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Breaking Down My Investment Portfolio — Transcript

by Ben Felix · 3,781 words · 571 segments · language en · Watch on YouTube

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0:00This video explains exactly how I invest
0:02my own money and where my views on money
0:04and investing come from. My friend Brian
0:06Portnoy is releasing the second volume
0:08of a book titled how I invest my money,
0:10which is a collection of essays from
0:12people in personal finance media about
0:14how they handle their own money. I wrote
0:16a chapter for the book and parts of what
0:18I'm sharing in this video come from that
0:20chapter. The book is available for
0:22pre-order now and I will put a link in
0:24the description. To be clear, I have no
0:26financial stake in the book, but I am
0:27grateful that I was asked to contribute
0:29to it. I'm Ben Felix, Chief Investment
0:31Officer at PWL Capital and I'm going to
0:32tell you how I invest my own money. You
0:35might not be surprised that my portfolio
0:36is pretty boring. For the most part, I
0:39own one public equity fund, which I'll
0:41talk more about, and I I do have one
0:43private equity holding, which you may be
0:45surprised by. I have the house that I
0:47live in and I've got a bit more cash
0:49than I probably need. A couple of those
0:51might surprise you. I've been vocally
0:53skeptical of private market investments
0:55and I've explained many times why
0:56renting a house is perfectly fine.
0:59Listen, personal finances are personal.
1:01I'll explain my thoughts on each one in
1:03a bit. Before I go into detail about how
1:05I invest, I think my upbringing,
1:07education, and early career provide
1:09important context for how I think about
1:11investing and money more generally. I
1:13grew up on the campuses of what I would
1:15call elite boarding schools in Canada.
1:17When I was a kid, my dad was a teacher
1:19and the housemaster of a boys dorm at
1:21Shawnigan Lake School in British
1:22Columbia, Canada. We lived on the
1:25incredible campus of the school in a
1:27house attached to the dorm that my dad
1:29was running. My family was not wealthy
1:31by any means, but we were comfortably
1:33middle class. I have nothing to complain
1:35about here, to be clear. But the
1:37interesting thing for me was that most
1:38of the students coming through that
1:40school were from very affluent families,
1:42while I was not. When I was in ninth
1:45grade, my dad took a job at Brentwood
1:47College School. Our family moved into a
1:49similar situation. We were again living
1:51on an elite boarding school campus and I
1:53was again surrounded by this extreme
1:55wealth without having it myself. Looking
1:57back on that time, it taught me a lot
1:59about money. Some of my peers who
2:01generally came from, again, very
2:03high-income families, had great families
2:05and stable lives, while others had very
2:08stressful family lives and a host of
2:10social and psychological problems to
2:12show for it. Looking back, I think some
2:14kids were sent to those schools to
2:16excel, while others were sent there
2:18because their parents didn't know what
2:19to do with them. This taught me
2:21firsthand that having access to lots of
2:23money does not necessarily create a good
2:25life for either adults or children. I
2:27didn't know it at the time, but I know
2:29now that there's research supporting
2:31this. An influential 2005 paper found
2:33that affluent kids in their sample
2:35showed elevated rates of substance
2:37abuse, anxiety, and depression. The
2:39authors pointed to two main culprits:
2:41excessive pressure to achieve and
2:43isolation from parents, both literal and
2:45emotional. Family wealth does not
2:47automatically confer mental well-being.
2:50The authors also cautioned that parents
2:52should be conscious of the risks that
2:53can stem from wealth and status.
2:55Believing that Ivy League educations and
2:57lucrative careers are critical for
2:59children's long-term happiness can have
3:00costs to their mental health and
3:02well-being. What I find even more
3:04interesting is that the broader
3:05relationship between life satisfaction
3:07and income is a lot weaker than you
3:09would intuitively expect. A 2018 global
3:12study measuring income satiation, which
3:15is the income level above which
3:16happiness stops improving, found that in
3:18North America life evaluation leveled
3:20off around $105,000 of income, which is
3:23around $137,000 today, adjusting for
3:26inflation, and day-to-day happiness
3:28leveled off around $65,000 in the study,
3:31or about $85,000 today. In some regions,
3:33including North America, life evaluation
3:36declined in this study at the highest
3:37income levels. The authors speculate
3:39that this can be attributed to more
3:40demands on time, less leisure time, more
3:43materialism and social comparison, and
3:46living in more expensive neighborhoods,
3:48all of which tends to follow from a
3:49higher income. Counter to the idea of
3:52satiation points, a 2021 US-based study
3:55using smartphone check-ins found that
3:57both day-to-day happiness and life
3:59satisfaction kept rising with income
4:01with no plateau. A 2023 adversarial
4:03collaboration between two sets of
4:05authors set out to determine whether
4:07there really is a plateau once and for
4:09all. They found that happiness does keep
4:11rising with income for most people, but
4:14plateaus for the least happy people.
