equal causation. That’s the mistake you’re making. The divided irrelevance theory deals with company value anyways. Talking about volatility is itself a red herring.
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  197. Probably ego.
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  198. What did he actually say that was wrong? He did use evidence for large cap growth stocks. The most relevant probably being the Fama and French paper.
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  199.  @ramzib.1092  index investing (when compared to stock picking) reduces your exposure to non systematic risk , while maintaining your exposure to systematic risk which drives expected returns. In this sense it’s clearly superior, you get the same expected returns for less risk. It’s really that simple. That’s why they say diversification is a free lunch. If you have an appetite for extreme positive skewness and a wide dispersion of possible returns than maybe stock picking is for you. If that’s what you’re after then yes , stock picking may be the superior alternative. But when you use the reliability of expected returns as a standard it clearly isn’t. On the aggregate, most people who employ that strategy will lag those who hold the entire hay stack, provided of course that there’s no other poor behaviour going on like market timing. There’s no agenda here , pretending there is some conspiracy to push a passive investing strategy is laughable. The position is backed by data and is evidence based , if you’re resulting to conspiracy theories then you won’t change many minds. Especially not here 😂 Where in the data can we see a demonstration that stock picking is an effective strategy?
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  200. It’s not really throwing them away, it’s just that those theories have been improved upon since they were developed, economics has come along way since 2008 let alone Friedman Economics
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  201.  @johndorian3685  to that I would ask how did people know Buffett would do that ahead of time? It doesn’t take a genius to go through the history books and point to the top performing fund managers. And could you use the same factors you used to identify Buffett would do that to choose the next top performing fund manager now? The data would suggest that investors are very poor at doing so. Buffett also used leverage and had extra exposure to value stocks - the market index is not an appropriate benchmark in this case. If you had used leverage to invest in a value fund that gap would have been a lot smaller.
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  202. People who invested with her probably can’t afford rent now
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  203. There’s plenty of opportunity to ‘dive in deep and get nerdy’ with this type of investing. Research into factors, pricing models , market efficiency etc leaves plenty of opportunity for research. But I get your point , you get utility from the fun of it , but that’s not what this channels about - at least not at the cost of forgetting what we know about risk , asset returns etc
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  204. No he’s reviewing the literature that demonstrates that most people are not capable of doing it right.
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  205. Lots of reasons really. But an important ones is that individual stock returns are extremely positively skewed , by not investing in approx half the available equities in the world you’re very much under diversified.
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  206. Not Canadian , but I think this applies to a lot of countries. There can be a tax advantage to having a home country bias.
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  207. Dividends being irrelevant doesn’t rely on an ‘ideal’ model or perfect market efficiency. However if dividends were relevant this would be evidence that the market is incredibly inefficient, to the point of just being plain broken. Luckily there isn’t any good evidence that the market is that broken and in fact , when dividends are investigated specifically the data confirms that they are not relevant - which lends support to market efficiency.
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  208. I second that , it would be an interesting video.
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  209. Why is it idiotic?
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  210.  @alankoslowski9473  I imagine REITs would allow investors to invest broadly in real estate, I don’t think there’s much evidence that they’re good inflation hedges though? 🤷‍♂️
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  211. Using empirical data (not just performance data too) along side financial theory in order to make informed decisions is very different to using past performance in order to assume future performance. In fact you can use past data to demonstrate why the latter is a bad strategy.
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  212. So you mean companies with exposure to the value premium and the possibly the profitability premium that also happen to pay a dividend are no problem at all? That was kind of the point of the video. 🤷‍♂️ The problem is lots of companies have exposure to those factors and also don’t happen to pay a dividend , and it’s those factors that actually matter.
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  213. They were delivered to shareholders in the form of dividends. They are other ways to deliver capital to shareholders , dividends has just been the most popular historically. It doesn’t mean that had companies not paid dividends during that time that investors would have earned 75% less.
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  214.  @kurdi98k  I’m sorry but I think if you investigated that concept a little deeper you would find that it is incorrect. Would you consider your house to be worthless? Do you not think the size of a companies current financial assets (cash at bank) might also influence its price alongside the markets expectations for risk and future profits? Seeing as when you buy a stock you’re purchasing a share of those assets on the balance sheet.
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  215. Kind of , it is ‘thin air’ in one sense , but there are rules in place that are meant to stop banks creating bad loans. In that sense they’re creating loans against your ability to pay it back (which is an asset and not really ‘nothing’) Once you do pay it back , the money is once again destroyed - except for the interest.
