October 30, 2021 • 54 mins
Dan Bortolotti is the creator of the Canadian Couch Potato blog, and host of the (soon to be resurrected?) Canadian Couch Potato podcast. He is THE authority on index investing in Canada and has just written a new book, Reboot Your Portfolio (Amazon affiliate link).
Dan joined me to explain what the book promises readers, and to discuss his journey from before knowing anything about investing himself, to becoming the writer behind the incredibly popular CanadianCouchPotato.com blog, and then eventually becoming a portfolio manager and financial planner.
We cover a range of topics in this interview, including:
-Dan's thoughts on how cryptocurrencies fit into a portfolio
-Why investing doesn't have to be time-consuming or exciting
-The rationale behind the couch potato method
-How you can reboot your portfolio whether you have $1,000 or $1 million
-and more
Links:
Buy the book: Reboot your portfolio (Amazon affiliate link)
CanadianCouchPotato.com blog
Canadian Couch Potato podcast
Dan's advisor website at PWL Capital Toronto
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Dan Bortolotti (00:00):
I'm not going to pretend that it wasn't stressful
(00:01):
for me. I mean, I was pacing theoffice every day felt like it
was going to throw up a few daysbecause it was just so difficult
to watch. But in the back of mymind, I always knew like, this
is what we're here for.
Preet Banerjee (00:24):
The Godfather of index investing in Canada, Dan
Bortolotti, is here to talkabout his new book, reboot your
portfolio. Now Dan is a verygood friend of mine, but you
know him as the writer behindthe Canadian couch potato blog,
the Canadian couch potatopodcast. And as a portfolio
manager and financial planner atp WL Capital in Toronto, where
(00:49):
he and his colleagues managedportfolios using the same
strategies, as described in thisnew book. Not only do we talk
about how you can reboot yourportfolio with exchange traded
funds, we learn a little bitmore about the man, the myth,
the legend, that is DanBortolotti, how he learned about
investing in the first place.
How he started his immenselypopular blog, became an advisor,
(01:11):
and his advice for people askingabout cryptocurrencies, whether
now is a good time to invest.
And so much more. Dan joined mein person at my condo in
Toronto, and here is ourconversation.
(01:46):
Joining me now on the mostlymoney podcast is Dan bored
allottee longtime listener? Andsecond time you've been on this
podcast, if not third? Yeah. Andyou've been on mine as well,
Preet. So it's nice to gettogether again and do this.
Yeah, my pleasure. And thereason that you're here is
you've written a new book calledreboot your portfolio. So we're
(02:07):
going to get into that in alittle bit more detail. But
first, I'd like you to talkabout why you wrote this book,
and why you think it's neededright now.
Dan Bortolotti (02:16):
Yeah, so the book is really a step by step
guide to index investing. And itstarts right from, you know, the
theory behind why indexinvesting is important, and why
it's effective, and then walksyou through the various stages
for building and maintainingyour portfolio. And the reason
that I decided to write the booklast year and bring it out now,
(02:39):
was that, you know, over theyears, I've written hundreds of
articles on the topic. But a lotof them are on very specific
aspects of index investing. AndI felt what was really needed,
especially for a new investor,was a step by step guide.
Because, you know, you can gointo my blog now, and there's
lots of things to read, but it'shard to know where to start.
(03:02):
And years ago, it's going to beseven or eight years ago, now, I
did write a brief book that waspublished by Rogers publishing,
which was publishing money Sensemagazine at the time. And it was
in fact that it was a DIY guide,to index investing book did
really well, but it hasn't beenavailable for a long time. And I
(03:24):
still get requests for it.
People ask me, where can I pickit up? And I said, well, first
of all, you can't pick it up.
And second, even if you do, it'sso out of date now that it's not
going to be very useful. So Ithought, why don't we take a
step back, use that step by stepguide as the model, and then
take all of the insights andthat I've learned between now
(03:46):
and when I wrote that book, andalso all of the new products and
all the changes in themarketplace. I mean, that back
then there was no all in oneETFs there were no robo
advisors, it was 30 bucks attrade on discount brokerages. I
know, it seems like a millionyears ago. So I just really felt
it was time to revisit thatwhole idea. So I went back and
(04:06):
I, you know, dredged up all ofthe articles that I had written
in the past that I thought stillhad relevance, updated all of
them for the current marketplaceand put them all together in the
book.
Preet Banerjee (04:17):
Now you are known as the godfather of
indexing in Canada. Whateversuperlative you want to use. You
are the guy when it comes toindex investing in Canada,
whether it's retail investors,financial advisors,
institutions, you've, you'vebasically put together this just
world class resource for peopleon your blog, as well as your
(04:39):
podcast. And now your podcast isthe Canadian couch potato
podcast. It is, which is nowdefunct is no longer being
Dan Bortolotti (04:48):
Yeah, let's say it's on hiatus. So have you done
any new episodes since thesummer of 2019?
Preet Banerjee (04:53):
Right. Yeah. And a very, very popular podcast. I
know that there are so manypeople are just like, oh, we
Wish Dan would continue on withthe podcast. But it sounds like
there is hope it may come backat some point.
Dan Bortolotti (05:06):
Yeah, I'm thinking that I, you know, I
might resurrect it. And now thatyou've put me on the spot, I
feel I'm gonna be obligated todo that. It the problem with the
podcast, at least for me was itwas just an enormous amount of
work. I did do interviews on thepodcast, but I also did a fair
bit of content that I wroteahead of time. And, you know, as
(05:27):
you can probably tell, fromlistening to it, even it was
scripted. I wasn't just riffing,you know, with the mic running.
I wrote,
Preet Banerjee (05:34):
wait a second.
This is not the way to run apodcast.
Dan Bortolotti (05:38):
Well, there's a reason why you cranked out 100
episodes, and I got to vote 26,before I burned out. So I just
found it was taking up so muchtime. And that that was
actually, you know, one of thereasons that I came up with the
idea for the book was, I wasdoing the podcast, and I
thought, you know, these arefine, and people, people seem to
(05:58):
enjoy it. But what I wanted todo for some more lasting value
was put together this kind ofstep by step guide, I actually
thought about it originally as apodcast series. And I thought
maybe I would do like a nine or10 part series for audio. And as
I started to write it, you know,I just realized that's my
(06:19):
background is I'm a writer, I'mnot a broadcaster. And it just
seemed to me a natural book. Andas I started to work on it,
that's how it evolved.
Preet Banerjee (06:30):
It's interesting, because, you know,
you're a fantastic writer, Ithink you've been won awards for
your writing. And it's clearanyone who's read your blog and
have your articles, like you area fantastic writer. But when you
say that you're not abroadcaster, I would I push back
on that, I would say, you have agreat voice for for your
(06:50):
podcast, I think your your, youcome across very natural,
authentic. And so I wouldencourage you to rethink, you
know, maybe creating a podcastseries on that on creating a
portfolio because I think a lotof people would would gobble it
up. But in any case, in anycase, I know I'm putting you on
the spot here. Let's there's somany things that I want to talk
(07:11):
to you about one of them is thepush towards index investing
over the last 1015 years, it'sbeen pretty big, right? It's
gotten more headlines, there's alot more, you know, people who
are espousing the benefits ofindexing. And then when I look
at what's going on today, itfeels like there are a lot of
(07:31):
new investors who are startingout with some very risky
investment strategies. They'rebeing lured into cryptocurrency,
single stock trading, I mean,stock trading and what have you.
And I, it feels like they thinkthat index investing is somehow
(07:52):
too boring, too simple, or won'tgive them results. So can you
maybe talk about, because I'msure you've gotten a lot of
questions about that over thelast couple years. What do you
say to people who are startingout? And and look at index
investing as somehow boring, oldand maybe not good enough?
Dan Bortolotti (08:11):
Well, I would say that it definitely can be
boring. But that's okay. Right,investing is not supposed to be
exciting. So I think you have toget past this idea that
investing should be somethingthat is deeply engaging, that
you should spend a lot of timeon, right, that you should be
following the markets reallyclosely consuming a lot of
(08:33):
financial media, repositioningyour portfolio every time you
get some new piece of economicnews, etc. So that's part of the
mindset. But to go to the otherpart of the idea that it's sort
of old school, it used to workin the past, but doesn't
anymore, it won't give me theresults I need. That's where I
(08:53):
have to hit hit the brakes andsay, Wait a second, wait a
second, let's remember whatindex investing is. It's a
strategy that allows you tocapture all of the returns of
the market, minus only a verysmall fee. Right? So if, for
example, you know, over the next20 years, the stock markets on
(09:14):
average, deliver six or 7%, youknow, an index investor who's
invested in those markets willget six to 7% minus a tiny
amount in fees. If that's not,quote unquote, good enough for
you? Well, what's thealternative? It means that
you're going to have to try tospend your investing career
beating the market. And I layout the evidence for this in the
(09:36):
book, right? The likelihood ofany individual doing that over
their investing lifetime isdismally small, right? Perhaps
not zero. Well, definitely notzero people do it. But to start
from the premise that as abeginner investor, you know,
even even or even with someonewith experience, that you're
(09:57):
going to somehow beat the marketover yourself. career is just a
dangerous and likelydisappointing place to begin.
So, I do think it's importantfor people to understand, you
know, the limits of indexinvesting, but also the promise,
which is, if you can capturewhat the markets deliver over
your investing career, then youare likely to be in the top, you
(10:20):
know, five to 10% of allinvestors.
Preet Banerjee (10:22):
You know, I remember a number of times. You
know, I remember a number oftimes when I would go on the
national with Peter Mansbridge.
And we have a, our bottom linepanel. And at the At its heyday,
we were on once a month, andthis was during the financial
crisis of the great financialcrisis. And there was one panel,
where we were talking aboutinvestment portfolios, and how
(10:47):
to invest and whatnot. And Imentioned, you know, a simple
balanced portfolio globallydiversified that you don't
touch. If you do that, and youhad done that for the last 30
years, you would have had, youknow, 70% return or something
like that. And the next day, Iremember getting an email from
someone who said to me, Preet, Idon't know what the hell you're
talking about, I've beeninvesting for 30 years. And when
(11:08):
I add in all the money I've everput in, and I compare that to my
balance today, it's the same. Soeffectively a 0% rate of return,
wow, over 30 years, right, inone of the best markets, like,
you know, continually fallinginterest rates, which pushed up
bond returns, equities did wellover those 30 years. I mean, it
(11:28):
would be hard not to make moneyas long as you just stuck to
your plan. And it's just soincredibly hard for people. And
so I think one of the issuesthat I think people maybe need a
little bit more clarity on isthe idea of benchmarking.
Because when you have, forexample, you know, the the
strong markets we've had, sincethe financial crisis, everyone
(11:49):
feels like a genius. And if youif you're up 20%, you're
thinking, wow, this is amazing.
People talk about these longterm returns of seven or 8%.
I've got 20%. Sometimes theydon't realize that the market
was up 30. Right. So can youtalk about the importance of
benchmarking?
Dan Bortolotti (12:07):
Absolutely. So you know, you make a great
point, right, in, in a in a bullmarket, like we've experienced
over the last, you know, since2009, it was relatively
difficult not to make goodreturns, as long as you had, you
know, a reasonable, reasonablydiversified portfolio with a
fair amount of equities, right?