4:17It's important to note that these
4:17studies measure income on a log scale,
4:20step up in happiness is a doubling of
4:22income. And even then, the relationship
4:24is weak. The correlation is 0.09,
4:28and the gap in median happiness between
4:29household incomes of $15,000
4:32and $250,000 is about five points on a
4:35100-point scale. A fourfold difference
4:37in income has about the same effect on
4:39happiness as being a caregiver for a
4:41disabled or elderly family member,
4:43roughly twice the effect of being
4:44married, about the same as a weekend,
4:47and less than a third the effect of a
4:48headache. In short, money helps, but it
4:51far from guarantees a good life from the
4:53perspective of life satisfaction. I saw
4:55this firsthand growing up surrounded by
4:57peers from families whose wealth far
4:59exceeded my own. This experience and the
5:01research supporting it shapes how I use
5:03and invest my own money today. It also
5:05shapes how I talk to my kids about
5:07money. Not all of my financial decisions
5:08are made with the sole intent of
5:10maximizing wealth. Following high
5:13school, I went and got a degree in
5:14mechanical engineering while on an NCAA
5:16Division 1 basketball scholarship at
5:18Northeastern University. I I wasn't very
5:20good at basketball. I'm 6'10" if you
5:22guys don't know that. Uh after my
5:25degree, I continued both basketball and
5:27my education back in Canada. I knew I
5:29didn't want to work in engineering, so I
5:31decided to do an MBA with a
5:32concentration in finance. I figured if I
5:35couldn't play pro basketball, an MBA was
5:37the next best thing. Two experiences
5:40during my MBA shaped how I invest and
5:42really the rest of my life. Just like
5:43subscribing to this channel could shape
5:45the rest of your life. You should
5:47subscribe if you haven't already. The
5:48first experience was a year spent
5:50selling insurance and actively managed
5:52mutual funds, which stemmed from what
5:54started as an internship program through
5:55my MBA program. I had assumed, like many
5:58people do, that financial advice is all
5:59about advice, and that advisors act in
6:02the best interest of their clients in
6:04providing that advice. I learned quickly
6:06that many parts of the financial
6:07services industry are more focused on
6:09sales
6:11than advice. Unfortunately, high-fee
6:13actively managed mutual funds, which I
6:15was selling at the time, are the last
6:17thing most people actually need in their
6:19lives. I've got a pretty good story
6:21here. I was interviewed for a column in
6:22The Globe and Mail in May 2013. I talked
6:25about how I personally invested in the
6:27Fidelity Dividend Plus Fund, which was
6:29true. At the time, I was eking out a
6:30meager living selling mutual funds and
6:32insurance. I figured the interview would
6:33be a good way for me to get my name out
6:36there. Instead, I got eviscerated in the
6:38comments.
6:39Eviscerated. The Globe and Mail have,
6:41unfortunately, since changed their
6:43comments engine, and those
6:45life-changing, in hindsight, comments
6:47are no longer visible on the article,
6:49but they were harsh enough for me to
6:50seriously question what I had learned in
6:52my brief time in the industry so far,
6:55which had mostly come from the fund
6:56companies themselves. Having come from
6:58an engineering background, I I did have
7:00a feeling that something was missing
7:01from what I was being taught about
7:03investing. I wanted rigorous analysis
7:05and evidence, but instead, there were
7:07lots of sort of vibes,
7:10platitudes, and cherry-picked data to
7:12support different narratives. I guess
7:14it's obvious in hindsight. I I was
7:15trained as an engineer and had barely
7:17started taking finance classes for my
7:19MBA program when I was working selling
7:21mutual funds and insurance. Listening to
7:23the experts at fund companies seemed
7:25sensible enough. After my comment
7:28section evisceration, I did what I
7:29should have done from the get-go and
7:31dove into the academic literature.