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  216. It seems like you completely missed to point? Dividends are an important part of calculating total returns , but if they were not paid you could expect capital to be returned to investors in the form of capital gains instead - dividends do not impact total returns they are just a component of them. The 73% percent figure you use wouldn’t disappear if those dividends were never paid , the market would have just returned that through appreciating share prices instead. The reason dividend tracking index’s outperform the market is not because they pay dividends, it’s because they get exposure to other risk factors such as value and profitability. You might think that makes it fine to concentrate on dividends as you get exposure to factors that drive returns by accident , however by excluding stocks that have exposure to these factors AND don’t pay dividends you are reducing the diversification of your portfolio and thus decreasing the reliability of capturing the value and profitability premiums.
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  217. What was bullshit?
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  218.  @xYoungDeezYx  well gunna need more evidence than that. Past returns are not evidence for future returns.
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  219. A stock gives you a share of a company. Therefore a stock has value because a company has value - so the important question is what gives a company value? It’s decision on how it should distribute capital comes after the capital has been created so it can’t be dividends that give a company its value. Maybe there is something to your ‘potential to pay dividends’ idea , but I’m not sure this means dividends matter. It’s a bit hypothetical. If businesses owners could never transfer wealth created by their business to themselves would they even start a business? In that way you’re right , dividends are an important mechanism for markets to even exist because if they wernt possible the market likely wouldnt exist - at least as it does now. That doesn’t mean they’re relevant to investors decision making however , which is what this video is about.
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  220.  @iMAGiNATi_0_N  technically that is probably correct, although I’m not sure Pluto ever has value to begin with if nobody would pay for it. That is likely your point but it seems meaningless to me. It’s a little like saying a share being a part ownership of a company is the mechanism that makes the market work , if it wasn’t a part ownership it would have no value. Well yeh but so what right 🤷‍♂️? Regardless how is this relevant to the investor? How should it influence an investors decision making? What you’re describing is basically just the rules of the game and we must decide how to play the game only after we agree on the rules. What’s ultimately important is whether the dividend policy of companies Or groups of companies are at all relevant to the investor (not whether businesses have the potential I pay dividends, which all companies do) That’s what the video is addressing when it’s talking about the irrelevance of dividends - nobody has said dividends arnt an important component of total returns. It almost sounds like you’re equating ‘dividends are irrelevant’ with ‘dividends are bad/pointless’. Your Pluto analogy is almost the same thing as saying a share has value but once it’s sold to you you’re not allowed to sell it. If you were never allowed to sell a share nobody would pay a single dime for it either. It’s completely hypothetical, doesn’t reflect reality and does nothin to tell us what factors should influence an investors decision making.
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  221. That’s not the take away of everything being priced in.
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  222.  @Neri-s2n where exactly was he wrong? If you paid attention you might have learnt something and not wasted your time.
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  223.  @Neri-s2n  and why would a ‘ fed shill’ say that the feds policies arnt that effective at influencing the things they’re trying to influence.
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  224. Why not?
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  225.  @DividendGuy  what’s your exposure to F&F 5 risk factors ?
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  226.  @Timbone07  don’t think it makes much sense to hold them in excess of their market weights.
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  227.  @MagicNash89  not really the argument , he wouldn’t support picking individual stocks to begin with. You shouldn’t need to rely on dividend to diversify either - you should be diversified already.
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  228.  @Oddly-SatisfyMe  but I’m sure your response was beautiful I’m sorry I missed it 😢 YouTube deleted lots of comments these days. Not sure why they flag them. I think they just don’t like two people responding to each other too often. 🤷‍♂️
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  229. Saint Nico you’re misrepresenting his position - he freely admits in both videos that dividend stocks have done really well. This doesn’t mean dividend irrelevance theory isn’t applicable to the real world. He is saying that they have done well due to their exposure to well known individual risk factor such as value and profitability. The problem is if you target stocks based on their dividend , then you will leave out stocks that are also exposed to the value and profitability factors but pay no dividends. This decreases your opportunity set of stocks to invest in.
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  230. Only funds. But I wouldn’t say valuation is ignored. It’s definitely not used to pick stocks though , but specific etfs or indexes use simple valuation rules (price to book for example) to decide whether or not to include a stock in an index. Investors who are happy to take on more risk could rationally invest in a broadly diversified / low fee fund that holds a cross section of ‘cheap’ stocks.
