Episode 394: Equal Weight vs. Market Cap Weight Index Funds

25:08Smaller companies tend to have higher volatility. I agree. That's exactly it. The additional risk of equal weighting does show up as volatility, like you said, Ben. If we look at the S &P 500 and the S &P 500 equal weight. The equal weight has quite a significantly higher 15-year standard deviation, like how much variability there has been in returns. It's been quite a bit higher for the equal weight fund. The reason, and Dan, you had this question when we were chatting about this earlier, the reason is that larger stocks that an equal weighted index underweights tend to be less volatile than the smaller and lower priced stocks that they overweight.

25:49And then another interesting point there is that equal weight indexes, just again, because of what makes up the smaller portion, the smaller companies in an index, equal weight indexes tend to be short the low volatility factor. So they've got more exposure to high volatility stocks, which is an independent factor relative to company size. So you can have small companies, you can have highly volatile small companies. They'll tend to be emphasized in an equal weighted portfolio. So that's the volatility piece. The other interesting piece, and it's related, but volatility is one way to think about risk.

26:24We can also think about risk from a multi-factor perspective. So like what kind of stocks does the equal weighted fund have exposure to? And it's really going to, you're going to end up with a tilt toward small caps. You're going to end up with a tilt toward value stocks. And again, if we go back to Fama and French asset pricing theory, those are theoretically being priced as riskier by the market. So again, come back to that question of is equal weighting riskier or safer? Okay. Well, it's more volatile. It's more exposed to stocks. The market is pricing as riskier. It's less concentrated, but then it's back to that question of is market concentration the right problem that we should be trying to solve with this tool with equal weighting.

27:04The other reason these things are kind of popular right now, that people are thinking about them right now, is market valuations. So I just mentioned that if you go equal weights, you're going to emphasize smaller and lower priced companies. Market cap weighted market valuations in the US market are high right now relative to their own history. I mean, they're just high. That one does have more of a relationship with future returns. So I mentioned market concentration of future returns, not a super strong relationship. But if you go and look at valuations and future returns, it's noisy, but there is a relationship there.

27:36And equal weighting does have this natural tilt away from the largest and the highest priced stocks. One way to look at that is the price to earnings and price to book ratios of an equal weighted S &P 500 fund and S &P 500 fund. The equal weighted is much cheaper on both metrics. That's kind of like part one. Okay. So what's equal weighting doing? It's reducing concentration in the biggest names. Cool. It's giving you a tilt towards smaller, lower priced companies and higher volatility companies. Cool. That's not necessarily a bad thing. People who listen to this podcast know that we talk about tilting toward certain types of companies as opposed to just accepting market cap weights all the time, although that is also a fine strategy.

28:21The problem with equal weighting is that if you want to get exposure to those types of stocks, there are probably more efficient ways of accomplishing that. So I will get into some more detail on that in a minute. But one other important point on equal weighting, there's probably a way to control for this, but from the ones I've looked at, they don't tend to control for it. Equal weighted indexes are going to tend to have materially different sector exposures. Actually, I guess there isn't really a way to control for it. I don't know how you would if you're equal weighting all the stocks in an index, that's it.

28:53Those are the weights. You than excluding stocks from certain industries, I guess. I wonder if there has been a equally sector weighted strategies where you take, what is there, 10 or 11 or 12 economic sectors, depending on which classification system you use and you allocate 10 % of the portfolio to each of the economic sectors. Obviously it's hugely skewed compared with the market as a whole, because small consumer discretionary retailers and things are going to be just naturally much smaller companies than tech giants. You could argue, well, you're getting sort of equal exposure to all of the various economic risks in the business community.

29:37But I don't know. I mean, it sounds logical, but I don't know if it's a thing. It's a thing. I don't know if there are products, but I didn't dig into it because it just wasn't the direction that I was going in. But there was a paper, an article, I can't remember what it was, that did talk about equal weighting countries and equal weighting sectors as a potential strategy. So it's something people have thought about and written about. The sector exposures with equal weighting, again, naturally, for the reason you said, Dan, the different sectors are represented at different weights in the market cap weighted index.