You could have picked 10 or 20,stocks, more or less at random,
(12:32):
and probably still done, youknow, again, quote, well, but
what does well mean, right, you,if you had earned a seven or 8%
annualized return, for example,you might think that that's
excellent. But as you point out,just investing in the broad
market and not picking anyindividual securities, you
likely would have done them alot better. So you always have
to compare your results to theresults of a benchmark. And when
(12:57):
we say a benchmark, we'retalking about a broad market
index. So you know, just asimple example, you know, if you
look at a Canadian equity index,that index would hold, you know,
roughly 250 stocks, the largest250 stocks in the country, it's
extremely easy to buy all ofthose stocks, just by buying a
low cost ETF that tracks thatindex. And it's virtually no
(13:19):
effort. So if you're going to bean individual stock picker, you
should compare the performanceof your individual stocks to
that benchmark over somemeaningful period as well,
right? I mean, the media lovesto talk about short term
performance. So they'll look atsome individual stock or some
investor and say, you know, theybeat the market over the last 12
(13:42):
months. I mean, the last 12months is a hiccup. It's it's
not important, over the longterm, how many people can you
know, continue to outperformthose benchmarks over a full
market cycles. So that would bea you know, bull market followed
by a crash followed by arecovery? It's just very
difficult to do. And the peoplewho will do it are often people
(14:06):
who just took outside risk. AndI think that that's an important
distinction as well. So if youbuy, you know, an index fund
that holds hundreds of stocks,and I buy three individual tech
companies, I could very wellcrush your performance over the
next 10 years, right. But theonly reason I did so is because
I bought three companies thatcould have gone to zero, right?
(14:28):
Whereas a broadly diversifiedindex portfolio. I mean, barring
Armageddon can't go to zero. Soyes, if you want to take a lot
more risk, you may very wellearn much higher returns, but
the it cuts both ways.
Preet Banerjee (14:45):
And have you met very many individual investors
who can calculate risk adjustedreturns.
Dan Bortolotti (14:52):
None, right.
Yeah, I mean, it's not an easything to do, right. It's hard
enough, frankly, to calculateyour own age. equalized return,
it seems like a simple thing,right? I mean, you start the
year with this dollar value, youend the year with another dollar
value. It's a fairly simplecalculation. But if you add
money during the year, or if youmake withdrawals during the
(15:13):
year, it suddenly becomes quitecomplicated. So I can remember
doing an investing, talk onetime to a group. And I said,
right off the top, hands up, howmany people's portfolio beat the
market over the last five years?
That was like three quarters ofthe people put up their hand,
I'm like, first of all, that'sunlikely to be true. I mean,
(15:36):
maybe it is. But I'm thinkinghow there's no way three
quarters of the audience knowsthat, right? Because they have
not calculated their rate ofreturn properly, and compared it
to an appropriate benchmark. Sothere's a lot of delusion, I
think, going on about people'strue investment performance.
Preet Banerjee (15:54):
So one of the I think benefits in my mind of,
you know, a couch potatoportfolio is you don't really
need to benchmark anymore. Canyou explain why that is true?
Dan Bortolotti (16:03):
Yeah, I mean, that that's a good point.
Because we, for example, withour clients, we have the same
sort of thing. We build indexportfolios only. And so you
know, if you buy, for example, Imean, let's use a simple
example, I buy a US equity indexfund, it tracks the s&p 500
index. So one of the most wellknown indexes. So what's my
(16:25):
benchmark? Well, my benchmark isprobably the s&p 500 index. And
so if the index fundspecifically is designed to buy
all of the stocks in that index,then if it's a well run index
fund, it's going to deliver thesame return as the s&p 500 minus
a tiny amount in fees or taxes.
So you're benchmarking your ownfund against a benchmark? I
(16:48):
mean, it's almost selfreferential, right? So in other
words, a, but it is stilluseful, I think, for index
investors to do it, because veryoften, they will assume that
they achieve the exact samereturn as the index. But in
fact, there could have beenbehavioral mistakes in there,
right? So for example, one ofthe things that that you know, I
(17:12):
do every year on my blog ispublish, you know, the returns
of my model portfolios. So,every year, we just calculate
what the returns would havebeen. And it assumes, though,
that you started the year with aperfectly in balance portfolio,
you added no money, you withdrewno money, and at the end of the
year, you measured your return.
(17:34):
So a lot of people will, youknow, I get all of these emails
around January, saying, When areyou going to publish your
returns? And I understand theappeal, but I also say, you
know, the returns that Ipublished for the model
portfolios aren't your returns,even if you follow the same
strategy? Because, you know,maybe you maybe you failed to
rebalance at some point in theyear, or maybe you made a big
(17:57):
market timing decision mid year,that cost, you know, maybe you
had too many transaction coststhat he wrote in some of your
return. So you need to you needto measure your own personal
return, even if you're an indexinvestor and compare it to an
objective benchmark from time totime, just to make sure there's
(18:18):
no leakage in there. Right,
Preet Banerjee (18:19):
right. Right.
Okay, so we're kind of gettinginto the weeds a little bit, I
think, for the people who wantto learn more about this, they
can buy a copy of, of your book.
And I would say that there'sprobably a big overlap of people
who listen to this podcast, andthose who know who you are, read
your blog, and listen to yourpodcast. And for those who may
(18:40):
already know a lot of thisstuff, I think a great way to
support Dan is to buy the book,if not for yourself to give to
someone else. So that you don'thave to spend hours and hours
trying to translate what Dan hasalready written, or published
elsewhere, and is a great way tosupport you in the book. And the
book is coming out November 1.
And so in the publishing world,it's very important, you know
(19:02):
that that first week to to getthose sales, because it, it
affects where you land on thosebestseller lists, which has
these knock on effects. So ifyou've been a fan of Dan's, if
you're just learning about himfor the first time, I encourage
you to buy the book right nowtoday, and support them and and
learn or give someone else thegift of this knowledge. Now,
(19:22):
that being said, let's talkabout some other stuff. So let's
talk about your personaljourney. So you and I have known
each other for I think, over adecade, and we met because of
basically index funds. And whenwe met you were not in the
industry. You were a writer. Andso you're coming from the
outside in. And I think you gottweaked to the idea of index
(19:46):
investing because of anassignment that you received
where I think it was somethingto do with like due diligence on
investment managers or whatnot,something like that. So do you
want to tell that story and howyou got started how you got
interested in investing? Becausebefore that you had no
background in investing?
Dan Bortolotti (20:04):
Yeah, that's right. In fact, Preet I think
when we met, you were in theindustry and I was a journalist.
And now the roles have kind ofclicked and that I'm in the
industry, and you've taken adifferent direction with your
career. So, yeah, so to get backto that story, so what happened,
I was I was a journalist formany years. And not a financial
(20:25):
journalist, I wrote about allkinds of different topics. But
one of the magazines I did writefor regularly was money sense,
which is now only a website, butwas a magazine back in those
days. Mm hmm. And even then,even though I wrote for money,
since I wasn't really writingabout investing, frankly,
because I didn't know very muchabout investing. But one of the
(20:45):
assignments I had was we did afeature in the magazine called
The Seven Day financialmakeover. And it was a very cool
project, what we did was we gotthree couples and one single
person from all over Canada, whohad written into the magazine to
talk about some of theirfinancial problems. And we
brought them to Toronto, we putthem up in the Royal York Hotel
(21:07):
for a week. And I was part ofall of the sessions as well,
just as a reporter. So webrought in, you know, insurance
person, a person about budgetinga person who helped couples, for
example, with money problems andthings like that. And one of the
experts or a couple of theexperts, we had, were talking
about investing. And theyintroduced what they called the
(21:29):
couch potato portfolio. I mean,my, my name has been associated
with that brand for a long timenow, but I certainly didn't come
up with the name. And evenmoneysense was using it long
before I ever wrote about it.
But anyway, they, they, theytalked about this investing
strategy, and I'm here as areporter, you know, trying to
write about these people that webrought into, to talk about
their situation. But I took areal personal interest in it as
(21:52):
well. I thought this is reallyfascinating. And, like a lot of
people when I first heard aboutthe strategy, it sounds too good
to be true, right? It's like,it's not very much work. Anybody
can do it. It's really cheap.
And it beats 80 or 90% ofprofessional money managers, I'm
thinking, how can that possiblybe true, right? Like it I always
(22:13):
said, it's like, it's likesaying, you're an amateur
golfer, you can beat the PGA youknow, champs because, you know,
they're not as good as peoplethink they are. And it's, it's
just a terrible analogy, right?
Because the fact is mostprofessional money managers lag
index funds year after year. Soyou had to get kind of past that
state of disbelief, right. Andonce you once you embrace that,
(22:35):
then I started to learn moreabout the strategy. And the more
I learned about it, the more itseemed appealing to me. And I
took it from there, I started towrite more in money sense about
the strategy. And then Ilaunched the blog in late 2009.
And yeah, and sort of balloonedfrom there became something I
was really passionate about. Andthere seemed to be a real
(22:56):
appetite for it. Like even inthe first six months of the blog
being launched. There were a lotof people that really latched on
to it, because I think theyneeded somebody to explain all
of these issues to them. And Ithink that was the background
that I had, because I didn'tcome from a financial
background, I came from ajournalistic background, that I
did my best to explain all ofthese concepts in plain English.
(23:18):
And I think that's that's what alot of the appetite was.
Preet Banerjee (23:23):
Oh, absolutely.
I mean, your ability to distillthese incredibly complex
concepts in a way that isentirely digestible by anyone, I
think, is one of the reasons whyyour brand sort of exploded from
there. So so that was 2009, whenyou started the blog, and then
tell me about those first coupleyears of the blogging when you
(23:46):
made the transition from, youknow, a blogger about index
funds to an advisor. How didthat happen?
Dan Bortolotti (23:54):
Yeah, so that was an interesting story, too.
So I was working at moneysenseMagazine, as a pretty regular
Freelancer in addition to doingthe blog, I think it was 2012.
They hired me as interim editorin chief because they were
transitioning from one editor toanother. I didn't want to do the
job full time, but I offered tostep in for a few issues to edit
(24:18):
the magazine. While I was there,I assigned myself a feature
called renovate your portfolio.
And because I had met a coupleof young advisors, Justin
Bender, and Shannon, who's nowShannon Bender, was Shannon DL
at the time at PW l Capital inToronto. And they had just
(24:38):
created this really interesting,do it yourself service. So what
they did was they took investorswho didn't want to work with an
advisor full time, but wanted tobuild a do it yourself portfolio
of index funds, and so they dida financial plan for them, and
they help them build animplement A portfolio of index
(24:59):
ETFs, which nobody else wasdoing at the time. And Justin
and I talked about it. And he's,you know, I said, this is like a
really interesting idea. Wouldyou guys be okay, if I talked to
three or four of your pastclients, and maybe wrote an
article, I mean, you've seenthese articles in the media all
(25:20):
the time that financial faceliftin the globe or things like
that, where, you know, you havea person who wants to take a
sort of bad portfolio to a goodone, and we talk about the
process. He said, Sure, he gotthe consent of the clients, I
called them up, they were allvery happy with the service. And
I interviewed them all, they allhad really interesting stories
about how they got to where theywere. And we I wrote a profile
(25:42):
about the transition that theseclients did. And the article was
really popular, their phone wasringing off the hook of with
other people who want the samething. So long story short, over
a couple of beers, you know, weall decided maybe it would make
sense if, you know, I came onboard with them. And you know,
we could work together on thiskind of thing. Now, of course, I
(26:06):
wasn't a licensed advisor at thetime. But I eventually became
one
Preet Banerjee (26:11):
ready to take like two weeks.
Dan Bortolotti (26:14):
Yeah, it does not take very long as we can
talk about to become a licensedadvisor, but to become a
licensed Portfolio Manager. AndI did the CFP program, that's
higher bar. Yeah. So it tookseveral years to actually do it.