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  231.  @josesammut9396  this hypothesis is based on data/ observations and an understanding of how money is actually created in reality. Economic theories come later in an attempt to explain what we observe in the real world - not the other way around. This video was not a prediction that inflation wouldn’t occur , just that QE would not likely be the cause if it did occur. Those who believe QE caused the current inflation phenomenon still have all their work ahead of them.
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  232. Perhaps not but Statistics are a useful tool for evaluating strategies and investigating how the markets behave. They are useful for informing how an investor ought to behave , at least if they want to make evidence based decisions.
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  233.  @lorenzmuller3542  no I’m not talking about psychology or behavioural finance- although statistics are undoubtedly useful in their fields as well. Regardless , something being a ‘social science’ doesn’t mean we can’t draw conclusions based on data - otherwise how could psychologists ever be effective? What would be the point of studying economics? Statistics can tell us a lot about the market. For instance it can be demonstrated that prices follow a ‘random walk’ which has very important implications to investors. You can also measure how quickly prices react to news events, how skewed individual stock returns are and you can develop pricing models. The pricing models that have been developed (from the data) are the best models we have to explain asset prices. If you’re against the use of ‘statistics and number crunching’ what is your own personal investing philosophy based on it you don’t mind me asking?
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  234.  @jasonmaguire7552 I was much more interested in finance as a kid than Shakespeare
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  235. Try his video on investing in happiness.
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  236.  @royjonzejr  not sure that’s what the OP meant , I think he was referring to index investors specifically earning returns from a market index which is the sensible choice because active investors do the work which leads to accurately priced stocks? Your own analogy seems to lack a crucial variable - risk. The coal mine investor has invested his capital into the business and risks losing it all should the business fail - the worker faces no such risk and will receive a guaranteed salary for their efforts (irrespective of business performance unlike for the investor) and should the business fail they lose their job and not their capital. To be fair people have struggled with this concept for a long time and whether it is fair or not. Not sure there is a perfect answer hence why people are so divided on political issues related to this.
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  237. You would still have more income , it just maybe wouldn’t be 2x if you happened to creep into a higher bracket. We’re in danger of being over pedantic here I think.
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  238.  @MrDjoppio  I’m not saying you’re not taxed , I’m saying that it’s plainly false to state that you have ‘LESS free income’ It’s Basic arithmetic : Gross pay = $100 Tax rate = 40%. Take home pay = $60 Then if your double your income : Gross income = 200 Tax rate = 40% Take home pay = $120 (precisely double your take home pay from before the doubling of your gross income). Now if you enter a new tax bracket that take home pay wont be exactly double - but it will defiantly be more than your original take home pay. Now the original question only gives income and inflation as variables , so tax isn’t even relevant - but as demonstrated here tax wouldn’t only matter to the solution to the question if your tax rate on your new income changed. We are not given that info in the question , so the solution provided in the video is correct.
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  239. No it doesn’t.
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  240. Perhaps , but this was a video about QE which is an asset swap and not the printing of money. Japan has one of the longest experiments with QE and has experienced deflation.
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  241. All of them
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  242. QE and other forms of expansionary monetary policy has been occurring a long time and only now has inflation started to increase. In fact deflation has been a bigger concern in some locations. This video was never a prediction that inflation wouldn’t occur.
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  243. I recommend his video ‘five factor investing with etfs’
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  244. lol good one
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  245. While the fed influences money supply (possibly) , it doesn’t print physical currency. That is done by the Treasury Department, that is, the government. The fed is accountable to the public and to congress. The feds financial statements are also audited by independent third party auditors.
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  246. Sounds like something you’d find in his video about ‘stock picking’ - but I’d have to rewatch to be sure.
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  247. Check out his video ‘commission free day trading’
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  248. Those are American funds.