30:05Some sectors tend to be bigger because they have bigger companies in them. And if you go and equal weight everything, you're going to end up with a whacked out sector mix. And that's, again, taking on sector risk that's different from the market, I would tend to call that an unpriced risk, a diversifiable risk that most investors probably don't want to take. So again, if we look at these two S &P 500 ETFs, the market cap weighted and the equal weight, as an example, we'll put the chart up in the video, but you can see that the sector compositions are materially different with a big underweight to technology, if you go equal weights and an overweight to industrials.

30:43The interesting thing there is even though some of the big companies are tech, if you underweight all of those companies, then you're underweighting tech as a whole, which tech companies are often jockeying for position in terms of their stock price. So you're potentially missing out on some of that tech return. And if other markets do well, like it's just interesting, the impacts of taking this equal weighted approach versus the market cap weighted. Like, as you said, It's a more of an active approach where you're saying, I want equal weights rather than letting the market decide how, which stocks are valued more than others.

31:20I would call it an unintended consequence. Like you're trying to solve, markets are concentrated and valuations are high. Equal weighting is a solution. Okay. But you're introducing, we've talked about a few different things. You're introducing a sector over and underweights, security level, significant over and underweights. And then the other issue that you're introducing that we'll talk about next is rebalancing. And that's, we talked about it a little bit earlier. I don't know if that one gets enough attention when people think about equal weighting. When a smaller company gets larger, as we talked about earlier, a market cap weighted index doesn't do anything.

31:53It's just, it is. But an equal weight index has to sell down that position back to equalize its weights at its next rebalancing. And they tend to rebalance quarterly. And then the same thing happens when a large company gets smaller. So again, looking at the S &P 500 equal weight ETFs, and these are Canadian listed versions because those are, as I mentioned earlier, we get the MRFP report where we can see the turnover. The five-year plus the six-month period for this interim MRFP, which is what we're looking at, the turnover has been 10 times higher for equal weight than it has for market cap weight.

32:28Wow. That's substantial. And like we talked about earlier, that comes with implicit and explicit trading costs. In this case, the explicit trading costs are not much different, but the implicit trading costs, even though we don't see them in reporting, are definitely there and they definitely make a difference. I alluded to this earlier. The other issue that comes with this, with the frequent rebalancing, the specific timing of rebalancing for equal weighted funds is momentum. Very well-documented empirical phenomenon where stocks that have recently done well tend to continue to do well for a time.

33:01And those that have recently done poorly tend to continue to do poorly. Equal weight funds, in order to maintain their equal weights, are always selling what has done well recently and buying what has done poorly. In a way, it's an anti-momentum strategy. Exactly. It is a negative momentum strategy. And it's just systematically trading against momentum because of its design and construction. So one of the things I did to look at this is I ran just a simple multi-factor regression. I use the Fama French five factors plus momentum. Regression is just a statistical test that shows us what's driving a fund's returns, like taking a blood test for yourself to see what's in your system, except we're doing it using time series data for an investment fund.

33:44So looking at the multi-factor regression for the equal weight S &P 500, you can see that it loads, we'll put a picture of the regression results in the video, but people absolutely want to see that. Nobody can say that we're boring if we're showing pictures of multi-factor regression. It doesn't get more exciting than that. That's what I was saying, Dan, but you can see it loads positively on the size and value factors. There's some interesting loadings on investment and profitability as well. Then there's a big negative momentum factor loading. They're all statistically significant. So they're like real patterns, not just noise that we're observing there.

34:20So there's a high likelihood that it is truly exposed to those factors. And so what that means is that this equal weight fund has more exposure to small cap and value stocks than a market cap weighted total market index fund would, and that it's trading in the opposite direction of momentum, which that is exactly what you'd expect based on the equal weighted index's structure. It's as we've talked about naturally overweight, smaller and cheaper stocks and underweight larger and more expensive stocks. and it by construction is going to trade against momentum systematically. In fairness, right? And we were chatting about this before, that's true of any rebalancing strategy.