But I am now a full time advisorwith PW L capital, I should I
should say to that we we havenot offered that DIY service for
(26:34):
many years, because people stillask us about it. But you feel
that it's
Preet Banerjee (26:40):
been a bit displaced by robo advisors like
for people who are looking forthat you could say, well, here's
a solution.
Dan Bortolotti (26:45):
Yeah, I think so. I mean, I think if all
you're looking for is decentportfolio construction, then
yeah, robo advisors aredefinitely an option for that. I
mean, the challenge back when wewere doing it was people didn't
know which ETFs to choose. Theydidn't know what proportion to
hold them in. They struggledjust literally with the
transactions, how do I place aproper trade on them on the
(27:08):
market? If you've never done itbefore, that can be a bit
intimidating or intimidating thefirst time. So robo advisors?
Yeah, so they've definitelyreplaced that. You know, in
terms of how to build adiversified ETF portfolio, you
no longer have to have thatexpertise in order to do
Preet Banerjee (27:25):
that. And now Yeah, so we've got the Robo
Advisor Now the all in one ETFsas well. Okay, so I kind of
steered us down a tangent there.
So the service you wrote aboutit, you asked if you could come
on. And so you came on. And whatwas that like for you having
written about? Here's how, howsimply you can create your own
(27:47):
portfolio? Did you sort ofquestion Well, why would someone
hire me to do this for them whenit's so easy? Like that's part
of the the offering? Can youtalk about that transition for
you? And how quickly you realizethat no, people do still need a
lot of help with with even someof these simple things?
Dan Bortolotti (28:07):
Yeah, for sure.
So it took me a couple of yearsafter the blog launched, to get
on to this idea that there is abig difference between, it
doesn't make sense to paysomebody to pick stocks and time
the market, right, which is kindof the traditional model of a
lot of advisors. Versus itdoesn't make sense to pay
(28:28):
someone to deliver value addedservices that don't involve
either of those two activities.
That and I still see a lot ofpeople blur those two things
together, right? From time totime, I still hear people say
this, like, you know, you wrotethis blog about DIY Investing,
and now you're an advisor. Now,they don't quite call me a
hypocrite, but I get that that'sthe subtext. cheriya. Right. And
(28:51):
it's like, why would anybody payyou when they can just read your
blog or your book and do itthemselves? To which my answer
is, they should and 1000s ofthem do. But there are a lot of
people who for many reasons thatwe can talk about, just aren't
suited to be do it yourself.
Investors, right. Yeah.
Preet Banerjee (29:09):
And I think I say there's probably two broad
strokes I can make with that.
One is planning as opposed toinvestments. And the other is
behavior and coaching. Yep. Sodo you want to talk about those
two aspects of because I thinkyou're absolutely right. I think
there's so many people who sortof see it as well. Here's this
prescription, why would I payfor anything over and above that
(29:31):
because part of that ethos iskeeping costs low. And by hiring
an advisor, I'm, you know, 10xin my cost, right? So they feel
that there's some kind of adisconnect. So let's talk about
what you should be getting ifyou are using a financial
advisor.
(29:58):
If you're a regular listen to mypodcast, chances are you already
know Dan and his work. I'mcompletely biased as he's a good
friend of mine. But I'm going tosuggest that a great way to show
appreciation for his work, ifyou're already familiar with it,
is to buy a copy of his book togive to someone else, perhaps a
great Christmas or holiday orbirthday present. And if you are
(30:19):
not familiar with his work, butwant to know more about low cost
index investing, this bookspells out how you can get
started whether you have $1,000or $1 million. Once again, the
book is titled reboot yourportfolio. And now back to the
conversation with Dan Bortles.
Dan Bortolotti (30:48):
Yeah, so if you're using a financial
advisor, I think you have to askyourself exactly that question.
What am I paying? And what am Igetting? Right. And if you're
paying, you know, a very highfee to someone whose only value
proposition is they can pickstocks and make forecasts that
will help you beat the market.
That's a bad place to beginfrom, right. But like for an
advisor, what where can anadvisor add value? I mean, you
(31:11):
touched on the first one, whichis planning. So here we're
talking about, you know, what Ilike to talk about how to deploy
your surplus savings. So let'sassume that you're starting from
the premise that you arespending less than you earn,
because if you're not, there'snot a lot we can do for you. But
if you are and you're saving,what's the best way to use that
(31:31):
surplus income? Should you paydown your mortgage a little
faster? Should you invest? Ifyou invest as a TFSA make more
sense than an RSP? If it's anRSP, maybe a spousal plan is
better than a regular RSP. Soall of those sort of personal
finance decisions that mostpeople don't even have the
interest or the inclination tokind of research and do. Then
there's the ongoing planning, ifyou're thinking about retiring,
(31:57):
for example, one of the thingswe deal with all the time with
clients, you know, I want toretire in five years, do I have
enough money? If I do, how muchcan I spend in retirement? When
do I take my Canada Pension Planand Old Age Security benefits,
right, all those sorts of thingshave nothing to do with
investing. And those are notstraightforward. back of the
envelope calculations, you needproper planning software and the
(32:19):
skill to use it. Right. So thoseare not usually DIY tasks. And
then maybe the most importantone is the behavioral piece that
you mentioned. You know, it isvery easy in theory to build a
diversified portfolio and holdit for the long run. In
practice, it is much moredifficult. Every time people add
(32:40):
money to their portfolio, ifthey're saving regularly, it is
an opportunity for them to tryto time the market, right? It's
very easy to say, well, youknow, add a few $100 a month to
your RSP and invested in adiversified portfolio for 20
years. Most people don't dothat. They invest lump sums from
(33:00):
time to time, they agonize overwhether now's a good time, they
build a diversified portfoliothat has four or five different
funds, there will always be somethat are up and some that are
down, they're going to secondguess every time one goes down,
maybe I should have bought lessof that maybe I should have
bought this other one that wentup. So there are all kinds of
ways to go wrong. And I thinkfor a lot of our clients, for
(33:25):
example, we earned our keep inMarch 2020. When you know the
market just, you know, hit thefloor in about what two weeks,
it was the most difficult twoweeks of my career, that's for
sure. We spent a lot of time onthe phone talking people in from
the ledge, and encouragingpeople that even though it
didn't feel like the right thingto do, we should be selling
(33:47):
bonds and buying stocks nowafter they fall in 30%. And that
was tough to do. And I'm notgoing to pretend that it wasn't
stressful for me. I mean, I waspacing the office every day felt
like it was going to throw up afew days because it was just so
difficult to watch. But in theback of my mind, I always knew
like this is what we're here forher. And now we have a plan in
(34:09):
place. And now it's time toexecute it. And we did it and
you know, we caught in therebound was much faster than
anybody expected. But the pointwas that, you know, we stuck to
the plan. I don't know how manyindividual investors did that.
I'm sure many did. But but I'msure I know for a fact many many
bailed. Yeah. And
Preet Banerjee (34:31):
you know, it's kind of ironic in that the the
market action was so fast.
There's probably a bunch ofpeople who don't even notice.
Just not having looked at theirportfolios, like what what
happened last month? Wow. Let metell you a story about back when
I was I was I was a full servicebroker. And this was during
2008 2009. And I remembertalking because you know, the
(34:55):
world was going to hell backthen. Right. And I was talking
To another stock broker who'sbeen in the business at that
point, 3040 years, somethinglike that. And we were chatting,
and I asked him, you know, whatwas it like being on the desk in
87? Right, during that, that daywhen the markets tumbled 20 plus
percent or whatever it was. Hesaid, Preet, let me tell you,
(35:16):
that was a walk in the parkcompared to what we're going
through right now. So 2008 2009,and he said, with that, it
happened and it was over. Right.
And it was quick, it was it wasincredibly stressful. But it was
over with the great financialcrisis, it was, you know, 18
months or whatever. And it wasmonth after month of, you know,
(35:40):
talking to clients walking themoff the off the edge, constantly
second guessing yourself as towhat was actually going to
happen in the world. And, and hetold me said, you know, I'm I
went to go see a psychiatrist,I'm on, you know, happy pills,
as he called them. Like, it wasjust incredibly stressful. And
at the time, like, this guy wasmanaging a huge book of
(36:02):
families. And so he really worethat. And, you know, I asked,
What are you doing in yourportfolio? Like, I am just, you
know, buying more when whenthings are down, and you know,
rebalancing all that stuff? Easyfor him. But it's so much harder
when you're dealing with otherpeople's money. In any case,
yeah, for people who think thatit's easy, it is not easy.
Dan Bortolotti (36:25):
Well, I would say that that's an interesting
time to bring up was the 87crash, which I don't remember
it. I mean, that was in highschool or something. I sure I
heard about it, but I didn'thave it any meaningful
connection to me, but 2008 2009I definitely remember. And
you're right, compared to say,because I was not an advisor at
(36:46):
that time. So the only realmassive crash I've experienced,
you know, as an advisor was the2021. And as you say, it
happened so quickly, that andthe recovery was so swift, that
if you just were a deer in theheadlights, you were actually
probably just fine, right? Andthat's why a lot of people
nowadays, I feel like especiallyyounger investors have
(37:08):
overestimated their risktolerance, because they say
things like, I'm fine with aportfolio of 100% stocks. I'm
okay with the volatility. I evengot through, you know, the 2020
crash, which again, was a bigcrash, but it lasted six weeks.
I would like to say, talk tosomebody who not only endured,
(37:30):
Oh, 809. But you know, what Ithink was even worse was 2000 to
2002, which was after the.combubble burst, because we had
three consecutive years ofnegative equity returns
something that has not happenedbefore, and or since. And so
it's one thing to say, Yeah,bear markets happen. And we'll
(37:52):
get through them. It's anotherthing when you have three
consecutive years, I cannotimagine being an advisor during
that period and trying to sitacross from a client saying,
Yeah, you know, equity marketswere down last year, but this
year, we expect things to getbetter, whoops, nope, another
negative year, next review,meeting, same conversation,
third year, bang, they went downagain, at some point, those
(38:13):
clients are gonna say, you know,what, things are different now,
right, we can no longer rely onstocks to deliver, you know,
growth in our portfolio. And howmany people who didn't bail
after the first year, finallyhad had enough and packed it in
after the third year? Well, thenwhat happened? I mean, we had
this huge bear market from 2004to 2007. And all those people
(38:35):
missed out on it. So it reallyis a matter of do you know, when
you assess your own risktolerance, you have to
appreciate the fact that youprobably have not endured, what
the market can really hand toyou unless you've been investing
for 20 plus years. You know,younger people just are not in
that situation. I'm not in thatsituation. And just
Preet Banerjee (38:57):
because I think some people might pointed out
2000 or 2000, he said, bearmarket, but you meant
Dan Bortolotti (39:01):
sorry, bold.
Yes, yes, sir. There are bigrecovery in the following the
Preet Banerjee (39:05):
you know, it's interesting as you bring up, the
tech crash is so in front ofyou, I've got a couple of books.
So our friend Andrew Helms, newbook, balance, I got a preview
copy of that. There's your book,reboot your portfolio, and then
beside it, there's a book that Ipicked up, and it's called
Electronic day trading to win.