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  249. I think he said a deflation spiral would be good to avoid. The reason being similar to when inflation gets out of control , just in the opposite direction. If prices are falling consumers start spending less because they expect prices to be lower in the future. For this reason amongst others deflation is often associated with weakening economies. Does it have to be bad , no, but inflation isn’t always bad either. There’s a lot of factors to consider
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  250. Wait have I missed some satire or something? 😂
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  251.  @BenFelixCSI  I might have to take a boat on my next overseas holiday 😬
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  252. Let’s try to put it in words someone with a PhD in thermodynamics can understand. I don’t have a PhD in thermodynamics, but I’ll try my best based on what I remember from physics in highschool 😝 In a isolated system the total energy of the system remains constant. The total amount of energy can only be changed by energy entering or leaving the system. Energy cannot be created or destroyed , only transformed. If you’re a shareholder of a businesses, you’re a part owner of its assets. Your personal bank account and your share of the business’s bank account can be thought of as an isolated system in respect to your total wealth. Your total wealth is conserved in this isolated system. It only changes by capital flowing in and out of this system. A dividend is merely a transformation from one from of capital to another, your total wealth remains unchanged. That was a maybe a stretch and a little tongue in cheek but I think it works 🙈 😂
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  253.  @ananditagangwar9988  it’s an analogy ignore the physics. Was just trying my best to use language youd appreciate being an expert in thermodynamics and was hoping it would connect with you but it seems it didn’t . This is actually a pretty basic concept in finance - it’s not even all that controversial really. What’s more likely you think - that you completely missed the point or financial academics have gotten math your ‘15 year old understands’ wrong for decades? We’re not talking about the stock market in general - We are talking specifically about dividends. Considering dividends it is actually is a zero sum game - that’s the whole point. Any dollar your receive in dividends is a dollar (Which belongs to you already ) removed from the company. It’s taking a dollar from your left pocket and putting it in your right pocket.
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  254. Yeh you got nothing 😂 Best of luck. ✌️
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  255. Deposits are money the bank owes you , so they are liabilities to the bank.
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  256. What exposure do you currently have to the F&F risk factors?
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  257.  @alankoslowski9473  I was wondering if the original poster had his exposure calculated (his portfolios sensitivity to each risk premium) so that we could fairly compare performance. Probably a pointless endeavour if it’s only over a short time frame though.
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  258. TSLY = -14.19% all time fyi.
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  259. They’re just moving your returns from one location to another. Or put another way the size of your investment return pie is unchanged , but the size of the slices are.
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  260. It’s not really gymnastics, it’s just what the evidence shows. The reason it doesn’t lead to more lending , I think, is because banks already have so much excess reserves that creating more has little effect on their lending decisions. Lending itself, at the moment anyways, seems to be constrained only by demand for loans and banks profit motives. You’re right though that the point of QE was to be inflationary - it’s just that it has largely failed. Take a look at Japan which has been implementing QE for decades and has struggled to avoid deflation.
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  261. Quality video as always.
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  262. He said the exact opposite of that. He directly said that it has an affect on stock prices. It’s just that monetary policy can not be thought of as being the only thing propping up the stock market as there are many other inputs.
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  263. You can’t throw out the conclusions derived from the theory simply because the assumptions arnt true. You would have to ignore a lot of useful theories if that were the case. Dropping some of the assumptions means the theory has to be adjusted , not dropped, in this case the assumptions just help keep the theory clean and simple. Do you think the authors of these papers arnt aware that taxes exist? The theory helps provide an explanation as to what we see in the data. On the whole , when dividends are paid, the prices of stocks fall relative to the amount of the dividend. When factor regressions are run on dividends in relation to asset pricing we find there is no statistically relevant relationship between dividends and returns. The dividend irrelevance theory , while imperfect, is one of the best theories we have of explaining these empirical facts. It’s fine if you want to ignore the theory but that doesn’t change the data and the conclusions we draw from it.
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  264. ⁠ @jake9764 well you’ve just described them as ‘income investors’ and if you’re treating dividends as income then you’re making the same mistakes as described in the video. It’s just semantics really. How many people have you heard refer to dividends as ‘passive income’?
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  265. How didn’t it age well?
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  266.  @precisi0n86  I can see why it’s tempting to point to QE. But it’s a significant financial action that has been taken for much longer than the last couple years. Why is Japan still struggling to avoid deflation despite ramping up QE more than anyone? What else of significance has happened since this video was made? New omricon variant , Significant supply chain disruptions , recovery from a major pandemic , a war. It’s a bit of a stretch that QE has been happening for decades in some places and only now when inflation occurs people say ‘SEE WE TOLD YOU’. This video was never a prediction that inflation wouldn’t happen, it was just saying that given available data at the time that QE was unlikely to be the cause of inflation. This causal relationship actually needs to be demonstrated. It still does. If you look at the global inflation rate over time it’s impossible to identify periods of rapid monetary expansion. What you can identify is periods of significant supply shock (oil embargo’s) , periods of significant economic shocks (end of Bretton woods system) and yes - War. Could these not be other possible explanations for inflation today? What about fiscal policy stimulus? It’s even difficult to establish a link between QE and private bank lending. So I guess in summary , I fail to see how this video ages poorly at all. In fact I think people would do well to consider all possible explanations for inflation.