34:59So we would generally, you know, rebalance portfolios when equities are overweighted and that has the same kind of anti-momentum effect. But I think it can be constrained by by not doing it too slavishly. For example, for our clients, we only rebalance once the portfolio is about five percentage points off its target. So if your target is 70 % stocks, we're not rebalancing when it's 71. We are going to let it run a little bit. Now that is primarily to reduce trading costs and capital gains and whatnot. But baked into that, there's a little bit of momentum allowance, let's call it. I wonder, because you would know this better than me, Ben, but I mean, the momentum period is, I seem to remember it's somewhere like three to 12 months is kind of before it starts to fade.

35:53And you don't know whether it's three or 12, that's why you can't systematically trade it. But if it's within that timeframe, maybe you don't rebalance the equal weighted index fund quarterly. Maybe you only do it semi-annually or even annually, you accept that at the end of that rebalancing period, it's not going to be equal weighted. There's probably a few that have crept way up, but you accept that as a trade-off that the tracking error versus the perfect equal weighted index might be a little higher, but you have allowed for a little bit of that momentum to do its thing. I'm sure these have all been questions considered by the index providers.

36:32I mean, that's one of the big product design questions is how consistent do you want your exposure to be? So in this case, we want consistent exposure to equal weights. Cool. The day after you rebalance, you're not going to have equal weights anymore. And the year after, it's going to be way off. But to your point, if you rebalance more frequently, you're taking a bigger negative momentum position. So yeah, that trade-off is this S &P 500 one that we were talking about. They're doing it quarterly. Is there an optimal rebalancing frequency? It depends on how strong your preference for equal weights is, I guess, and how you want to make those trade-offs.

37:06There's also the difference between, I guess these guys would be short cross-sectional momentum, like in the cross-section of stocks. You don't take all the stocks in the market, some of them are going up, some of them are going down, which is a little different from time series momentum, where the market as a whole, after it's done well, tends to continue doing well. So these guys are short cross-sectional momentum. Anyway, how much does that matter? To the extent that momentum still exists, it probably matters quite a bit. And it has mattered to the past performance of these funds. Portfolio Visualizer, which is one of the tools that I use to look at the factor aggressions, it has a new chart that's really cool.

37:47It shows you the past performance by year in a graph, but it breaks down the performance by the contribution from each factor that you ran in your regression. So you can see like usually there's a big contribution from the market factor and there's smaller contributions, positive or negative from each of the other factors. It's a really interesting way to look at past returns. But momentum has definitely, being short momentum has hurt. But so is in recent history, being long value and size has also hurt. The big question that we have to ask if we're thinking about should we invest in equal weighted funds is if you want exposure to smaller and lower price stocks, we have to ask, is equal weighting the most efficient way to get there?

38:31I think that is the fundamental question. What problem are we trying to solve? We don't want concentration in the largest stocks. We don't want high valuations to hurt our future returns or our expected returns. Okay. So we consider equal weighting as a potential solution, but it comes with these other trade-offs that we've talked about. So then the next question is, how else could we solve this problem? These concerns that we have, it's actually interesting to look at the dimensional core equity one fund, a mutual fund, but it also has an ETF version more recently, but we're talking about mutual fund because it has more historical data.

39:06It has, and this is the part that's kind of cool to see, it has roughly similar. It's not quite as heavily tilted as the equal weighted S &P 500, but has roughly similar exposures to the small cap and value factors as the equal weight S &P 500 fund. But the big difference is that Dimensional is not naively getting those exposures by equal weighting. They're being super intentional about targeting specific types of stocks, similar fees, kind of a wash. Yeah. So we're talking about the mutual fund. There is an ETF. I always worry about that with Dimensional. People will hear me talk about Dimensional, like, oh, I can't access that anyway.

39:45In Canada, that's still true. In this case, the fund we're talking about has a US listed ETF that's available to anyone and it's implementing the same strategy as the mutual fund. You end up with roughly similar exposures to the different factors that the equal weight fund has exposure to, but Dimensional's limiting their sector divergence from the market. Dimensional places a cap on sector weight differences relative to their benchmark to avoid taking those big sector bets. They also apply a rule when they trade to avoid selling recent winners and buying recent losers, all else equal. Dimensional will always have a list of potential candidates that they can buy or sell in order to meet the exposures that they want.

