Episode summary
Is VEQT Costing You? (& Other Questions) | Rational Reminder 416
The Rational Reminder Podcast
· · 1 hr 7 min · Hosts: Benjamin Felix, Dan Bortolotti, Ben Wilson
Summary
The episode opens with a practical comparison between buying an all-in-one ETF like VEQT and assembling the four underlying ETFs separately. The hosts argue that the fee savings can matter in dollar terms, but the bigger issue is implementation: simplicity reduces rebalancing friction, analysis paralysis, and the chance of drifting from the intended allocation. They also note that VEQT’s fee has already fallen, narrowing the gap further, so the trade-off often favors the simpler solution for long-term investors, especially in smaller accounts or where the same asset mix is held across accounts.
From there, they broaden into portfolio construction and behavior. They treat global diversification as the default and question the idea that investors need to do something more complex to be “actually diversified.” The hosts argue that the global market portfolio is easy to own today, and that deviations from it should require a clear reason, such as tax, currency, or risk-management considerations. They also stress that defined benefit pensions should be viewed in the context of a financial plan rather than as a fixed-income asset, because the real question is how the pension changes a person’s ability, willingness, and need to take risk.
The episode also addresses why active management tends to lose its edge as assets grow and why individual investors usually should not assume they can beat the market simply by trying harder or doing more research.
Key takeaways
- The hosts say VEQT can still be worth using because the simplicity benefit often outweighs a few basis points of fee savings.
- They argue that global diversification is the baseline, and investors should need a specific reason to move away from it.
- They say defined benefit pensions affect risk capacity and planning, but should not be treated as a literal bond holding.
- They explain active management’s decline with scale as diminishing returns to scale: bigger funds have fewer opportunities that move the needle.
- They caution that individual stock-picking success is hard to distinguish from luck, even for thoughtful investors.
Notable quotes
“I simplicity to me is huge. It's like one of the most important things in investing, especially if you're diying it”
“we know from Morning Star's mind the gap report where they measure the difference between fund returns and the the returns that investors in the funds earn”
“why not own the whole market? It's not really that difficult to do anymore”
“you have to talk yourself out of the global market portfolio”
“the simple answer is is what's called diminishing returns to scale in active management”
How the episode opens
This is the Rational Reminder podcast, a weekly reality check on sensible investing and financial decision-making from three Canadians. We're hosted by me, Benjamin Felix, chief investment officer, Dan Bordalotti, portfolio manager, and Ben Wilson, a head of M&A at PWL Capital
World Cup edition. Not sure how far along we'll be by the time uh this goes to air, but uh it's the talk of the town these days. — Yeah, especially for you. It's uh not hearing a whole lot about it out in uh rural Quebec, but uh
Well, it's uh it's causing a little congestion here in Toronto for sure. — Yeah, — I can imagine — With the rickety temporary stands that they put up at the stadium. — Yeah, exactly. I'm not sure I'd want to sit on those for $3,000, but we'll see how that make how that goes.
All right, so we're back with another AMA episode. It's been been nice to get a few of these uh out because we hadn't done in a while. And uh we we've had this will be the second one in the last little bit.
So, that's good. And we still have like I don't know 300 unanswered AMA questions. So, if we have not yet gotten to your question, we are working on it.
We should be there by the next World Cup.
So, — I think we do have some good ones today, though. Uh, so let's let's jump into it. One of you guys want to read the first one? — I'll take the first one. I'll go ahead. — That's okay. Yeah, thanks. Um, uh, is there a point at which you think it would be worthwhile buying the individual component ETFs of an asset allocation ETF instead of the single ETF?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- portfolio construction
- diversification
- active vs passive management
- defined benefit pensions
- fiduciary duty
Companies and tickers mentioned
- PWL Capital
Watch the episode
Watch “Is VEQT Costing You? (& Other Questions) | Rational Reminder 416” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Rational Reminder Podcast, this episode and its artwork belong to Benjamin Felix, Cameron Passmore, and Dan Bortolotti. Octagon is not affiliated with the show; this page is an independent summary.
