Your Complete Guide to Index Investing with Dan Bortolotti

Podcast 3: A Hedge Fund Manager Comes Clean

2018-09-27T19:07:40+00:00January 11th, 2017|Categories: Podcast|Tags: , , |35 Comments

The third episode of the Canadian Couch Potato podcast is now live. You can listen in your browser using the tool below, or download it using iTunes or your favourite podcasting software.

My first podcast of 2017 features an interview with Lars Kroijer, author of Investing Demystified, which will soon be released in a second edition. Based in the UK, Lars is a former hedge fund manager, but today he advises investors to give up the dream of market-beating returns in favour of a simple indexing strategy. As he says in our chat: “It’s my view that the overwhelming majority of investors have no chance whatsoever of beating the financial markets and they should act accordingly.”

Lars outlines his arguments in a new series of YouTube videos. The clips are well-produced and provide a good introduction to the principles of index investing.

What’s your expected return?

In the Bad Investment Advice segment, I scoff at an advisor who recently told one of my readers that he could expect 12% returns from traditional mutual funds. Then I encourage investors to challenge advisors and others who casually mention expected returns without explaining how they came up with their numbers.

For more guidance on expected returns, see the white paper I co-wrote with my colleague Raymond Kerzhéro.

Starting young

In the Ask the Spud segment that closes the show, my colleague Amanda Dalziel and I discuss whether it makes sense for young investors to have very aggressive portfolios. The conventional wisdom here is that young people should invest their entire portfolio in stocks, but I don’t necessarily agree with that advice.

While it’s true that people in their late teens or 20s have many decades before retirement, that doesn’t necessarily mean they have the fortitude to deal with the volatility of a 100% equity portfolio. Many young investors today think they have a high risk tolerance, but if you started investing after 2008 you really haven’t been battle tested. No one truly knows their risk tolerance until they have lost a big chunk of their savings.

My concern is that when we finally do have a nasty bear market, many new investors will be so shocked by the losses that they’ll be scared out of the market for years. There’s some anecdotal evidence this happened to millennials (and many older investors!) after the financial crisis of 2008–09.

Enjoy the podcast, and if you like what you hear, please take some time to leave a rating or review on iTunes.



  1. Nick de Peyster January 11, 2017 at 8:47 am

    “I scoff at an advisor who recently told one of my readers that he could expect 12% returns from traditional mutual funds.” Probably an extrapolation of past results? Unless one is fairly sophisticated, one would not know how to decompose the returns into the sustainable, unsustainable and reverting parts.

    Nick de Peyster

  2. Canadian Couch Potato January 11, 2017 at 9:28 am

    @Nick: I don’t think one needs to be particularly sophisticated to understand that a 12% expected return is absurd. Certainly anyone in the in the business of selling investments knows that, or he should be stripped of his license.

  3. Oldie January 11, 2017 at 11:39 am

    Leaving aside volatility considerations, which would be maximum at 100% Equities in your portfolio, isn’t there reasonable evidence that long term predicted return is actually optimized at a mix of around 80% Equities and 20% Intermediate Term Bonds (emphasizing again that volatility in this mix would still be quite high even with maximum appropriate index diversification)?

  4. Canadian Couch Potato January 11, 2017 at 11:49 am

    @Oldie: Not that I’m aware of. I think you’re referring to the idea that a portfolio of 80% bonds and 20% stocks is actually less volatile and than a portfolio of 100% bonds. (Counterintuitively, adding the risky asset makes the overall portfolio less risky.)

  5. Steph January 11, 2017 at 12:41 pm

    Absolutely love these podcasts, keep up the goodwork!

  6. Paul G January 11, 2017 at 2:04 pm

    I like the calculator, which just kind of forces us to consider the basic math of it all.

  7. Tom Sellers January 11, 2017 at 4:05 pm

    I don’t have iTunes installed (and don’t care to), and it does not seem the download link above works in Chrome or Brave for me. Indeed I cannot even get the podcast to play in either browser at the moment.

    I recall downloading the debut episode somehow. Not sure if this is my machine, or perhaps the website is got a glitch at the moment. Is there another way to download the podcast that is easy to accomplish?