40:29If they have two different candidates, but one has the wrong momentum exposure, they will avoid trading that one and they'll trade something else. They also have the flexibility to do that because they're not index funds and not rebalancing on a quarterly schedule or whatever. And then turnover is another big one. So again, they have similar tilts roughly, but dimensional has a much more modest turnover, like a fraction of the turnover. And a big part of the reason for that is that while dimensional is tilting toward the smaller and lower priced stocks, they're anchoring to market cap weights.

41:01So they start with market cap weights, and then they apply modest tilts to get where they want. Dimensional actually has a paper on this where they look at this, different weighting schemes for systematic equity strategies, and they talk about how minimizing unnecessary deviations from market cap weights means less aggressive rebalancing requirements. It doesn't perfectly address the concentration issue. It sort of does. Just by tilting away from the biggest stocks and toward the smaller stocks, It is less concentrated than say the S &P 500 of the US total market, but it still has a pretty high percentage in the top stocks.

41:35I find it really interesting how close the factor regression loadings are. So the dimensional fund and the equal weighted fund are pretty similar, but the interesting thing is dimensional does not have that negative loading on the momentum factor, which again is by design. The equal weighted fund is systematically trading against momentum and dimensional is being careful not to trade against momentum. The dimensional mutual fund here launched in 2005, compared it to the equal weight S &P 500 ETF and the S &P 500 equal weight and the S &P 500. Over that period, the dimensional fund has outperformed the equal weight fund.

42:12Both have underperformed the S &P 500. And you made this point earlier, Dan, that's just like, it's been really hard to beat the S &P 500 in recent history. But that's a 20-year period though, right? Yeah. Back to 2005, that's right. It's always hard to beat the S &P 500. That is true. This recent period especially. Always, I agree. Yes. So going back to 1971, which is where backtest data for the S &P 500 equal weight start. In that period, equal weighting looks really good compared to the market cap weighted S &P 500. And that is a period where small cap and value stocks did perform well. It was a stock pickers market.

42:49it. I'm just kidding. Every year since 1971, it has been a stock picker's market. I did run regressions on these again, on the indexes. And again, very similar results where the performance is largely explained by higher exposure to small cap and value stocks with a negative contribution from momentum in the case of the equal weighted fund. And then I also had the dimensional US core equity one index. So this is not the fund anymore. This is the index that dimensional calculates after the fact, like, you know, they calculated it recently going back to the 1970s using their current implementation for that strategy.

43:29This index has the momentum screen, it has tilts toward small cap value, profitability, and all that stuff. But that was not in live funds until relatively recently. I mean, dimensional didn't even exist in 1971. So just to be clear, This is a back test calculation based on the current strategy, but again, roughly similar exposure to small cap and value stocks and a much lighter exposure to momentum and nearly identical performance to the equal weight S &P 500 over this full period. So that's going back to 1971 up until I think November, 2025 is when that ended. And the dimensional fund was much less volatile.

44:06to double reiterate that is backtest data, both for the equal weighted fund and for the dimensional fund. It's one thing to say, well, yeah, this thing beat the S and P 500 going back to 1971. It didn't actually, the backtested index did, but that was not a live fund that was being traded. It was probably more expensive to trade small cap, smaller companies in 1971 than it is today. Like who knows what the actual performance would be, but that's just the, the backtest data. There is a funny saying in finance that you'll never see a backtest you don't like. I know I haven't. I've never seen one.

44:37You've probably done a few, but you just haven't shared them with us. You don't share those ones. You keep them secret. Exactly. They're quietly taken out back and shot. Yeah. So despite the backtesting issues that do exist, I think it's still pretty interesting to see the same kind of trend that we see in the live funds has existed in the backtest calculations. And the result is similar where exposure to smaller and cheaper stocks and negative momentum really explains most of the results of the equal weighted index performance. So equal weighting, it seems really appealing right now because there's high concentration in the top stocks in the market cap weighted index.