And I don't want to, I don'twant to crop on these guys too
(39:26):
much. But this book waspublished in 1999. And the
reason I bought it just recentlywas to take a look at some of
the things people were sayingbefore the tech bubble
collapsed. And I'm not saying I,I do not know what is going to
happen to markets tomorrow inthe next five years in the next
10 years. But I do hear a lot ofthe same things that we were
(39:48):
hearing back in the late 90s Interms of, hey, you know, maybe
growth stocks are just the newnormal and everything has in
fact changed. And so you'rehearing A lot of the same things
now where anyone and everyone isgiving you stock tips, anyone,
and everyone is recommendingcryptocurrencies. And when you
drill them a little bit, yourealize they don't actually know
(40:09):
what they're talking about. Andyet they're so incredibly
adamant about it. And so itfeels like we're in this, this
new era of investing in a sense,because as you mentioned, you
know, you've got a lot of peoplewho don't really understand what
a market crash, a downturn feelslike, they don't really
(40:30):
understand what volatility cando. And part of it is this, I
don't know, this new wave ofinvestors who are galvanized and
almost insulated fromprofessional advice, because
they've grown up under this. Iknow two or three instances
where Wall Street has beenbailed out on the backs of the
the little guy, there is this usversus them mentality, which is
(40:53):
fueled things like Wall Streetbets, that forum, trying to
stick it to the hedge funds, buythe dip. And so there's this
militant sort of perspectiveabout investing. And with
anything, though, the one thingthat I always go back to is it
works until it doesn't. Andpeople don't really understand
(41:13):
the gravity of that statement.
So again, I'm not saying I haveno idea what happens next, the
market can stay irrationallonger than people can stay
solvent. But what do you say tothe people who are starting, you
know, investing with, you know,cryptocurrencies where, and
(41:34):
we've talked about this, whereputting them into 100% stock
portfolio was de risking whatthey have now, what do you say
to people who are looking atinvesting not as, you know, this
discipline, long term, boring,which can be beautiful process,
but more as, partlyentertainment?
Dan Bortolotti (41:55):
Yeah, I think that, you know, the, the
specifics have changed, right.
And the distractions aredifferent now. But the overall
idea that humans are nothardwired to invest in a, you
know, boring, diversified longterm portfolio, that hasn't
changed, right? So I'm trying tolook at it, as you know, we, if
(42:17):
you should study past bubbles,and past, you know, irrational
exuberance, and things likethese, and try to take some
lessons, even though thespecific things that distracted
people were different. So wetalked about the.com. Bubble,
for example. You know, I Theexample I like to remind people
(42:38):
about that one is, in that case,it wasn't crypto, it wasn't meme
stocks, it was just tech stocks,right. And the basis of the idea
in the 1990s, that caused themarket to become a bubble was
that the internet was going tochange the world. Right? Now I
say that I was like, of courseit did. Like they were right.
(42:58):
Right. It's just that theyweren't right about the specific
stocks to pick. So even if youhave the right idea about where
the market is headed, trying tocapitalize on that is incredibly
difficult. And I think thatthere's a parallel here with
crypto, right, I'm not going topretend I understand that much
about it. But I will say, thetechnology is amazing. Its
(43:21):
potential for changing the waywe spend and the way commerce is
conducted is real, right. Butthat's not the same thing as
saying, If I buy Aetherium,today, I'm gonna make a lot of
money on it, right? We don'tknow how that is going to shake
down over the next 1020 years.
So I think we should stop tryingto convince ourselves that we
(43:46):
know the opportunities, we canidentify them now. And we will
profit from those in the longrun. Because whatever you think,
you know, the market alreadyknows it. And there's way
smarter people out there thatknow more than you do. So we
have to try to get distractedfrom thinking about investing as
a series of transactions thatare based on, you know, some
(44:08):
forecasts that we've made, andjust try to take a step
backwards and remember whatinvesting is, it's an attempt to
put, you know, our hard earnedmoney into the global economy.
And as it grows, our money growswith it. It's not foolproof,
it's not exciting. But it'sinvesting in businesses that
(44:31):
have an expectation to makemoney over the long term, are in
the case of bonds. It's lendingmoney to borrowers who will pay
you interest, you know, in orderto to have your money. So that's
all it is. It's not veryexciting. And there will always
be things that are more excitingand worse. I mean, FOMO is a
huge problem with people now.
Right? I mean, it's very, I havediscussions with people who all
(44:54):
they want to talk about is theirsuccess stories about how you
know this and that This stock orthis and that crypto, you know,
went way up? I can't comparewith that in terms of exciting
stories, but I'm not interestedin it. But I understand why
other people are
Preet Banerjee (45:10):
right. So it's Yeah, I think one of the things
that I've sort of started tochange my perspective on in the
last little while is just howimportant the entertainment
factor is for so many people.
And there are some people wherethey are in a position where you
could sort of say, Hey, listen,here is a way to invest that is,
(45:30):
you know, evidence based, it'sdisciplined, it's prudent, and
what have you, and there's somepeople who are just never gonna
get there. And I'm not talkinglike a small percentage, it's a
big percentage of people wherethe entertainment factor is a
dominating factor in terms oftheir what they do with their
investments in their portfolios.
(45:52):
Now, that being said, thecryptocurrency craze has been so
pervasive that I imagine youprobably have some clients who
say, Hey, I know that, you know,we're in this couch potato
thing, but what about 5%? Incryptocurrency? You get
questions like that?
Dan Bortolotti (46:08):
That's the most common question I get from
clients.
Preet Banerjee (46:11):
And what do you tell them? Well, I,
Dan Bortolotti (46:13):
I tell them, you know, the first thing is to be
respectful of the fact that, youknow, people are interested in
this, and they see it as anopportunity. So I, you know, I
don't I don't jump all over it,but I say to them, let's look at
this a couple of ways. Beforecrypto, people used to ask us
the same question about gold.
Say, right, why don't we holdgold in the portfolio? And I'd
say, Well, you know, youprobably could add a small
(46:37):
allocation to gold. And it wouldbe a decent diversifier. But you
know, at the end of the day,gold, you know, doesn't grow in
and out, you know, WarrenBuffett was always explained
this way, like, you know, gethave a cubic yard of gold, and
20 years from now, it's stillthe same, it doesn't pay any
yield. It's not like a business.
(46:58):
So what is its value based on?
We don't really know. And sobecause we don't really
understand how to value it. Wedon't include it in the
portfolio, it's unnecessary. AndI would say with crypto, it's a
whole level different, not onlydo we not know how to value it,
I mean, at least gold we can sayhas had value as long as humans
have been around. Right? It hasbeen a store of value. It has
(47:22):
practical use in jewelry andindustrial applications and
things. I don't think we reallyknow what crypto is right now. I
mean, it's difficult to spend,right? When people buy it, their
hope is just to sell it tosomebody else. Right? And this
is the greater fool theory, theycall it right. So until this has
any utility, and until it hassome way that we can value it. I
(47:47):
don't think it makes sense as anasset class in a diversified
portfolio.
Preet Banerjee (47:54):
Have you heard of the EMH theory? I have heard
of the EMH theory. And you knowwhich EMH theory I'm talking
about? Well, I
Dan Bortolotti (48:00):
think you mean efficient market hypothesis,
Preet Banerjee (48:02):
the Alon Markets Hypothesis theory, which is, I
think it was a Bloombergjournalist, journalist, Matt
Levine, who wrote about it. Andhe talked about how now things
are being dominated by if ElonMusk is tweeting about it,
that's what drives value. And iscompletely detached from from
fundamentals, I'll give him whenhe, when he starts talking about
I'm gonna buy whatever, shibuinew dog or whatever, which is
(48:25):
the dog that Dogecoin is modeledafter, and it causes a massive,
like, multi billion dollar flowof assets into these
cryptocurrencies. Somethingisn't right.
Dan Bortolotti (48:36):
Yeah, and once you go down that road, it's,
it's a slippery slope. And Iworry too, about, you know,
looking back in a few years andgoing wow, I just wish we had,
you know, pushed back a littlebit more. And, you know, said
look, our job as advisors hereis to be the adult in the room
and not to give way to every,you know, trend and every, you
(49:01):
know, flavor of the monthinvestment. Now, saying that we
could turn out to be dead wrong,right? We could be we could
sound like the advisors wholooked at ETFs and index funds
15 years ago and call it a fad,right? And proven wrong, and we
could look very stupid. But Ithink at the end of the day, our
(49:22):
job is to say, No, it's notready or we're not ready yet to
add this asset class to aportfolio. Yeah,
Preet Banerjee (49:31):
in you know, it's um, sometimes when I'm
talking to people and they ask,Have I missed the boat on
cryptocurrency? I don't know.
Maybe you've avoided an iceberg.
I have no idea. But what I cantell you is if you're worried
about the world leaving behindbecause everyone starts adopting
blockchain technology, which isI think, is the more interesting
part of the whole cryptocurrencyworld. I would say listen, the
(49:54):
companies that are in a broadlydiversified index fund will take
advantage of this technology andif it does, too, Ride drive
value for these companiesbecause of what it pretends to
offer, you'll participate inthat too, right. And so, and
that's almost necessary if theblockchain technology takes off
and is adopted by all these bigcompanies, which is part of the
(50:14):
promise, then these companiesthat are publicly traded by
adopting this technology willbenefit from it. So don't feel
like you've missed the boat, youcan just sort of stick to the
the ethos, which is buyeverything, and the winners will
win, the losers will lose,you'll have them both. But in
the end, you're going tooutperform the average investors
(50:35):
actively trading.
Dan Bortolotti (50:35):
That's right.
And you know, you don't knowwhich, which stocks are going to
grow because of this change inthe economy, right? You might
think you do. But just like inthe tech bubble, people got the
thesis, right, which was thetechnology was gonna change the
world, they just usually got thecompanies wrong. The way to get
around that is by buying a totalmarket index fund that holds
(50:56):
virtually every publicly tradedcompany, and then you're
guaranteed to have all thewinners in the portfolio right?
From the very beginning. Yeah.
Preet Banerjee (51:08):
Alright, so we've covered a lot of ground
here. This has been reallyinteresting. We will probably
continue chatting after I hitthe stop record button. Because
that's what Ben and I do. Andany case, let's, as you know,
everyone on the podcast gets,you know, the last couple
minutes for a commercial,obviously, we're here to promote
(51:29):
your book, but why don't yousort of give your own personal
plea to people about the newbook, reboot your portfolio?
Dan Bortolotti (51:35):
Yeah, so the book should be available online,
right now for pre order at allthe usual suspects, Amazon and
indigo. And if you are soinclined, that you know, really
appreciate it too, for peoplewho are interested in supporting
local bookstores. Many of them Ithink, will be carrying it,
we're doing our best to getdistribution to the bookstores
(51:56):
as well. If your bookstoredoesn't have it, ask them for
it. So again, it's called rebootyour portfolio. And if you're
interested, I will say the bookdoes go through step by step on
the investment process. But Iconsciously avoided mentioning
specific ETFs in very muchdetail. I didn't include any
model portfolios or anything. Sobecause I knew people just skip
(52:18):
to the back and look at theportfolios, and I wanted them to
understand the process. Butafter you read the book, if you
want to visit Canadian couchpotato calm, you will find model
ETF portfolios there,
Preet Banerjee (52:29):
and what's the due date on restarting the
podcast?
Dan Bortolotti (52:33):
Thanks. Great.
I'm gonna make that one. TBD.
Preet Banerjee (52:36):
There we go.
Very good. All right. Dan, thankyou so much for coming on the
show.
Dan Bortolotti (52:39):
My pleasure.
Thanks for having me.
Preet Banerjee (53:01):
Coming up in January, I'm going to have
another friend of the show onyou might know him as the
millionaire teacher, whereby hisreal name Andrew Hallam. Andrew
has a new book launching in thenew year. And so what all this
really means is that there are afew more sporadic episodes of
the podcast coming up in thefuture. Now I won't be getting
back to a regular publishingschedule anytime soon. Not that
(53:24):
I ever had one. But staysubscribed for when any future
surprise episodes are released.