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  267. Yes that’s one way , but there’s an added diversification benefit by tilting towards risk factors.
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  268.  @pavelshliaha1706  a great deal of that rational active investing is likely done by large banks or high frequency traders using the power of their computers and algorithm trading to trade on information quickly. This might be one reason it seems new information is incorporated into stock prices very quickly. There’s not much left for the rest of us.
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  269. The franking credit helps make dividends less tax inefficient than the otherwise would have been - but even with fully franked dividends it doesn’t make dividends themselves relevant to investors.
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  270. ‘I would never buy established shares that does not pay me , the investor a reasonable dividend’ You might call yourself Mystic Jedi …… But only a Sith deals in absolutes 👹 🤓
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  271. Why do we need to consider them when we have a cross section of data to look at?
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  272.  @AndrewLetendre  I think I understand what you’re saying. I do think those people who are outperforming due to skill can take it though. To be fair , the video didn’t address the presence skill vs luck for all investors - but specifically luck vs skill for fund managers. The claim that outperformance is likely due to luck was supported by referring to two important studies (two I can recall off the top of my head anyways). So that claim was not unfounded. Nor do I believe that Ben was was claiming that none of them were skilled, it’s just that in the context of fund management , that spoils of that skill are more likely to be enjoyed by the fund managers themselves than by those who invest in the fund. That is also backed up by the data.
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  273. This channel is the best on YouTube when it comes to financial advice and it’s not close. If you truly believe what you said then perhaps you should reconsider your entire perspective on investing 😂
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  274.  @enonknives5449  you’re aware that this is precisely what is taught in every finance degree everywhere? This isn’t controversial, it’s mainstream. Perhaps to work out where he ‘goes off the deep end ‘ I’d need to study less not more ? 😂
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  275. Did it though?
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  276.  @hanst7218  yes exactly right. Id even go so far as to say the difficulty in defining whether a company is good or bad is irrelevant , because even if we were to have a concrete definition the information about whether a company is good or bad is information that is likely priced in already. Your second reply is basically the main message to gain from the video. A good/bad company is not necessarily a good/bad investment. I think it’s even called the ‘Good Company : Good investment fallacy’ but maybe it has another name.
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  277. I know I’m being petty. I’ll own that. But I think it would be far funnier if it ARKK doesn’t recover 😂
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  278.  @Richierich833 feel free to come back and listen to good evidence based advice once you trade away all your money.
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  279. It also leaves room for luck 🍀
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  280. It’s the rate at which companies are growing their assets. Companies with higher asset growth tend to have lower returns.
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  281. Market timing is never a good idea.
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  282. I’m not so sure universities don’t teach this? Not at mine anyways. Maybe in an econ 101 course you learn about a simple money multiplier model but as you progress you soon learn about the flaws in the model. I found in my own economics degree each new course to take you seemed to learn why everything you had just learned in the previous course isn’t necessarily true 😂
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  283. Not true. If you really wanted to put on a tin foil hat , you could much more easily argue that those who want people to remain poor are the ones arguing that dividends are relevant. Receiving dividends is often a tax event , dividends that are reinvested increase brokerage revenue for brokers , people who receive dividends can spend the money etc etc
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  284. The Fed does actually produce reserves out of thin air.
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  285. How that money is used is what matters, banks can give out more loans thus increasing the money supply , but if those loans are used for increasing the productive capacity of the economy then it may not be inflationary. On a related note , central banks can implement expansionary monetary policy and bank lending may not even increase.
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  286. They don’t on a personal level. But if the claim is that market timing is a good idea then you have to prove it and to prove it requires more than anecdotal evidence. In other words you need to show it wasn’t a fluke. The individual investor in this scenario wouldn’t care if it was a fluke or not.
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  287. How might one approach rebalancing if they’re using leverage? What are the considerations anyways.
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  288. I think that’s kind of the point isn’t it?
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  289.  @PapaCharlie9  picking individual options I’m sure he’s against. I’m not sure what he would say about using options to leverage a position in an index etf however. There would be pros and cons.
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  290. There’s nothing that forces this to be the case , but it’s demonstrable in the data that this is what occurs. The market just does a good job of pricing in that information.
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  291. He never said index funds are bad. He said index funds are the best option for most people. There are just caveats , as there is a lot of problems in the etf space. It’s still possible to be under diversified and invest in index funds - for instance if you have too much home country bias - or if you pick thematic etfs or if you try to market time.