45:16There's high market valuations in the US market and that stuff's making people nervous. And so they look around and they say, oh, equal weighting, that's maybe a solution. And then I think you go and look up an equal weighted fund and you say, oh, wow, this is actually outperformed the S &P 500 since inception. Maybe this is a good solution. But I think the issue is that it comes with, it comes with some meaningful baggage. Equal weighting results in large over and underweights at the individual stock and sector levels, results in high portfolio turnover, and it gives you this systematic bet against momentum, which is maybe not a bet you want to take or make.

45:52The other big point here is that the strong past returns, which are a real thing, but the strong past returns of equal weighting are largely explained by tilts toward smaller and lower priced stocks, not some equal weighting magic. Implication for investors is that if you do want to tilt toward smaller and lower priced stocks, you can do it without introducing the downsides of equal weighting. And I think Dimensional is doing something like that. There are other fund companies doing it too. Dimensional is just a good example because they have funds with long histories, but they are tilting towards smaller and lower price stocks and some other factors too, while controlling for sector exposure, limiting portfolio turnover, and intentionally avoiding trading against momentum.

46:36I do want to just say real quick that Dimensional did not pay me or us or otherwise incentivize us in any way to talk about their funds in this episode, but we do use Dimensional funds at PWL, they're Canadian funds in some of our clients' portfolios. and we did a video a while ago explaining Dimensional's history and their long-term performance compared to comparable Vanguard funds. And the last thing I have here is that there is a 2023 paper in the Journal of Portfolio Management, why the equally weighted portfolios beat value weighted ones. And in that paper, they pretty much corroborate what we talked about in this episode.

47:16They find that applying a factor lens explains most of the variation in the return spread of equal weighted equity portfolios relative to valuated ones, that's market cap weighted, with the biggest contributor being the size factor. And they always talk about the negative momentum loading and the negative low volatility factor loading. So that's it. I wouldn't use these things. I don't know. I don't know what you guys think. I find it fascinating, just like reflecting on the ETF slop episode and just like investor behavior in general. Investors are always looking for the next best way to win or beat the market.

47:52There's always uncertainty. I've had many conversations in the past week of what's going to happen with Trump, the high valuations. These conversations happen all the time, no matter what the market's doing. And you can see the appeal in these types of products to investors. It's like, oh, well, this product fights against this, but you need to think through all those implications? And is it the portfolio designed in such a way to capture the academic evidence or to capture what you want to return? And second, just pick a strategy that you can remain disciplined to. Like that is one of the most, one of the best ways to kind of beat or stay on track, I guess is what I'm trying to say.

48:31I've said that a couple of times to clients this week. The best defense against uncertain times is a diversified portfolio and a disciplined strategy. I think too that, because I've spent a lot of time looking at these various weighting strategies and how they match up against market cap weighting. And my conclusion has always been that there's a lot of different ways to get exposure to the risks that you want. And frankly, it always kind of bothered me a little bit. Like if a study like this says, well, equal weighting didn't really outperform because it was equal weighted. It outperformed because there was greater exposure to a smaller value.

49:13Okay. But maybe the people who designed the strategy were trying to get access to cheaper and smaller stocks. And so we can't just kind of wave our hands and dismiss that as a bad strategy because it wasn't articulated in the title of the ETF. But I think the point, which I think you've made very well, Ben, is that if your goal is to get exposure to these different risk factors in a way that is different from the market cap weighted strategy, then what is the most efficient way you can get that exposure? And, you know, we've talked many times about the various merits of dimensional versus traditional index points.

49:57And one thing I've always said is if your goal is to get the factor exposure, like we've described, dimensional does seem to me to be the best way to do it. The funds are so thoughtfully constructed to do exactly what you've described here, which is try to get the positive risk exposure that you want without giving up too many of the trade-offs. And that's what they're so good at. So I think it's just a bit of a subtle point. There's all kinds of different fundamentally weighted indexes were huge like 20 years ago. And that had a really good story behind it too. And then when you broke it down and you did these regressions, it was kind of like, it's a value fund or it's a mid cap value fund.