  8. Canadian Couch Potato January 11, 2017 at 6:12 pm

    @Tom: The link above should work in Chrome or any other browser. You may have to adjust a setting on your system. I don’t think the problem is on this end.

  9. Russ January 11, 2017 at 7:36 pm

    An excellent interview with Lars Kroijer, despite the glitches with Skype. I especially appreciate the point that for the average retail investor, indexing is the way to go. I’m also happy to hear that you will have Charlie Ellis on next. If anything, I believe he will be an even more strident advocate of indexing.

    Just posted my 5-start review in iTunes.

  10. Jack B January 11, 2017 at 8:41 pm

    Not a new idea…Jack Bogle’s been saying this for 40 years. Bogle’s book “The Little Book of Common Sense Investing” is the only book the average investor needs to read.

  11. Chris January 11, 2017 at 9:18 pm

    First off, I must say I really appreciate the information you provide to us non-pros and I have subscribed to your site for a couple of years now.

    I may be one of the few who don’t like the podcasts. I find too much time is spent on general niceties and not enough on the details of the subject. I don’t really have a half hour to spend listening to non-relevant material.

    Please re-consider limiting the number of podcasts you do and increasing the number of written blogs. Thanks.

  12. lou cornelis January 11, 2017 at 11:46 pm

    echoing comments by chris. I can find what I want quickly in the written blogs but cannot do that with a podcast. given the clarity and deft touch of dan’s writing, I would love to see more of it, rather than less.

  13. Judy January 12, 2017 at 12:43 am

    Loving the podcasts! I was wondering what the 2 ETFs were that Lars would hold? Did I miss it? Thanks!

  14. Andy January 12, 2017 at 1:46 pm

    I’d love to share these with my friends in transcript format. Is there a transcript available or a plan to release transcripts in time with the podcast?

  15. Canadian Couch Potato January 12, 2017 at 2:04 pm

    @Andy: I don’t have any plans to publish full transcripts of the podcasts, which would be very time-consuming. However, if there is a specific segment you were interested in, feel free to email me and I will see if can send you something useful.

  16. Canadian Couch Potato January 12, 2017 at 2:13 pm

    @Judy: Lars isn’t tied to any specific products, which is a good thing. And because he is primarily addressing UK investors his fund choices would not be available here anyway. His recommendations correspond very closely to my three-ETF model portfolio, though as we discuss in the interview, he would tend to hold much less in Canada and proportionally more in the global equity ETF. For the bond part, any broad market bond ETF would do (such as VAB, ZAG or XQB), or if you prefer lower volatility use a short-term ETF such as VSB.

  17. Oldie January 12, 2017 at 9:28 pm

    In the podcast advice to the young investor regarding risk tolerance, I thought the contrasting example of the older investor with a 7 figure portfolio was not fleshed out realistically. Of course the older investor would tolerate a loss in value of a few thousand much more easily than the young investor would tolerate a loss of the same absolute value in the small portfolio. However, the older investor with a similarly small bond allocation would actually suffer the same proportional portfolio loss as the young investor if the large equity portion crashed. That would be a huge stress to any normal investor (even if, as an experienced investor, he or she had learned to be more hardened to such setbacks over the years, but I don’t think that’s what you or Amanda were referring to).

  18. Weekend reading: Considerably richer than you – Frozen Pension January 14, 2017 at 6:31 am

    […] An interview with Lars Kroijer [Podcast] – Canadian Couch Potato […]

  19. Paul Haskins January 14, 2017 at 10:49 am

    I really appreciate the podcast format as a complement to your blog. The podcast works well for me as I can listen in the car to and from work and the content reinforces the investing principles documented elsewhere.

    Great work Dan! Good content, well presented. Thanks for taking the time and effort to share your valuable insights.

    I’d be interested to hear about investing in non registered accounts on a future podcast segment.

  20. Jacky January 15, 2017 at 3:52 pm

    Hey Dan,

    I really liked your 3 podcasts so far.
    Great addition to your blog.