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  292. Do you often call people biased who present peer reviewed evidence and quality data that supports their view? If you disagree with him, point out where the researchers got it wrong instead.
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  293.  @dakotadak100  if you have two companies with identical discounted future earnings - but one had $1 million in retained earnings and the other had $1 in retained earnings - which would you be willing to spend more for?
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  294.  @dakotadak100  the first reason you gave wasn’t a very good so I don’t expect the second reason to be any better.
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  295.  @dakotadak100  yes you’ve said already. YouTube unfortunately has issues with its comment section. Your comments arnt being deliberately deleted. Are you saying dividends themselves are less volatile - or that the share prices of dividend stocks are less volatile than other stocks? Either way it’s irrelevant.
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  296. The risk is not the same. This is just the inverse of the good company / good investment fallacy .
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  297. Predicting what technology will change the world is different than picking which company delivering that technology will win the most market share before that info is priced into the stock
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  298. The irrelevance of dividends doesn’t mean that share prices MUST decrease on the ex dividend date - there are lots of things that affect the price not just the dividend being paid, that’s why it’s difficult for a lot of dividend investing proponents to believe. However you can expect to be no better off in terms of total returns, that is, if the price did rise then if the dividend wasn’t paid you could expect it to have risen more. For example a share worth $100 may pay $2 dividend per share. On the ex dividend date some positive earnings news is released and the stock rises to $103. If the dividend was paid the investor would have $2 paid to him as a dividend and $3 in capital gains ($5 total gains). However if the dividend was not paid the investor would have $0 paid to him and $5 in capital gains (you could expect the stock price to rise to $105 instead of $103) When a large cross section of dividend paying companies is analysed , over a period of timing (so that you can filter out the noise of other things affecting the price) this is demonstrated to be exactly what happens.
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  299. There’s no such thing as passive investing. Even the most basic ‘passive’ strategy involves significant capital allocation decisions which will vary over an investors lifespan. Even if investing in market cap weighted funds , on the index level there is significant active mgmt. You just don’t see it. Take any S&P 500 index for example - a group of people decide what gets to be in that index , and the size of the business are not the only factors that go into the decision. While it’s true that investing in small caps by removing the junk is more active than simply holding market cap weighted funds - it is still rules based , simple , low cost and can be done while remaining highly diversified and the strategy is based on both empirical data and sound financial theory. There is no need for market timing or individual stock picking either.
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  300. This video was about quantitative easing and whether is causes inflation - it wasn’t a prediction that inflation would/wouldn’t occur.
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  301. QSuper allows you to invest in some passive funds (limited options but it’s better than nothing). Unfortunately the fees are higher than if you had just invested in the etfs directly. That’s rather annoying when all it appears the superfund is doing is renaming the investment option - but it’s better than nothing and you still get the tax advantages I guess. 🤷‍♂️
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  302. The video supports the title the whole way through.
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  303.  @johnlow810  it’s not a rage bait title , it’s a nod at a very well known theory in finance. Dividend irrelevance theory is a cornerstone to all finance courses. ‘Dividends are clearly not irrelevant’ Sounds like you don’t understand the theory.
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  304. Dave fired an employee for getting pregnant before marriage. While that has nothing to do with the quality of his advice , he’s built his brand on the back of being ‘righteous’ - and I think a lot of his supporters are unaware of some of the things he’s done.
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  305. - It attracts competition , threatening margins - more profitable firms tend to have more of their cash flow in the distant future which is more uncertain.
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  306. There’s nothing wrong with borrowing to invest if it fits your risk tolerance. For many it doenst and they shouldn’t do it , it probably doesn’t fit your risk tolerance level which is why you think it’s crazy , but for people in specific circumstances (all of which discussed in his video on leverage) it is perfectly rational to invest with leverage. It’s fairly pointless to accuse Ben of only selecting studies that agree with him, what matters is the quality of the research and if you have a problem with those papers - please point out what’s wrong with them. The evidence in favour of investing in passive funds over active funds is quite convincing at this stage - there is no bias here that I can see just simple acceptance of what the data is showing us.