50:39Okay. Whatever you want to call it. The question is maybe those factors are worth trying to access, but maybe there's a better way to get it. Cheaper, less turnover, fewer trade-offs. And at the end of the day, what I'm always struck to is if you have enough data, if you can back test 40 or 50 years, almost everything comes out the same. If you go through enough market cycles, there's no strategy that consistently beats cap weighting. So sometimes it might be best to just accept that if you're going to hold for the very long term, the cheapest and most efficient way to do it is with a cap weighted index.

51:19I agree with that. I've got to mention this. There's a very, very funny slide deck on the internet. Still exists. I just found it as you were talking there, Dan, because you reminded me about it. it's cliff ass and is critiquing rob or not who created fundamental indexing we can show the slides here because they're pretty funny so cliff writes this is a presentation that cliff gave at some point it's from 2007 but cliff says i'm going to share with you a fictionalized dialogue between myself and rob it's obviously made up but it approximates our real life interchanges on this topic and sums up the issues pretty well it's got a picture of rob and cliff and it says our good looking protagonists.

51:59And it has Rob saying, we've had both these guys on this podcast, by the way, both great episodes. Rob says, I have invented a theory about how massive bodies are pulled toward each other. I call it fundamental attraction. And Cliff says, yes, Rob, we know about this. We call it gravity. Then Rob says, you don't understand. It makes remarkably accurate predictions. Yes, we know it's called gravity, but it works everywhere. We've tried it. This is really amazing. Rob, listen to me. We call it freaking gravity. And then Rob says, I better hurry up and trademark this. Anyway, it's a joke about how fundamental indexing was really just value investing all along.

52:41Pretty funny. That was kind of my point here was that an equal weight index is essentially a strategy to overweight, small underpriced stocks and underweight large cap overvalued stocks, which is not a crazy idea. It just might not be the best way to do that if your goals are to adjust your risk exposure in that way. I think that's a very good point. And it's an interesting question. I said that I wouldn't use equal weighted index funds, but if someone said, I think factor investing is a bad idea, but I really like equal weighted indexing. And I think that's a better solution than market cap. that's like okay you're going to get the factor exposure anyway it's maybe a little bit less efficient than some other thing that you could do more efficiently but if you're okay with tracking our relative to the market maybe it's not so bad i mean there is it has performed well historically it's a fact and over very long periods it hasn't really performed that differently it's essentially a factor tilt strategy in disguise because it's not named in such a way that it's tilting to the factors, it's equally weighted by definition.

53:54It means it's tilting to smaller companies. Right. In the live fund data since 2003, it's performed about the same as the S &P 500. Over the longer periods, like going back to 1970, the back test, it's outperformed by quite a bit. But over any interim period, it has had quite a bit of tracking error relative to, that's another thing I didn't talk much about, I guess, but dimensionals anchoring to market weights should reduce your tracking error relative to the market, whereas equal weighting, you're going to have more tracking error. So to the extent that people care about that, but again, if someone said, I don't think factor investing makes sense, but I don't want to market cap weight, so I'm going to equal weight and I'm okay with tracking error.

54:33All right. Well, then you're also okay with factor investing. You just don't appreciate that you are. Oh, true. That's kind of the point here is that you say that you don't believe in factor investing, but then you're attracted to a strategy that overweight specific knowable identifiable factors just in a way that as you described like in disguise and i think that honestly factor regressions have kind of proved that active management is just various forms of getting factor exposure it's just not identified in that way certainly before the research was done people didn't even know that they might have had some intuition that that made sense They couldn't quantify it, but most strategies that deviate from market cap weighting are some form of factor investing.

55:23If they're diversified and systematic, if they're throwing darts at a stock page, it's different, but these kinds of systematic strategies are just generally some attempt at getting exposure to those factors, even if the people implementing them don't realize it. There was one paper I came across. I didn't dig into it in detail, but they did actually look at the throwing darts at a dartboard strategy. And that beat market cap weighting too. It did. Yeah. That was the point of their papers. They had a whole bunch of standard weighting schemes and they compared them to market cap weighting. And the one where they just randomly picked stocks, I don't know how they weighted them or anything.