7:33Research on mutual fund performance goes
7:34back to at least Michael Jensen's 1968
7:37paper, which found that actively managed
7:39mutual funds, on average, failed to beat
7:41a buy-and-hold market portfolio after
7:43costs.
7:44The finding has held up remarkably well
7:46since then. A 2010 paper asked whether
7:48the funds that do beat the market are
7:50skilled or just lucky. After fees, most
7:53funds in that study did worse than you'd
7:54expect from luck alone, and even the
7:56funds with strong track records mostly
7:58looked lucky rather than skilled. Very
8:01few managers showed enough skill to
8:02cover their costs. A 2023 paper looked
8:05at nearly 8,000 US equity mutual funds
8:07from 1991 to 2020. Over the full sample
8:10period, 69.7%
8:12of the funds trailed a simple S&P 500
8:15index ETF. When they adjusted for how
8:18much market risk each fund took, most
8:19funds had negative returns relative to
8:22the index. Once I started to understand
8:24this, I figured I needed to just get out
8:26of this industry altogether because what
8:28I was seeing in practice was so far away
8:30from the decades of academic literature
8:33that I had then read. The second
8:34personal breakthrough during my MBA was
8:36a corporate finance lecture where I
8:37learned about the Fama and French
8:39three-factor asset pricing model. Fama
8:41and French found that the price of risk
8:43in the overall market did an
8:44insufficient job of explaining why
8:46different portfolios earned different
8:48average returns, but adding a size
8:50factor and a value factor explained most
8:52of the remaining difference. During some
8:55casual Google searches for Fama and
8:57French, as one does probably on a
8:59weekend, I learned that their research
9:01was actually being used to create
9:02investment products that were available
9:04in Canada. This was very exciting for me
9:06at the time. Their approach made sense.
9:08It was what my engineering education
9:10told me an investment product should
9:12look like. Instead of vibes and sales
9:14pitches, it was based on theory and
9:15evidence. So, I called Dimensional Fund
9:18Advisors and they shut down the prospect
9:20of me using their funds at the firm that
9:22I was working for at the time. That
9:24call, honestly, almost ended my career
9:25in financial services, but Dimensional
9:27called me back a few months later asking
9:29if I wanted to meet Cameron Passmore at
9:31PWL Capital. This was in 2013. Cameron's
9:35wealth management practice managed
9:36around 120 million in Canadian dollars
9:38at the time, but his practice was
9:40growing and he needed to hire someone. I
9:42joined him in the same year and I I
9:44never left. I'm still at PWL as as many
9:47of you know.
9:48Uh we now manage around 8 billion
9:49dollars for Canadian families, business,
9:51and institutions. So, we've we've grown
9:53a lot. Okay, after all that background,
9:55hopefully not too much background, I can
9:57now tell you how I invest my own money.
10:00I will tell you about my actual
10:02investments, my my assets that I own,
10:04but I want to emphasize that we also
10:05place my family also places a high
10:07priority on investing in our lives
10:09today. We have four kids.
10:11Time flies by as anyone with kids knows.
10:14We try to create memorable experiences
10:16for our family while still being
10:17responsible about our future. It's the
10:19same way we approach planning with
10:21clients at PWL Capital. Money is a tool
10:23for funding a good life, and a good life
10:25is about more than the size of your
10:27portfolio. This shows up in our
10:28long-term decisions about spending
10:30versus saving. We're also deliberate
10:31about investing in our health and using
10:33our money to buy time by outsourcing
10:35certain tasks. Okay, now I'll tell you
10:37about my my actual assets, which is
10:39probably what you want to hear about.
10:41Most of our liquid long-term financial
10:42assets are invested in one fund. Very
10:45simple, which I like. The Dimensional
10:47Global Equity Portfolio. This is a fund
10:49that PWL uses for many of our clients as
10:51well, though of course not every client
10:53is in an all equity portfolio like I am.
10:56The fund holds stocks from around the
10:57world with a larger allocation to Canada
11:00than its share of the global market.