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  307.  @alankoslowski9473  perhaps it usually isn’t advisable to people , but that doesn’t mean a rational case can’t be made in favour of using leverage. Your usual client may or may not be representative of the investing community at large either, perhaps more people with the sensible risk appetites for leverage exist than you think they do? The video in question I think you’re referring to doesn’t ‘encourage’ using leverage, it discusses its pros and cons against other strategies of increasing exposure to risk. For example it compares it to having a more concentrated portfolio (which is a more conventional way to increase risk) and rightly points out that investing in a diversified portfolio using leverage actually leads to better expected outcomes than investing in a concentrated portfolio. If you disagree then I think your argument is with the data and the conclusions that are, usually uncontroversially, drawn from it - rather than with Ben? This is the kind of information that is useful to investors , it doesn’t mean they’re being encouraged to use leverage. As with anything in investing a decision like this must be made in the context of an individuals circumstances , objectives and appetite for risk as you would be well aware of. I just think the charges you level against Ben in your original post are unwarranted or at least slightly exaggerate what he’s actually saying.
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  308.  @alankoslowski9473  yes I absolutely did that - at least with my second reply, my first reply was intended for the original poster. My apologies 👍
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  309. Even above average traders seem to trade to their own detriment
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  310. Where in this video did he say not to invest in real estate? He was detailing the costs to investing in a home that need to be considered. There’s nothing wrong with that. Also why would you be out hundreds of thousands of dollars ? How did you arrive at this figure? Did you account for the stock market rising approx 35 percent during this period that would have been an opportunity cost had you invested those funds in real estate ? Did you account for taxes , interest costs and maintenance and repair - all of which make investing in real estate much more expensive than equities ? If you didn’t account for those perhaps you could benefit from watching the video again.
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  311.  @infantryhawk  I’m just curious where you got your ‘hundreds of thousands of dollars ‘ from - and whether you accounted for all the costs? As you said it’s purely mathematical. How do you know they would have been better off investing in real estate? You’re just stating it as fact when it’s not that clear. ‘With the idea in mind that investing is about maximising profits’ - but that’s not what this video is about nor is that the definition of investing used on this channel. So why use that definition to make a point ?
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  312.  @infantryhawk  I’m struggling to find evidence online that real estate has outperformed equities since this video was released. What are you using as a reference for real estate performance?
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  313. Putin is that you? 😂
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  314. And yet when we look at the data to find variables that explain stock returns, dividends are not found to be a factor.
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  315. This is called nonsense
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  316.  @Golf_Quest  he was correct about December prices being lower than November and that’s about it. ‘now the probability of missing the best 15 days is probably no worse than the probability of missing the worst 15 days, so this is an extreme example’ - Ben addressed Brads main criticism directly in the video. The idea that ‘your whole case is out the door’ is nonsense. The case against market timing isn’t held up by just that one scenario in that one study. If the OP is implying that we should rationally pursue a market timing strategy because of this , then that is also nonsense. As it stands I’m not sure what they were implying. Calling it swing trading doesn’t add anything to the discussion at all, call it what you want it doesn’t change the argument.
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  317. Why do you think it would change the arguments?
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  318. But it did ?
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  319. The S&P 500 destroyed that. Have to consider things like maintenance costs , closing costs , insurance etc when you’re considering property return as well. Just because the prices have gone up by 150% doesn’t mean that’s what you would have earned as a property investor. The costs for investing in stocks are a lot smaller.
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  320. Govt expenditure mostly comes from tax revenue or by raising more capital through debt. However the treasury, unlike the Fed, could also print money if they chose to. I’m not from the US , but I don’t think that is what they’ve done - I think they’ve increased their debt?
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  321.  @oleksacrowley9580  would you have preferred I responded to your rhetorical question? Your comment on total war against the west seems to erroneously suggest that America is not a part of the west. It also seems to assume that you can accurately predict not only returns but significant economic/political events based on geography. Even if we were to grant you that something like that is likely to occur you have to take it a step further and assume that the markets havnt priced this risk in. This channel doesn’t advocate for investment in themed etfs - there’s a whole video on it. If you were to invest in the broad total world market at market weights BABA would only come in as around the 44th biggest holding I believe - hardly significant enough to have a significant impact on your wealth on its own. Which is the point of global diversification. ‘Working against yourself , reinforcing your enemy’ - what in the world does that even mean?
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  322. It’s not futile , this video isn’t saying dividends are bad and whatever you choose to do with them must also be bad - it’s just that you shouldn’t use dividends as a metric for choosing funds or stocks. Receiving dividends is likely inevitable if you’re going to be a long term investor into broadly diversified etfs anyways.