If you want more personalfinance content, you can always
follow me on Twitter orInstagram. It's the same handle
in both cases at Preet Banerjee,also have two YouTube channels,
you can subscribe to my mainchannel which covers personal
(53:45):
finance and investing topicsthat are more universal in
scope, and a Canadian specificchannel as well. That is it for
this episode. Thank you so muchas always for listening
I'm not going to pretend that it wasn't stressful
(00:01):
for me. I mean, I was pacing theoffice every day felt like it
was going to throw up a few daysbecause it was just so difficult
to watch. But in the back of mymind, I always knew like, this
is what we're here for.
Preet Banerjee (00:24):
The Godfather of index investing in Canada, Dan
Bortolotti, is here to talkabout his new book, reboot your
portfolio. Now Dan is a verygood friend of mine, but you
know him as the writer behindthe Canadian couch potato blog,
the Canadian couch potatopodcast. And as a portfolio
manager and financial planner atp WL Capital in Toronto, where
(00:49):
he and his colleagues managedportfolios using the same
strategies, as described in thisnew book. Not only do we talk
about how you can reboot yourportfolio with exchange traded
funds, we learn a little bitmore about the man, the myth,
the legend, that is DanBortolotti, how he learned about
investing in the first place.
How he started his immenselypopular blog, became an advisor,
(01:11):
and his advice for people askingabout cryptocurrencies, whether
now is a good time to invest.
And so much more. Dan joined mein person at my condo in
Toronto, and here is ourconversation.
(01:46):
Joining me now on the mostlymoney podcast is Dan bored
allottee longtime listener? Andsecond time you've been on this
podcast, if not third? Yeah. Andyou've been on mine as well,
Preet. So it's nice to gettogether again and do this.
Yeah, my pleasure. And thereason that you're here is
you've written a new book calledreboot your portfolio. So we're
(02:07):
going to get into that in alittle bit more detail. But
first, I'd like you to talkabout why you wrote this book,
and why you think it's neededright now.
Dan Bortolotti (02:16):
Yeah, so the book is really a step by step
guide to index investing. And itstarts right from, you know, the
theory behind why indexinvesting is important, and why
it's effective, and then walksyou through the various stages
for building and maintainingyour portfolio. And the reason
that I decided to write the booklast year and bring it out now,
(02:39):
was that, you know, over theyears, I've written hundreds of
articles on the topic. But a lotof them are on very specific
aspects of index investing. AndI felt what was really needed,
especially for a new investor,was a step by step guide.
Because, you know, you can gointo my blog now, and there's
lots of things to read, but it'shard to know where to start.
(03:02):
And years ago, it's going to beseven or eight years ago, now, I
did write a brief book that waspublished by Rogers publishing,
which was publishing money Sensemagazine at the time. And it was
in fact that it was a DIY guide,to index investing book did
really well, but it hasn't beenavailable for a long time. And I
(03:24):
still get requests for it.
People ask me, where can I pickit up? And I said, well, first
of all, you can't pick it up.
And second, even if you do, it'sso out of date now that it's not
going to be very useful. So Ithought, why don't we take a
step back, use that step by stepguide as the model, and then
take all of the insights andthat I've learned between now
(03:46):
and when I wrote that book, andalso all of the new products and
all the changes in themarketplace. I mean, that back
then there was no all in oneETFs there were no robo
advisors, it was 30 bucks attrade on discount brokerages. I
know, it seems like a millionyears ago. So I just really felt
it was time to revisit thatwhole idea. So I went back and
(04:06):
I, you know, dredged up all ofthe articles that I had written
in the past that I thought stillhad relevance, updated all of
them for the current marketplaceand put them all together in the
book.
Preet Banerjee (04:17):
Now you are known as the godfather of
indexing in Canada. Whateversuperlative you want to use. You
are the guy when it comes toindex investing in Canada,
whether it's retail investors,financial advisors,
institutions, you've, you'vebasically put together this just
world class resource for peopleon your blog, as well as your
(04:39):
podcast. And now your podcast isthe Canadian couch potato
podcast. It is, which is nowdefunct is no longer being
Dan Bortolotti (04:48):
Yeah, let's say it's on hiatus. So have you done
any new episodes since thesummer of 2019?
Preet Banerjee (04:53):
Right. Yeah. And a very, very popular podcast. I
know that there are so manypeople are just like, oh, we
Wish Dan would continue on withthe podcast. But it sounds like
there is hope it may come backat some point.
Dan Bortolotti (05:06):
Yeah, I'm thinking that I, you know, I
might resurrect it. And now thatyou've put me on the spot, I
feel I'm gonna be obligated todo that. It the problem with the
podcast, at least for me was itwas just an enormous amount of
work. I did do interviews on thepodcast, but I also did a fair
bit of content that I wroteahead of time. And, you know, as
(05:27):
you can probably tell, fromlistening to it, even it was
scripted. I wasn't just riffing,you know, with the mic running.
I wrote,
Preet Banerjee (05:34):
wait a second.
This is not the way to run apodcast.
Dan Bortolotti (05:38):
Well, there's a reason why you cranked out 100
episodes, and I got to vote 26,before I burned out. So I just
found it was taking up so muchtime. And that that was
actually, you know, one of thereasons that I came up with the
idea for the book was, I wasdoing the podcast, and I
thought, you know, these arefine, and people, people seem to
(05:58):
enjoy it. But what I wanted todo for some more lasting value
was put together this kind ofstep by step guide, I actually
thought about it originally as apodcast series. And I thought
maybe I would do like a nine or10 part series for audio. And as
I started to write it, you know,I just realized that's my
(06:19):
background is I'm a writer, I'mnot a broadcaster. And it just
seemed to me a natural book. Andas I started to work on it,
that's how it evolved.
Preet Banerjee (06:30):
It's interesting, because, you know,
you're a fantastic writer, Ithink you've been won awards for
your writing. And it's clearanyone who's read your blog and
have your articles, like you area fantastic writer. But when you
say that you're not abroadcaster, I would I push back
on that, I would say, you have agreat voice for for your
(06:50):
podcast, I think your your, youcome across very natural,
authentic. And so I wouldencourage you to rethink, you
know, maybe creating a podcastseries on that on creating a
portfolio because I think a lotof people would would gobble it
up. But in any case, in anycase, I know I'm putting you on
the spot here. Let's there's somany things that I want to talk
(07:11):
to you about one of them is thepush towards index investing
over the last 1015 years, it'sbeen pretty big, right? It's
gotten more headlines, there's alot more, you know, people who
are espousing the benefits ofindexing. And then when I look
at what's going on today, itfeels like there are a lot of
(07:31):
new investors who are startingout with some very risky
investment strategies. They'rebeing lured into cryptocurrency,
single stock trading, I mean,stock trading and what have you.
And I, it feels like they thinkthat index investing is somehow
(07:52):
too boring, too simple, or won'tgive them results. So can you
maybe talk about, because I'msure you've gotten a lot of
questions about that over thelast couple years. What do you
say to people who are startingout? And and look at index
investing as somehow boring, oldand maybe not good enough?
Dan Bortolotti (08:11):
Well, I would say that it definitely can be
boring. But that's okay. Right,investing is not supposed to be
exciting. So I think you have toget past this idea that
investing should be somethingthat is deeply engaging, that
you should spend a lot of timeon, right, that you should be
following the markets reallyclosely consuming a lot of
(08:33):
financial media, repositioningyour portfolio every time you
get some new piece of economicnews, etc. So that's part of the
mindset. But to go to the otherpart of the idea that it's sort
of old school, it used to workin the past, but doesn't
anymore, it won't give me theresults I need. That's where I
(08:53):
have to hit hit the brakes andsay, Wait a second, wait a
second, let's remember whatindex investing is. It's a
strategy that allows you tocapture all of the returns of
the market, minus only a verysmall fee. Right? So if, for
example, you know, over the next20 years, the stock markets on
(09:14):
average, deliver six or 7%, youknow, an index investor who's
invested in those markets willget six to 7% minus a tiny
amount in fees. If that's not,quote unquote, good enough for
you? Well, what's thealternative? It means that
you're going to have to try tospend your investing career
beating the market. And I layout the evidence for this in the
(09:36):
book, right? The likelihood ofany individual doing that over
their investing lifetime isdismally small, right? Perhaps
not zero. Well, definitely notzero people do it. But to start
from the premise that as abeginner investor, you know,
even even or even with someonewith experience, that you're
(09:57):
going to somehow beat the marketover yourself. career is just a
dangerous and likelydisappointing place to begin.
So, I do think it's importantfor people to understand, you
know, the limits of indexinvesting, but also the promise,
which is, if you can capturewhat the markets deliver over
your investing career, then youare likely to be in the top, you
(10:20):
know, five to 10% of allinvestors.
Preet Banerjee (10:22):
You know, I remember a number of times. You
know, I remember a number oftimes when I would go on the
national with Peter Mansbridge.
And we have a, our bottom linepanel. And at the At its heyday,
we were on once a month, andthis was during the financial
crisis of the great financialcrisis. And there was one panel,
where we were talking aboutinvestment portfolios, and how
(10:47):
to invest and whatnot. And Imentioned, you know, a simple
balanced portfolio globallydiversified that you don't
touch. If you do that, and youhad done that for the last 30
years, you would have had, youknow, 70% return or something
like that. And the next day, Iremember getting an email from
someone who said to me, Preet, Idon't know what the hell you're
talking about, I've beeninvesting for 30 years. And when
(11:08):
I add in all the money I've everput in, and I compare that to my
balance today, it's the same. Soeffectively a 0% rate of return,
wow, over 30 years, right, inone of the best markets, like,
you know, continually fallinginterest rates, which pushed up
bond returns, equities did wellover those 30 years. I mean, it
(11:28):
would be hard not to make moneyas long as you just stuck to
your plan. And it's just soincredibly hard for people. And
so I think one of the issuesthat I think people maybe need a
little bit more clarity on isthe idea of benchmarking.
Because when you have, forexample, you know, the the
strong markets we've had, sincethe financial crisis, everyone
(11:49):
feels like a genius. And if youif you're up 20%, you're
thinking, wow, this is amazing.
People talk about these longterm returns of seven or 8%.
I've got 20%. Sometimes theydon't realize that the market
was up 30. Right. So can youtalk about the importance of
benchmarking?
Dan Bortolotti (12:07):
Absolutely. So you know, you make a great
point, right, in, in a in a bullmarket, like we've experienced
over the last, you know, since2009, it was relatively
difficult not to make goodreturns, as long as you had, you
know, a reasonable, reasonablydiversified portfolio with a
fair amount of equities, right?
You could have picked 10 or 20,stocks, more or less at random,
(12:32):
and probably still done, youknow, again, quote, well, but
what does well mean, right, you,if you had earned a seven or 8%
annualized return, for example,you might think that that's
excellent. But as you point out,just investing in the broad
market and not picking anyindividual securities, you
likely would have done them alot better. So you always have
to compare your results to theresults of a benchmark. And when
(12:57):
we say a benchmark, we'retalking about a broad market
index. So you know, just asimple example, you know, if you
look at a Canadian equity index,that index would hold, you know,
roughly 250 stocks, the largest250 stocks in the country, it's
extremely easy to buy all ofthose stocks, just by buying a
low cost ETF that tracks thatindex. And it's virtually no
(13:19):
effort. So if you're going to bean individual stock picker, you
should compare the performanceof your individual stocks to
that benchmark over somemeaningful period as well,
right? I mean, the media lovesto talk about short term
performance. So they'll look atsome individual stock or some
investor and say, you know, theybeat the market over the last 12
(13:42):
months. I mean, the last 12months is a hiccup. It's it's
not important, over the longterm, how many people can you
know, continue to outperformthose benchmarks over a full
market cycles. So that would bea you know, bull market followed
by a crash followed by arecovery? It's just very
difficult to do. And the peoplewho will do it are often people
(14:06):
who just took outside risk. AndI think that that's an important
distinction as well. So if youbuy, you know, an index fund
that holds hundreds of stocks,and I buy three individual tech
companies, I could very wellcrush your performance over the
next 10 years, right. But theonly reason I did so is because
I bought three companies thatcould have gone to zero, right?