    Its great to hear from Lars Kroijer. Funny, I just got his book a few days ago from the library and will start reading it soon. Will also watch his youtube videos, thanks for the link.
    Interesting to see that he recommends a 2 ETF-Portfolio (and I thought your 3 ETF-portfolio didn’t have enough ETFs!).

    Definitely 30 useful minutes.

    Thanks for the calculator also!

  21. Brendan January 17, 2017 at 4:32 pm

    I look forward to the upcoming guests you mention. I’m a fan of Millionaire Teacher; it’s very approachable and I like to throw it at people when they need couch-potato-ing. You know, it’d be really exciting if you could get a big name like Bogle, Malkiel or Swedroe on here… just sayin’!

  22. Canadian Couch Potato January 17, 2017 at 8:13 pm

    @Brendan: Charles Ellis is a pretty big name! And I will certainly have Larry Swedroe on a future episode: we’ve already discussed it. Stay tuned.

  23. John January 22, 2017 at 6:49 pm

    I love the podcast. I wish though that you would get into a debate when one is merited. For example, yourself and Lars obviously have different views on how ‘local’ a portfolio should be – judging by your recommendations and I think a reader answer from another podcast. I would have liked to see some point, counter-point there.

    I realize of course that this is episode three and you are finding your groove but just an idea.

  24. Ariel January 27, 2017 at 9:13 am

    Excellent podcast, I would be interesting to have a complete discussion/reflexion about the home bias your portfolio might have.

  25. Canadian Couch Potato January 27, 2017 at 10:02 am
  26. HeatherB February 25, 2017 at 10:33 pm

    Hi, I watched all his videos and they make total sense to me. A question for a total novice then is: How/Where do you buy the “broadest, cheapest, index tracker for world equities?”

  27. Canadian Couch Potato February 26, 2017 at 4:02 pm

    @Heather: I would suggest simply using one of my model portfolios:

  28. Yvon March 4, 2017 at 10:46 am

    Hi Dan,

    As an avid podcast listener, I was very impressed by the content and production value of your first five episodes. Keep up the good work!!!

  29. Fred March 24, 2017 at 9:19 am

    Hi Dan, I am a long time reader and recent listener of your podcasts. Firstly, I would like to thank you for providing so much comprehensive investments information over your carrier. And I really enjoy listening to the postcasts on my way to and from work!

    I listen to your podcast with Lars Kroijer and I though he made an interesting point about home bias that I never heard before. He raised the question of looking at your investement portfolio as a whole and include all our assets, which for me would include my house (by far my most important asset). By looking at all my assets, my assets allocation in Canada vs. World is about 80% to 20%, but in terms of investments, 1/3 of my stocks are Canadian. How would you answer is argument that when we are determining assets allocations, we need to take into account all our assets already in Canada?

  30. Canadian Couch Potato March 24, 2017 at 10:26 am

    @Fred: I generally disagree with Lars on this point. While it is true that most of your assets are dominated in Canadian dollars, so are most (or all) of your liabilities. If a Canadian investors wants to hold only a tiny percentage of their equities in their home country, that’s fine, but they should understand that they will likely pay higher costs, higher taxes and take excessive currency risk:

  31. James September 11, 2017 at 10:58 pm

    This was a great interview! Thanks for posting the link to Lars’ videos. I’m going to use these to introduce my spouse to index investing.

  32. Daniel March 13, 2018 at 8:26 pm

    Are there any options of ETFs here in Canada that would track the global equity market? I could just find global ETFs excluding Canada.

  33. Canadian Couch Potato March 13, 2018 at 8:31 pm

    @Daniel: iShares MSCI World Index ETF (XWD) would be an option, though it does not include emerging markets.

  34. Mark September 27, 2018 at 6:25 pm

    Hi Dan, love your work! I think the calculator link is missing; as well the link to your whitepaper is broken.

  35. Canadian Couch Potato September 27, 2018 at 7:09 pm

    @Mark: Many thanks for the comment. The calculator was built with a plug-in that was later discontinued, so I had to delete it. I have fixed the link to our white paper. Cheers!

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