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  323. Gold is an element , a rock, something that can be debased, is expensive and inefficient to use in transactions and is inflexible as a monetary system when it comes to dealing with certain economic problems. There’s no reason why numbers on a screen couldn’t be ‘real money’. The idea that gold is real money relies on a commodity theory of money which hasn’t been relevant for an long time.
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  324. The video was never a prediction about if inflation or deflation would occur , it did point out that historically when expansionary monetary policy is occurring that deflation was a bigger concern. That is historically accurate. The reason this video never predicted inflation or deflation is becuase you can’t based on solely on monetary policy. QE has occurred for a long time in several locations and did not lead to inflation , and today inflation is likely mostly caused by fiscal policy and supply issues.
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  325.  @markus8605 a cherry picked moment short window of time also cannot be generalised. The studies he listed here took a much more scientific approach
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  326. Well that wasn’t all he said - ‘In the Monetarist view of the price level the only thing that matters is the monetary supply’ We know that monetary supply isn’t the only thing that influences the inflation rate. We’ve had long periods of expansionary monetary policy with little effect on inflation. Actually during a lot of those times where the money supply was increasing , deflation was a more immediate concern. The reason is that monetary supply isn’t the only thing that can influence it , it depends a lot on how that money is used. If increasing the money supply leads to activities that can also put downward pressure on inflation , why would it be nonsense to say that the supply is unrelated to inflation?
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  327.  @timbradford9397  you don’t need both monetary and fiscal policy to increase the money supply , you only need banks to start writing more loans. If banks stop writing loans then the actions of the fed will find it difficult to influence the money supply. Regardless you said it yourself , it’s not the increase in money supply that caused inflation of asset prices , it was the actions of investors. How the money is used has a significant impact , if it’s used to increase the productive capacity of an economy then there will less upward pressure on prices.
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  328.  @timbradford9397  I understand why you would see it that way, but I disagree. The line you quoted as it stands on its own is a little puzzling but that’s not all he’s said on the matter. If it’s possible to have periods of both low inflation and high inflation during periods of expanding monetary policy then I’m not sure how much of a relationship can be established. The problem is you’ve taken one throw away line out of context I think , he has a whole other video discussing this issue. It’s a little like if you clipped ‘returns are not related to profits’ from his other video and left out everything else that was said. What is your own opinion on money supply , the actions of the fed and inflation and how exactly is what was said in this video nonsense?
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  329.  @ilq00477able  i agree that is a good video , pleas don’t mistake me saying you are ‘basically disagreeing with his entire investment philosophy’ as meaning that I think you must disagree with everything he has ever said. But come on , disagreeing with Ben on the benefits of index funds and diversification is a little like disagreeing with Greta Thundberg on climate change. It’s kind of his thing! The decision to rent vs buy is not purely an investment decision to begin with and thus falls outside the scope of what I’m suggesting. If you were forced ,gun to your head , to invest in property though - I’m sure ben would advise doing so only holding them at market weights within a total market fund. He suggests this in his video on Reits. Surely if you’ve watched most of his videos you must see the humour in your initial post when you describe this as the only issue you’ve disagreed with him on ‘so far’. That’s quite an important and significant issue to disagree with him on -😂
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  330. If I were to take a guess I would say it’s because busiensss in those industries are typically riskier - its those industries as a whole that outperformed , but many individual companies in those industries went out of business.
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  331. Would you consider investing in rolling leap options to be a sensible way to leverage a long term portfolio?
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  332. Where in the video did he predict we’d see deflation?
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  333.  @SuperKiller232  he means low share price with respect to some fundamental indicator. For example price to book ratio. This is because value is a independent type of a priced risk. You can expect to earn a premium for it by being exposed to it - but of course it’s important you do so by by picking individual value stocks but by investing in a total market index fund AND holding another type of value fund so that assets with this type of characteristic are held in excess of their market weights within the context of your well diversified/low fee portfolio.
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  334. He’s not saying you should time the market. He’s also not saying to focus on growth stocks
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  335. Businesses don’t have to and should not spend money on projects that don’t have a positive net present value to them. They’re allowed to keep the cash on their balance sheet. And as a part owner you have a claim to that asset.
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  336. Supply chain shocks , and growing fiscal debt coupled by decreasing certainty they can pay back the debt.
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  337.  @jonathankrimer  federal governments
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  338. They can’t just lower them. They don’t set the rates arbitrarily - they set targets and attempt to hit them by using OMO or QE. They might not necessarily be successful in achieving their target rates.
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