55:59I'd have to go back to the paper, but it outperformed in their construction. There was a couple of papers at some point that did that where they looked at dozens of strategies and they literally came up with like everything beat market cap weight. And I wrote an angry blog post about it at the time, because, you know, I said, this is great that apparently every strategy beats market cap weighting. Where are all the investors that are beating market cap weighting? Because it's one thing to create some abstract hypothetical strategy that no one implements. And then where are all the people who are beating the market if every strategy beats market cap weighting?

56:35So take it with a gigantic grain of salt as a practitioner versus someone just looking at the theory. Not a lot of things beat cap weighting consistently. That's a great point. And the people would have had to stick with those non-standard strategies for whatever period of time. And they highly likely wouldn't have, even if they identified the strategy, sticking with it would be not so easy. It's got to be the same paper. That's like a 2009 paper, which is when you were. Yeah. I think that's the one. It drove me nuts at the time. I have to admit. I'm sorry for bringing it up and making you read it.

57:04Yeah, no, no, it's a pleasant memory. Yeah, yeah, I'm much more chill about these things now. Should we get into these reviews and feedback here? Yeah, let's do it. I think we ended with a burst of enthusiasm for the record. I would say so, I don't know. Maybe it haven't flowed by - The people that make it this far, we got enthusiastic at the end. That's right. All right, I'll read the disclaimer, but does one of you guys want to read the - Yeah, I can do it. All right, I've talked a lot today. So we do have a review from Apple Podcasts to read. Under SEC regulations, we are required to disclose whether a review which may be interpreted as a testimonial was left by a client, whether any direct or indirect compensation was paid for the review, or whether there are any conflicts of interest related to the review.

57:45As reviews, including this one by Flint Abatee Flonatin 2, are generally anonymous, we are unable to identify if the reviewer is a client or disclose any such conflicts of interest. But as we always say, we have never paid for a review, so we're not too worried about that anyway. Go ahead, Ben. Here it is. That's the best podcast for financial literacy. This podcast has pushed me through most of the Dunning-Kruger effect. Interesting, most of the Dunning-Kruger effect. I started listening to this podcast after learning the Canadian couch potato basics from Dan's blog in the 2010s. I've related to the two shaved head hosts, but I'm willing to accept that Ben's hair genes are just better.

58:26After the years listening to the podcast, I've pushed through the pit of despair and now on the slope of enlightenment. Your varied approach on broad or specific topics along with topics on happiness and utilizing time has been amazing. My wife does not enjoy my summaries to her, but regardless, thank you so much for your efforts by improving our lives. My wife doesn't really enjoy talking about finance either, so you're not alone in that. I guess apologies to the reviewer's wife for having to listen to a summary about equal weighted index funds. My wife pretends to care, but she definitely does not care.

59:01I don't know about yours. We don't talk about this stuff much. I mean, anything to do with finance or work. It's like not interested at all. It just doesn't come up. If I were to talk about it, my wife would at least pretend to be interested, but we just don't talk about it much. Okay. Then there's one, this was from YouTube, but I thought it was, I just wanted to read it. Well, we've been foreshadowing it for the whole episode here. So we've got to read it now. So they said, Hey guys, let me preface this by saying that I love your show. I'm finally not lost when it comes to finance. And it's all thanks to the PWL crew and your commitment to educating us once a week.

59:32So for that, you will have my eternal gratitude. Having said that I discovered your podcast about one year ago. I listened to about 150 of the episodes started with more recent ones, but have now decided recently to start listening from the beginning, I'm up to episode 80. I would like to give some constructive criticism if you would hear it. Not only will we hear it, we will share it with our entire audience. Your most recent episodes I find are missing enthusiasm. The team sounds a bit more tired as if they're just going through the motions. This episode in particular, this was, I think the ETF slop episode.