11:01About a third of the portfolio is in
11:03Canadian stocks versus about 3% of the
11:06market. People love to debate whether
11:07home country bias makes sense. I did a
11:09video a while ago on why I think it
11:11does, at least to a point. Dimensional
11:13funds and therefore my own portfolio
11:15look a lot like index funds. They're
11:17low-cost, broadly diversified total
11:19market portfolios, but Dimensional funds
11:21are not technically index funds. They
11:23tilt towards smaller companies, lower
11:25priced companies, and more profitable
11:27companies. They also exclude certain
11:29stocks in in small-cap segment of the
11:31market. The tilts are based on research
11:33from Fama and French's 2015 paper, which
11:36updated their three-factor model that I
11:38learned about during my MBA to introduce
11:40two additional factors, profitability
11:42and investment. It improved the
11:44explanatory power of the three-factor
11:46model, and it's now what I would call
11:47the workhorse asset pricing model in
11:49academic finance. I do not own bonds. I
11:52have nothing against bonds. Many of PWL
11:54Capital's clients do own bonds in their
11:56portfolios, but bonds just don't fit
11:58with my personal tolerance or capacity
12:00for volatility in my investments. I've
12:03been all equity for a long time, but did
12:06get some sweet, sweet confirmation bias
12:08from a 2025 paper that supports a
12:10diversified all equity portfolio with
12:13about a third in domestic stocks and
12:14two-thirds in international stocks as
12:17the optimal portfolio over the life
12:18cycle for most people. To be clear, this
12:21paper does not mean that stocks are
12:23safe. Stocks are volatile, and an all
12:25equity portfolio will have deep
12:27drawdowns over time. In my view,
12:29flexibility in spending goes a long way
12:31to addressing this. We don't live an
12:33extravagant life, and our spending can
12:35be flexible if we need it to be. Okay,
12:37that part of my investments is pretty
12:39boring and what you might expect if
12:41you've been watching my videos for a
12:42while. This next piece has surprised a
12:44lot of people when I've talked to them
12:45about it. A sizable part of my portfolio
12:48is in private equity, specifically
12:50equity in PWL's parent company One
12:52Digital.
12:53I don't go looking for private market
12:55investments, and I've been vocally
12:56skeptical about private equity funds and
12:59private credit funds. And I think for
13:01good reason, research from Ludovic
13:03Fallopeau consistently finds that since
13:05at least 2006, private equity funds have
13:07delivered net of fee returns in line
13:09with public equities. While that's true,
13:11equity in PWL and now One Digital has
13:15been my most successful investment so
13:17far. Don't get me wrong, I know that a
13:19lot of that outcome comes down to luck.
13:21Some of it also has to do with the fact
13:22that it's not the type of private equity
13:24I usually talk about. There was no fund,
13:26no layers of fees, and no manager
13:28between me and the business I was
13:30investing in. It was a direct stake in a
13:32company I knew well and was personally
13:33helping to grow.
13:35Still, a lot of luck. Like
13:37trust me, I understand that. I received
13:39some stock options in PWL early on. I
13:41got some shares in exchange for formal
13:43ownership of the Rational Reminder
13:45podcast and this YouTube channel,
13:47neither of which anyone expected to
13:49amount to much when we started them.
13:51But, they went on to play a non-trivial
13:53role in the growth of the firm. And I
13:55bought some shares later on when I was
13:56permitted to do so. In 2025, PWL was
13:59acquired by One Digital for a valuation
14:02multiple above what employees had been
14:04allowed to buy shares at. When we were
14:06acquired, I rolled a large portion of my
14:08PWL equity into One Digital equity,
14:11which I continue to hold today. That was
14:13partially to defer tax, but it was also
14:15a very deliberate decision. You guys
14:17don't need to tell me that it's not wise
14:18to invest in the same company that pays
14:20your salary. That's like classic
14:22personal finance advice.
14:23I think it's a little bit different when
14:25the company's not public, and especially
14:27when it was PWL. We we traded at a
14:29valuation way below market prior to
14:31being acquired by One Digital.
14:33Valuation aside, the reality is I put a
14:36lot of my blood and sweat, figuratively
14:39most of the time, into this firm,
14:41working more hours than an employee
14:43would and personally directly driving
14:45clearly observable growth in the
14:46business.
14:47I know I'm taking on lots of
14:49idiosyncratic risk or company-specific
14:51risk by holding on to this one equity
14:53holding, but as weird as this may sound,
14:56it's idiosyncratic risk that I want to
14:58take. I'm not saying everyone should do
14:59this, and it would probably be
15:00considered bad advice if I encouraged
15:02others to follow my lead. But again,
15:04personal finance is personal. I've got
15:06enough diversified that I'll be okay.