(14:28):
Whereas a broadly diversifiedindex portfolio. I mean, barring
Armageddon can't go to zero. Soyes, if you want to take a lot
more risk, you may very wellearn much higher returns, but
the it cuts both ways.
Preet Banerjee (14:45):
And have you met very many individual investors
who can calculate risk adjustedreturns.
Dan Bortolotti (14:52):
None, right.
Yeah, I mean, it's not an easything to do, right. It's hard
enough, frankly, to calculateyour own age. equalized return,
it seems like a simple thing,right? I mean, you start the
year with this dollar value, youend the year with another dollar
value. It's a fairly simplecalculation. But if you add
money during the year, or if youmake withdrawals during the
(15:13):
year, it suddenly becomes quitecomplicated. So I can remember
doing an investing, talk onetime to a group. And I said,
right off the top, hands up, howmany people's portfolio beat the
market over the last five years?
That was like three quarters ofthe people put up their hand,
I'm like, first of all, that'sunlikely to be true. I mean,
(15:36):
maybe it is. But I'm thinkinghow there's no way three
quarters of the audience knowsthat, right? Because they have
not calculated their rate ofreturn properly, and compared it
to an appropriate benchmark. Sothere's a lot of delusion, I
think, going on about people'strue investment performance.
Preet Banerjee (15:54):
So one of the I think benefits in my mind of,
you know, a couch potatoportfolio is you don't really
need to benchmark anymore. Canyou explain why that is true?
Dan Bortolotti (16:03):
Yeah, I mean, that that's a good point.
Because we, for example, withour clients, we have the same
sort of thing. We build indexportfolios only. And so you
know, if you buy, for example, Imean, let's use a simple
example, I buy a US equity indexfund, it tracks the s&p 500
index. So one of the most wellknown indexes. So what's my
(16:25):
benchmark? Well, my benchmark isprobably the s&p 500 index. And
so if the index fundspecifically is designed to buy
all of the stocks in that index,then if it's a well run index
fund, it's going to deliver thesame return as the s&p 500 minus
a tiny amount in fees or taxes.
So you're benchmarking your ownfund against a benchmark? I
(16:48):
mean, it's almost selfreferential, right? So in other
words, a, but it is stilluseful, I think, for index
investors to do it, because veryoften, they will assume that
they achieve the exact samereturn as the index. But in
fact, there could have beenbehavioral mistakes in there,
right? So for example, one ofthe things that that you know, I
(17:12):
do every year on my blog ispublish, you know, the returns
of my model portfolios. So,every year, we just calculate
what the returns would havebeen. And it assumes, though,
that you started the year with aperfectly in balance portfolio,
you added no money, you withdrewno money, and at the end of the
year, you measured your return.
(17:34):
So a lot of people will, youknow, I get all of these emails
around January, saying, When areyou going to publish your
returns? And I understand theappeal, but I also say, you
know, the returns that Ipublished for the model
portfolios aren't your returns,even if you follow the same
strategy? Because, you know,maybe you maybe you failed to
rebalance at some point in theyear, or maybe you made a big
(17:57):
market timing decision mid year,that cost, you know, maybe you
had too many transaction coststhat he wrote in some of your
return. So you need to you needto measure your own personal
return, even if you're an indexinvestor and compare it to an
objective benchmark from time totime, just to make sure there's
(18:18):
no leakage in there. Right,
Preet Banerjee (18:19):
right. Right.
Okay, so we're kind of gettinginto the weeds a little bit, I
think, for the people who wantto learn more about this, they
can buy a copy of, of your book.
And I would say that there'sprobably a big overlap of people
who listen to this podcast, andthose who know who you are, read
your blog, and listen to yourpodcast. And for those who may
(18:40):
already know a lot of thisstuff, I think a great way to
support Dan is to buy the book,if not for yourself to give to
someone else. So that you don'thave to spend hours and hours
trying to translate what Dan hasalready written, or published
elsewhere, and is a great way tosupport you in the book. And the
book is coming out November 1.
And so in the publishing world,it's very important, you know
(19:02):
that that first week to to getthose sales, because it, it
affects where you land on thosebestseller lists, which has
these knock on effects. So ifyou've been a fan of Dan's, if
you're just learning about himfor the first time, I encourage
you to buy the book right nowtoday, and support them and and
learn or give someone else thegift of this knowledge. Now,
(19:22):
that being said, let's talkabout some other stuff. So let's
talk about your personaljourney. So you and I have known
each other for I think, over adecade, and we met because of
basically index funds. And whenwe met you were not in the
industry. You were a writer. Andso you're coming from the
outside in. And I think you gottweaked to the idea of index
(19:46):
investing because of anassignment that you received
where I think it was somethingto do with like due diligence on
investment managers or whatnot,something like that. So do you
want to tell that story and howyou got started how you got
interested in investing? Becausebefore that you had no
background in investing?
Dan Bortolotti (20:04):
Yeah, that's right. In fact, Preet I think
when we met, you were in theindustry and I was a journalist.
And now the roles have kind ofclicked and that I'm in the
industry, and you've taken adifferent direction with your
career. So, yeah, so to get backto that story, so what happened,
I was I was a journalist formany years. And not a financial
(20:25):
journalist, I wrote about allkinds of different topics. But
one of the magazines I did writefor regularly was money sense,
which is now only a website, butwas a magazine back in those
days. Mm hmm. And even then,even though I wrote for money,
since I wasn't really writingabout investing, frankly,
because I didn't know very muchabout investing. But one of the
(20:45):
assignments I had was we did afeature in the magazine called
The Seven Day financialmakeover. And it was a very cool
project, what we did was we gotthree couples and one single
person from all over Canada, whohad written into the magazine to
talk about some of theirfinancial problems. And we
brought them to Toronto, we putthem up in the Royal York Hotel
(21:07):
for a week. And I was part ofall of the sessions as well,
just as a reporter. So webrought in, you know, insurance
person, a person about budgetinga person who helped couples, for
example, with money problems andthings like that. And one of the
experts or a couple of theexperts, we had, were talking
about investing. And theyintroduced what they called the
(21:29):
couch potato portfolio. I mean,my, my name has been associated
with that brand for a long timenow, but I certainly didn't come
up with the name. And evenmoneysense was using it long
before I ever wrote about it.
But anyway, they, they, theytalked about this investing
strategy, and I'm here as areporter, you know, trying to
write about these people that webrought into, to talk about
their situation. But I took areal personal interest in it as
(21:52):
well. I thought this is reallyfascinating. And, like a lot of
people when I first heard aboutthe strategy, it sounds too good
to be true, right? It's like,it's not very much work. Anybody
can do it. It's really cheap.
And it beats 80 or 90% ofprofessional money managers, I'm
thinking, how can that possiblybe true, right? Like it I always
(22:13):
said, it's like, it's likesaying, you're an amateur
golfer, you can beat the PGA youknow, champs because, you know,
they're not as good as peoplethink they are. And it's, it's
just a terrible analogy, right?
Because the fact is mostprofessional money managers lag
index funds year after year. Soyou had to get kind of past that
state of disbelief, right. Andonce you once you embrace that,
(22:35):
then I started to learn moreabout the strategy. And the more
I learned about it, the more itseemed appealing to me. And I
took it from there, I started towrite more in money sense about
the strategy. And then Ilaunched the blog in late 2009.
And yeah, and sort of balloonedfrom there became something I
was really passionate about. Andthere seemed to be a real
(22:56):
appetite for it. Like even inthe first six months of the blog
being launched. There were a lotof people that really latched on
to it, because I think theyneeded somebody to explain all
of these issues to them. And Ithink that was the background
that I had, because I didn'tcome from a financial
background, I came from ajournalistic background, that I
did my best to explain all ofthese concepts in plain English.
(23:18):
And I think that's that's what alot of the appetite was.
Preet Banerjee (23:23):
Oh, absolutely.
I mean, your ability to distillthese incredibly complex
concepts in a way that isentirely digestible by anyone, I
think, is one of the reasons whyyour brand sort of exploded from
there. So so that was 2009, whenyou started the blog, and then
tell me about those first coupleyears of the blogging when you
(23:46):
made the transition from, youknow, a blogger about index
funds to an advisor. How didthat happen?
Dan Bortolotti (23:54):
Yeah, so that was an interesting story, too.
So I was working at moneysenseMagazine, as a pretty regular
Freelancer in addition to doingthe blog, I think it was 2012.
They hired me as interim editorin chief because they were
transitioning from one editor toanother. I didn't want to do the
job full time, but I offered tostep in for a few issues to edit
(24:18):
the magazine. While I was there,I assigned myself a feature
called renovate your portfolio.
And because I had met a coupleof young advisors, Justin
Bender, and Shannon, who's nowShannon Bender, was Shannon DL
at the time at PW l Capital inToronto. And they had just
(24:38):
created this really interesting,do it yourself service. So what
they did was they took investorswho didn't want to work with an
advisor full time, but wanted tobuild a do it yourself portfolio
of index funds, and so they dida financial plan for them, and
they help them build animplement A portfolio of index
(24:59):
ETFs, which nobody else wasdoing at the time. And Justin
and I talked about it. And he's,you know, I said, this is like a
really interesting idea. Wouldyou guys be okay, if I talked to
three or four of your pastclients, and maybe wrote an
article, I mean, you've seenthese articles in the media all
(25:20):
the time that financial faceliftin the globe or things like
that, where, you know, you havea person who wants to take a
sort of bad portfolio to a goodone, and we talk about the
process. He said, Sure, he gotthe consent of the clients, I
called them up, they were allvery happy with the service. And
I interviewed them all, they allhad really interesting stories
about how they got to where theywere. And we I wrote a profile
(25:42):
about the transition that theseclients did. And the article was
really popular, their phone wasringing off the hook of with
other people who want the samething. So long story short, over
a couple of beers, you know, weall decided maybe it would make
sense if, you know, I came onboard with them. And you know,
we could work together on thiskind of thing. Now, of course, I
(26:06):
wasn't a licensed advisor at thetime. But I eventually became
one
Preet Banerjee (26:11):
ready to take like two weeks.
Dan Bortolotti (26:14):
Yeah, it does not take very long as we can
talk about to become a licensedadvisor, but to become a
licensed Portfolio Manager. AndI did the CFP program, that's
higher bar. Yeah. So it tookseveral years to actually do it.
But I am now a full time advisorwith PW L capital, I should I
should say to that we we havenot offered that DIY service for
(26:34):
many years, because people stillask us about it. But you feel
that it's
Preet Banerjee (26:40):
been a bit displaced by robo advisors like
for people who are looking forthat you could say, well, here's
a solution.
Dan Bortolotti (26:45):
Yeah, I think so. I mean, I think if all
you're looking for is decentportfolio construction, then
yeah, robo advisors aredefinitely an option for that. I
mean, the challenge back when wewere doing it was people didn't
know which ETFs to choose. Theydidn't know what proportion to
hold them in. They struggledjust literally with the
transactions, how do I place aproper trade on them on the
(27:08):
market? If you've never done itbefore, that can be a bit
intimidating or intimidating thefirst time. So robo advisors?