15:09You guys don't need to worry. I have
15:11also put a lot of blood, sweat, and
15:13tears into the next asset, our home that
15:16we live in. I bought our house in late
15:182020 after renting for my my adult life
15:20prior to that. Renting was great. And
15:23unlike a lot of traditional financial
15:24advice would have you believe, it is not
15:26throwing money away. The flexibility of
15:28renting had been incredible. As my
15:31family grew, we bought a home for two
15:32main reasons. We were moving out of the
15:34city we were living in during COVID, and
15:37we couldn't find rentals we liked in the
15:38more rural area we we wanted to move to.
15:41And the other thing is that we were
15:42ready to stay in one place for a long
15:44time. Owning a home effectively locks in
15:46the cost of housing yourself in that
15:48specific home. So, an owned home behaves
15:50like a long-term bond indexed to the
15:52cost of living in that house. The longer
15:55you plan to stay there, the more
15:56valuable that protection becomes.
15:58Renting avoids the risk of house prices
16:00falling, but it leaves you exposed to
16:02rising rents. For a family planning to
16:04stay in one place for a long time,
16:06owning reduces that risk. I like my
16:08house a lot. Purely from a financial
16:09perspective though, owning our home has
16:11been by far our worst investment. The
16:15amount of money we have
16:16invested into the house to keep it up
16:18and running and to improve it, which we
16:21would never do to the same extent as
16:22renters, makes me want to Honestly,
16:24makes me want to throw up. When we
16:26rented, we knew exactly what our housing
16:28would cost each month. The cost of
16:29owning a home is a wild card. I don't
16:32even want to run the numbers on what we
16:34would have counterfactually invested in
16:36public markets and in PWL equity because
16:39of the way that the timing worked with
16:40that with that timeline, if we had just
16:43kept renting for a little bit longer.
16:45But I know, without running the numbers,
16:47that the opportunity cost of owning a
16:48home for for my situation, and again, a
16:51lot of that comes back to just luck and
16:53timing, but I know that opportunity cost
16:55has been astronomical. Now, that said,
16:57numbers aside, opportunity cost aside,
17:00owning a home has been the right
17:01decision for my family. Our kids love
17:03our home, they love their school, and
17:05they love our community. And as planned
17:08at the time when we made that decision,
17:09we have been in one place for more than
17:126 years at this point with no intention
17:13of moving. The last asset that I hold is
17:15cash. Well, technically a interest
17:18savings account that's paying some
17:19interest, not literal cash under the
17:20mattress.
17:21We currently hold more cash than we
17:23probably need to be holding, and I know
17:25that's suboptimal or could be viewed as
17:26suboptimal. Part of the reason is that
17:28we're still recovering from recent
17:30unpredictable renovation costs. It's not
17:32a strategic allocation. We have no
17:34specific plan for it. It's not a
17:36tactical allocation. I'm not timing the
17:37market with it. And really, it may not
17:40stay forever. But having a chunk of cash
17:42is is comfortable.
17:44We might invest it in the market
17:45eventually. Again, not from a market
17:47timing perspective. We just might We
17:49might spend it on the house. There's
17:50still more things we want to do around
17:51the house. We might spend it on
17:53experiences like like trips with our
17:55with our kids or or maybe some
17:57combination of those things. I don't
17:58really know. But for now, it simply
18:00feels good to have probably a bit more
18:03of a cash buffer than we realistically
18:05need. There is, of course, just like I
18:07mentioned with the house, an opportunity
18:08cost to having more than the necessary
18:10amount of cash, but there's also a
18:12psychological cost to a potential
18:14liquidity crunch. We're comfortable with
18:16our current trade-offs. That's the whole
18:17balance sheet. One low-cost, broadly
18:19diversified public equity fund, which is
18:21super simple to manage and think about.
18:25One meaningful private equity holding in
18:26the business that acquired the business
18:28that I helped to build. A house that has
18:30been a a bad financial investment, but a
18:33great home to live in. And some cash
18:35that provides enough psychological
18:36comfort to justify its opportunity cost
18:39for us.
18:41Not every one of those decisions is
18:43rational, and that's fine. There's more
18:45to a good life than the perfect
18:46portfolio, and nobody can agree on the
18:48perfect portfolio anyway. I've talked a
18:50lot in other videos about how money can
18:52and can't improve our lives and make us
18:54happier.
18:55Check this video out to learn more.

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