Yeah, so they've definitelyreplaced that. You know, in
terms of how to build adiversified ETF portfolio, you
no longer have to have thatexpertise in order to do
Preet Banerjee (27:25):
that. And now Yeah, so we've got the Robo
Advisor Now the all in one ETFsas well. Okay, so I kind of
steered us down a tangent there.
So the service you wrote aboutit, you asked if you could come
on. And so you came on. And whatwas that like for you having
written about? Here's how, howsimply you can create your own
(27:47):
portfolio? Did you sort ofquestion Well, why would someone
hire me to do this for them whenit's so easy? Like that's part
of the the offering? Can youtalk about that transition for
you? And how quickly you realizethat no, people do still need a
lot of help with with even someof these simple things?
Dan Bortolotti (28:07):
Yeah, for sure.
So it took me a couple of yearsafter the blog launched, to get
on to this idea that there is abig difference between, it
doesn't make sense to paysomebody to pick stocks and time
the market, right, which is kindof the traditional model of a
lot of advisors. Versus itdoesn't make sense to pay
(28:28):
someone to deliver value addedservices that don't involve
either of those two activities.
That and I still see a lot ofpeople blur those two things
together, right? From time totime, I still hear people say
this, like, you know, you wrotethis blog about DIY Investing,
and now you're an advisor. Now,they don't quite call me a
hypocrite, but I get that that'sthe subtext. cheriya. Right. And
(28:51):
it's like, why would anybody payyou when they can just read your
blog or your book and do itthemselves? To which my answer
is, they should and 1000s ofthem do. But there are a lot of
people who for many reasons thatwe can talk about, just aren't
suited to be do it yourself.
Investors, right. Yeah.
Preet Banerjee (29:09):
And I think I say there's probably two broad
strokes I can make with that.
One is planning as opposed toinvestments. And the other is
behavior and coaching. Yep. Sodo you want to talk about those
two aspects of because I thinkyou're absolutely right. I think
there's so many people who sortof see it as well. Here's this
prescription, why would I payfor anything over and above that
(29:31):
because part of that ethos iskeeping costs low. And by hiring
an advisor, I'm, you know, 10xin my cost, right? So they feel
that there's some kind of adisconnect. So let's talk about
what you should be getting ifyou are using a financial
advisor.
(29:58):
If you're a regular listen to mypodcast, chances are you already
know Dan and his work. I'mcompletely biased as he's a good
friend of mine. But I'm going tosuggest that a great way to show
appreciation for his work, ifyou're already familiar with it,
is to buy a copy of his book togive to someone else, perhaps a
great Christmas or holiday orbirthday present. And if you are
(30:19):
not familiar with his work, butwant to know more about low cost
index investing, this bookspells out how you can get
started whether you have $1,000or $1 million. Once again, the
book is titled reboot yourportfolio. And now back to the
conversation with Dan Bortles.
Dan Bortolotti (30:48):
Yeah, so if you're using a financial
advisor, I think you have to askyourself exactly that question.
What am I paying? And what am Igetting? Right. And if you're
paying, you know, a very highfee to someone whose only value
proposition is they can pickstocks and make forecasts that
will help you beat the market.
That's a bad place to beginfrom, right. But like for an
advisor, what where can anadvisor add value? I mean, you
(31:11):
touched on the first one, whichis planning. So here we're
talking about, you know, what Ilike to talk about how to deploy
your surplus savings. So let'sassume that you're starting from
the premise that you arespending less than you earn,
because if you're not, there'snot a lot we can do for you. But
if you are and you're saving,what's the best way to use that
(31:31):
surplus income? Should you paydown your mortgage a little
faster? Should you invest? Ifyou invest as a TFSA make more
sense than an RSP? If it's anRSP, maybe a spousal plan is
better than a regular RSP. Soall of those sort of personal
finance decisions that mostpeople don't even have the
interest or the inclination tokind of research and do. Then
there's the ongoing planning, ifyou're thinking about retiring,
(31:57):
for example, one of the thingswe deal with all the time with
clients, you know, I want toretire in five years, do I have
enough money? If I do, how muchcan I spend in retirement? When
do I take my Canada Pension Planand Old Age Security benefits,
right, all those sorts of thingshave nothing to do with
investing. And those are notstraightforward. back of the
envelope calculations, you needproper planning software and the
(32:19):
skill to use it. Right. So thoseare not usually DIY tasks. And
then maybe the most importantone is the behavioral piece that
you mentioned. You know, it isvery easy in theory to build a
diversified portfolio and holdit for the long run. In
practice, it is much moredifficult. Every time people add
(32:40):
money to their portfolio, ifthey're saving regularly, it is
an opportunity for them to tryto time the market, right? It's
very easy to say, well, youknow, add a few $100 a month to
your RSP and invested in adiversified portfolio for 20
years. Most people don't dothat. They invest lump sums from
(33:00):
time to time, they agonize overwhether now's a good time, they
build a diversified portfoliothat has four or five different
funds, there will always be somethat are up and some that are
down, they're going to secondguess every time one goes down,
maybe I should have bought lessof that maybe I should have
bought this other one that wentup. So there are all kinds of
ways to go wrong. And I thinkfor a lot of our clients, for
(33:25):
example, we earned our keep inMarch 2020. When you know the
market just, you know, hit thefloor in about what two weeks,
it was the most difficult twoweeks of my career, that's for
sure. We spent a lot of time onthe phone talking people in from
the ledge, and encouragingpeople that even though it
didn't feel like the right thingto do, we should be selling
(33:47):
bonds and buying stocks nowafter they fall in 30%. And that
was tough to do. And I'm notgoing to pretend that it wasn't
stressful for me. I mean, I waspacing the office every day felt
like it was going to throw up afew days because it was just so
difficult to watch. But in theback of my mind, I always knew
like this is what we're here forher. And now we have a plan in
(34:09):
place. And now it's time toexecute it. And we did it and
you know, we caught in therebound was much faster than
anybody expected. But the pointwas that, you know, we stuck to
the plan. I don't know how manyindividual investors did that.
I'm sure many did. But but I'msure I know for a fact many many
bailed. Yeah. And
Preet Banerjee (34:31):
you know, it's kind of ironic in that the the
market action was so fast.
There's probably a bunch ofpeople who don't even notice.
Just not having looked at theirportfolios, like what what
happened last month? Wow. Let metell you a story about back when
I was I was I was a full servicebroker. And this was during
2008 2009. And I remembertalking because you know, the
(34:55):
world was going to hell backthen. Right. And I was talking
To another stock broker who'sbeen in the business at that
point, 3040 years, somethinglike that. And we were chatting,
and I asked him, you know, whatwas it like being on the desk in
87? Right, during that, that daywhen the markets tumbled 20 plus
percent or whatever it was. Hesaid, Preet, let me tell you,
(35:16):
that was a walk in the parkcompared to what we're going
through right now. So 2008 2009,and he said, with that, it
happened and it was over. Right.
And it was quick, it was it wasincredibly stressful. But it was
over with the great financialcrisis, it was, you know, 18
months or whatever. And it wasmonth after month of, you know,
(35:40):
talking to clients walking themoff the off the edge, constantly
second guessing yourself as towhat was actually going to
happen in the world. And, and hetold me said, you know, I'm I
went to go see a psychiatrist,I'm on, you know, happy pills,
as he called them. Like, it wasjust incredibly stressful. And
at the time, like, this guy wasmanaging a huge book of
(36:02):
families. And so he really worethat. And, you know, I asked,
What are you doing in yourportfolio? Like, I am just, you
know, buying more when whenthings are down, and you know,
rebalancing all that stuff? Easyfor him. But it's so much harder
when you're dealing with otherpeople's money. In any case,
yeah, for people who think thatit's easy, it is not easy.
Dan Bortolotti (36:25):
Well, I would say that that's an interesting
time to bring up was the 87crash, which I don't remember
it. I mean, that was in highschool or something. I sure I
heard about it, but I didn'thave it any meaningful
connection to me, but 2008 2009I definitely remember. And
you're right, compared to say,because I was not an advisor at
(36:46):
that time. So the only realmassive crash I've experienced,
you know, as an advisor was the2021. And as you say, it
happened so quickly, that andthe recovery was so swift, that
if you just were a deer in theheadlights, you were actually
probably just fine, right? Andthat's why a lot of people
nowadays, I feel like especiallyyounger investors have
(37:08):
overestimated their risktolerance, because they say
things like, I'm fine with aportfolio of 100% stocks. I'm
okay with the volatility. I evengot through, you know, the 2020
crash, which again, was a bigcrash, but it lasted six weeks.
I would like to say, talk tosomebody who not only endured,
(37:30):
Oh, 809. But you know, what Ithink was even worse was 2000 to
2002, which was after the.combubble burst, because we had
three consecutive years ofnegative equity returns
something that has not happenedbefore, and or since. And so
it's one thing to say, Yeah,bear markets happen. And we'll
(37:52):
get through them. It's anotherthing when you have three
consecutive years, I cannotimagine being an advisor during
that period and trying to sitacross from a client saying,
Yeah, you know, equity marketswere down last year, but this
year, we expect things to getbetter, whoops, nope, another
negative year, next review,meeting, same conversation,
third year, bang, they went downagain, at some point, those
(38:13):
clients are gonna say, you know,what, things are different now,
right, we can no longer rely onstocks to deliver, you know,
growth in our portfolio. And howmany people who didn't bail
after the first year, finallyhad had enough and packed it in
after the third year? Well, thenwhat happened? I mean, we had
this huge bear market from 2004to 2007. And all those people
(38:35):
missed out on it. So it reallyis a matter of do you know, when
you assess your own risktolerance, you have to
appreciate the fact that youprobably have not endured, what
the market can really hand toyou unless you've been investing
for 20 plus years. You know,younger people just are not in
that situation. I'm not in thatsituation. And just
Preet Banerjee (38:57):
because I think some people might pointed out
2000 or 2000, he said, bearmarket, but you meant
Dan Bortolotti (39:01):
sorry, bold.
Yes, yes, sir. There are bigrecovery in the following the
Preet Banerjee (39:05):
you know, it's interesting as you bring up, the
tech crash is so in front ofyou, I've got a couple of books.
So our friend Andrew Helms, newbook, balance, I got a preview
copy of that. There's your book,reboot your portfolio, and then
beside it, there's a book that Ipicked up, and it's called
Electronic day trading to win.
And I don't want to, I don'twant to crop on these guys too
(39:26):
much. But this book waspublished in 1999. And the
reason I bought it just recentlywas to take a look at some of
the things people were sayingbefore the tech bubble
collapsed. And I'm not saying I,I do not know what is going to
happen to markets tomorrow inthe next five years in the next
10 years. But I do hear a lot ofthe same things that we were
(39:48):
hearing back in the late 90s Interms of, hey, you know, maybe
growth stocks are just the newnormal and everything has in
fact changed. And so you'rehearing A lot of the same things
now where anyone and everyone isgiving you stock tips, anyone,
and everyone is recommendingcryptocurrencies. And when you
drill them a little bit, yourealize they don't actually know
(40:09):
what they're talking about. Andyet they're so incredibly
adamant about it. And so itfeels like we're in this, this
new era of investing in a sense,because as you mentioned, you
know, you've got a lot of peoplewho don't really understand what
a market crash, a downturn feelslike, they don't really
(40:30):
understand what volatility cando. And part of it is this, I
don't know, this new wave ofinvestors who are galvanized and
almost insulated fromprofessional advice, because
they've grown up under this. Iknow two or three instances
where Wall Street has beenbailed out on the backs of the
the little guy, there is this usversus them mentality, which is
(40:53):
fueled things like Wall Streetbets, that forum, trying to
stick it to the hedge funds, buythe dip. And so there's this
militant sort of perspectiveabout investing. And with
anything, though, the one thingthat I always go back to is it
works until it doesn't. Andpeople don't really understand
(41:13):
the gravity of that statement.
So again, I'm not saying I haveno idea what happens next, the
market can stay irrationallonger than people can stay
solvent. But what do you say tothe people who are starting, you
know, investing with, you know,cryptocurrencies where, and
(41:34):
we've talked about this, whereputting them into 100% stock
portfolio was de risking whatthey have now, what do you say
to people who are looking atinvesting not as, you know, this
discipline, long term, boring,which can be beautiful process,
but more as, partlyentertainment?
Dan Bortolotti (41:55):
Yeah, I think that, you know, the, the
specifics have changed, right.
And the distractions aredifferent now. But the overall
idea that humans are nothardwired to invest in a, you
know, boring, diversified longterm portfolio, that hasn't
changed, right? So I'm trying tolook at it, as you know, we, if
(42:17):
you should study past bubbles,and past, you know, irrational
exuberance, and things likethese, and try to take some
lessons, even though thespecific things that distracted
people were different. So wetalked about the.com. Bubble,
for example. You know, I Theexample I like to remind people
(42:38):
about that one is, in that case,it wasn't crypto, it wasn't meme
stocks, it was just tech stocks,right. And the basis of the idea
in the 1990s, that caused themarket to become a bubble was
that the internet was going tochange the world. Right? Now I
say that I was like, of courseit did. Like they were right.
(42:58):
Right. It's just that theyweren't right about the specific
stocks to pick. So even if youhave the right idea about where
the market is headed, trying tocapitalize on that is incredibly
difficult. And I think thatthere's a parallel here with
crypto, right, I'm not going topretend I understand that much
about it. But I will say, thetechnology is amazing. Its
(43:21):
potential for changing the waywe spend and the way commerce is
conducted is real, right. Butthat's not the same thing as
saying, If I buy Aetherium,today, I'm gonna make a lot of
money on it, right? We don'tknow how that is going to shake
down over the next 1020 years.
So I think we should stop tryingto convince ourselves that we
(43:46):
know the opportunities, we canidentify them now. And we will
profit from those in the longrun. Because whatever you think,
you know, the market alreadyknows it. And there's way
smarter people out there thatknow more than you do. So we
have to try to get distractedfrom thinking about investing as
a series of transactions thatare based on, you know, some
(44:08):
forecasts that we've made, andjust try to take a step
backwards and remember whatinvesting is, it's an attempt to
put, you know, our hard earnedmoney into the global economy.
And as it grows, our money growswith it. It's not foolproof,
it's not exciting. But it'sinvesting in businesses that
(44:31):
have an expectation to makemoney over the long term, are in
the case of bonds. It's lendingmoney to borrowers who will pay
you interest, you know, in orderto to have your money. So that's
all it is. It's not veryexciting. And there will always
be things that are more excitingand worse. I mean, FOMO is a
huge problem with people now.
Right? I mean, it's very, I havediscussions with people who all
(44:54):
they want to talk about is theirsuccess stories about how you
know this and that This stock orthis and that crypto, you know,
went way up? I can't comparewith that in terms of exciting
stories, but I'm not interestedin it. But I understand why
other people are
Preet Banerjee (45:10):
right. So it's Yeah, I think one of the things
that I've sort of started tochange my perspective on in the
last little while is just howimportant the entertainment
factor is for so many people.
And there are some people wherethey are in a position where you
could sort of say, Hey, listen,here is a way to invest that is,
(45:30):
you know, evidence based, it'sdisciplined, it's prudent, and
what have you, and there's somepeople who are just never gonna
get there. And I'm not talkinglike a small percentage, it's a
big percentage of people wherethe entertainment factor is a
dominating factor in terms oftheir what they do with their
investments in their portfolios.
(45:52):
Now, that being said, thecryptocurrency craze has been so
pervasive that I imagine youprobably have some clients who
say, Hey, I know that, you know,we're in this couch potato
thing, but what about 5%? Incryptocurrency? You get
questions like that?
Dan Bortolotti (46:08):
That's the most common question I get from
clients.
Preet Banerjee (46:11):
And what do you tell them? Well, I,
Dan Bortolotti (46:13):
I tell them, you know, the first thing is to be
respectful of the fact that, youknow, people are interested in
this, and they see it as anopportunity. So I, you know, I
don't I don't jump all over it,but I say to them, let's look at
this a couple of ways. Beforecrypto, people used to ask us
the same question about gold.
Say, right, why don't we holdgold in the portfolio? And I'd
say, Well, you know, youprobably could add a small
(46:37):
allocation to gold. And it wouldbe a decent diversifier. But you
know, at the end of the day,gold, you know, doesn't grow in
and out, you know, WarrenBuffett was always explained
this way, like, you know, gethave a cubic yard of gold, and
20 years from now, it's stillthe same, it doesn't pay any
yield. It's not like a business.
(46:58):
So what is its value based on?
We don't really know. And sobecause we don't really
understand how to value it. Wedon't include it in the
portfolio, it's unnecessary. AndI would say with crypto, it's a
whole level different, not onlydo we not know how to value it,
I mean, at least gold we can sayhas had value as long as humans
have been around. Right? It hasbeen a store of value. It has
(47:22):
practical use in jewelry andindustrial applications and
things. I don't think we reallyknow what crypto is right now. I
mean, it's difficult to spend,right? When people buy it, their
hope is just to sell it tosomebody else. Right? And this
is the greater fool theory, theycall it right. So until this has
any utility, and until it hassome way that we can value it. I
(47:47):
don't think it makes sense as anasset class in a diversified
portfolio.
Preet Banerjee (47:54):
Have you heard of the EMH theory? I have heard
of the EMH theory. And you knowwhich EMH theory I'm talking
about? Well, I
Dan Bortolotti (48:00):
think you mean efficient market hypothesis,
Preet Banerjee (48:02):
the Alon Markets Hypothesis theory, which is, I
think it was a Bloombergjournalist, journalist, Matt
Levine, who wrote about it. Andhe talked about how now things
are being dominated by if ElonMusk is tweeting about it,
that's what drives value. And iscompletely detached from from
fundamentals, I'll give him whenhe, when he starts talking about
I'm gonna buy whatever, shibuinew dog or whatever, which is
(48:25):
the dog that Dogecoin is modeledafter, and it causes a massive,
like, multi billion dollar flowof assets into these
cryptocurrencies. Somethingisn't right.
Dan Bortolotti (48:36):
Yeah, and once you go down that road, it's,
it's a slippery slope. And Iworry too, about, you know,
looking back in a few years andgoing wow, I just wish we had,
you know, pushed back a littlebit more. And, you know, said
look, our job as advisors hereis to be the adult in the room
and not to give way to every,you know, trend and every, you
(49:01):
know, flavor of the monthinvestment. Now, saying that we
could turn out to be dead wrong,right? We could be we could
sound like the advisors wholooked at ETFs and index funds
15 years ago and call it a fad,right? And proven wrong, and we
could look very stupid. But Ithink at the end of the day, our
(49:22):
job is to say, No, it's notready or we're not ready yet to
add this asset class to aportfolio. Yeah,
Preet Banerjee (49:31):
in you know, it's um, sometimes when I'm
talking to people and they ask,Have I missed the boat on
cryptocurrency? I don't know.
Maybe you've avoided an iceberg.
I have no idea. But what I cantell you is if you're worried
about the world leaving behindbecause everyone starts adopting
blockchain technology, which isI think, is the more interesting
part of the whole cryptocurrencyworld. I would say listen, the
(49:54):
companies that are in a broadlydiversified index fund will take
advantage of this technology andif it does, too, Ride drive
value for these companiesbecause of what it pretends to
offer, you'll participate inthat too, right. And so, and
that's almost necessary if theblockchain technology takes off
and is adopted by all these bigcompanies, which is part of the
(50:14):
promise, then these companiesthat are publicly traded by
adopting this technology willbenefit from it. So don't feel
like you've missed the boat, youcan just sort of stick to the
the ethos, which is buyeverything, and the winners will
win, the losers will lose,you'll have them both. But in
the end, you're going tooutperform the average investors
(50:35):
actively trading.
Dan Bortolotti (50:35):
That's right.
And you know, you don't knowwhich, which stocks are going to
grow because of this change inthe economy, right? You might
think you do. But just like inthe tech bubble, people got the
thesis, right, which was thetechnology was gonna change the
world, they just usually got thecompanies wrong. The way to get
around that is by buying a totalmarket index fund that holds
(50:56):
virtually every publicly tradedcompany, and then you're
guaranteed to have all thewinners in the portfolio right?
From the very beginning. Yeah.
Preet Banerjee (51:08):
Alright, so we've covered a lot of ground
here. This has been reallyinteresting. We will probably
continue chatting after I hitthe stop record button. Because
that's what Ben and I do. Andany case, let's, as you know,
everyone on the podcast gets,you know, the last couple
minutes for a commercial,obviously, we're here to promote
(51:29):
your book, but why don't yousort of give your own personal
plea to people about the newbook, reboot your portfolio?
Dan Bortolotti (51:35):
Yeah, so the book should be available online,
right now for pre order at allthe usual suspects, Amazon and
indigo. And if you are soinclined, that you know, really
appreciate it too, for peoplewho are interested in supporting
local bookstores. Many of them Ithink, will be carrying it,
we're doing our best to getdistribution to the bookstores
(51:56):
as well. If your bookstoredoesn't have it, ask them for
it. So again, it's called rebootyour portfolio. And if you're
interested, I will say the bookdoes go through step by step on
the investment process. But Iconsciously avoided mentioning
specific ETFs in very muchdetail. I didn't include any
model portfolios or anything. Sobecause I knew people just skip
(52:18):
to the back and look at theportfolios, and I wanted them to
understand the process. Butafter you read the book, if you
want to visit Canadian couchpotato calm, you will find model
ETF portfolios there,
Preet Banerjee (52:29):
and what's the due date on restarting the
podcast?
Dan Bortolotti (52:33):
Thanks. Great.
I'm gonna make that one. TBD.
Preet Banerjee (52:36):
There we go.
Very good. All right. Dan, thankyou so much for coming on the
show.
Dan Bortolotti (52:39):
My pleasure.
Thanks for having me.
Preet Banerjee (53:01):
Coming up in January, I'm going to have
another friend of the show onyou might know him as the
millionaire teacher, whereby hisreal name Andrew Hallam. Andrew
has a new book launching in thenew year. And so what all this
really means is that there are afew more sporadic episodes of
the podcast coming up in thefuture. Now I won't be getting
back to a regular publishingschedule anytime soon. Not that
(53:24):
I ever had one. But staysubscribed for when any future
surprise episodes are released.
If you want more personalfinance content, you can always
follow me on Twitter orInstagram. It's the same handle
in both cases at Preet Banerjee,also have two YouTube channels,
you can subscribe to my mainchannel which covers personal
(53:45):
finance and investing topicsthat are more universal in
scope, and a Canadian specificchannel as well. That is it for
this episode. Thank you so muchas always for listening
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
Las Culturistas with Matt Rogers and Bowen Yang
Ding dong! Join your culture consultants, Matt Rogers and Bowen Yang, on an unforgettable journey into the beating heart of CULTURE. Alongside sizzling special guests, they GET INTO the hottest pop-culture moments of the day and the formative cultural experiences that turned them into Culturistas. Produced by the Big Money Players Network and iHeartRadio.