1:00:05I personally noticed two to three gaps where no one was talking and I thought my earphones had lost connection. I was about to go check them and the conversation started again. Compare this to episode 80. I don't even know what episode 80 was about. Where Cameron and Ben sound much more into the conversation, it's a marked difference. I'm writing this because I want you guys to continue succeeding. Don't lose your momentum factor, Ben. We might've just been taking a sip of water. I mean, let's not read too much into those two second pauses. Didn't mention you guys. What about your momentum factors?

1:00:34Two seconds feels like an eternity, but it's not really that long. How can you not get excited about that? Oh, I remember that episode, episode 80, a planning checklist, portfolio concentration on leverage. That was a fun. I'm all a tingle just thinking about it. I'm going to go back and re-listen. Very funny. Anyway, thought we'd share that feedback from a listener. We do always appreciate getting feedback. What else was going to say? Oh, we started uploading the videos of the episodes to Spotify. and there's a thing on Spotify where you can upload audio, which we've historically done, or you can upload video, which we are now doing, but you cannot upload both.

1:01:15Interesting. So now people who have been listening to our podcast on Spotify can now watch, which is cool. The trade-off though, is that they have to listen to the audio of the video. Some listeners may be aware because we've talked about this a couple of times. The audio edit is different from the video edit. we speed up the audio by about 10 % and all those gaps that our YouTube viewer was concerned about, they get cut from the audio edit. So it's much tighter and it goes a little bit faster. So people listening on Spotify are probably thinking, why are these guys so slow? We are no longer sped up by 10%.

1:01:53I don't know. We thought people might like to see the video, but people are now complaining that it's too slow. I guess you can go and speed it up in your app. now that the audio has slowed down a little bit. We are 15 % more enthusiastic on the podcast feed. I can assure you of that. Oh, the other thing there, we made all this fuss about the disclaimer, which people love. The people who did listen to it, Dan, you did a great job writing that. People did think it was funny and it was less painful to listen to, which was the objective. In the video edit though, we don't actually put the disclaimer because it shows up on the screen in text at the end of the episode.

1:02:28And so now the Spotify episode, because it has the displayed text disclaimer, no longer has the audio disclaimer. So people who didn't like the disclaimer coming through their audio, they can now listen on Spotify, but they're going to have to listen to the slow down. A lot of trade-offs here. I don't know. I think everyone should watch and listen. You'll retain much more if you go through it twice. Yeah, that was true. They could listen to the audio edit and watch the video edit, but not listen to the video edit. Well, I guess they're still going to listen to it. And who doesn't have three hours a week to do both?

1:02:57I agree, Dan. Double up. I think that's it. All right. Anything else for you guys? I'm good. Thanks, guys. That's it for me. Try and finish with some enthusiasm here. I don't know. Reach yours. All right. Thanks, everyone, for listening. See ya.

1:03:17Hey, everyone. It's producer Matt. Thank you so much for tuning in to this week's episode. Before we sign off, here's the disclaimer you've been waiting for. Portfolio management and brokerage services in Canada are offered exclusively by PWL Capital, which is regulated by the Canadian Investment Regulatory Organization and is a member of the Canadian Investor Protection Fund. Investment advisory services in the United States of America are offered exclusively by One Digital Investment Advisors, LLC. One Digital and PWL Capital are affiliated entities, and they mostly get on really well with each other.

1:03:49However, each company has financial responsibility for only its own products and services. Nothing herein constitutes an offer or solicitation to buy or sell any security. Occasionally, we tell you not to buy crappy investments in the first place, but that's not the same thing as telling you to sell them. This communication is distributed for informational purposes only. The information contained herein has been derived from sources believed to be truthy, but not necessarily accurate. We really do try, but we can't make any guarantees. Even if nothing we say is fundamentally wrong, it might not be the whole story.

1:04:24Furthermore, nothing herein should be construed as investment, tax, or legal advice. Even though we call the podcast your weekly reality check on sensible investing and financial decision making, you shouldn't rely on us when making actual decisions, only hypothetical ones. Different types of investments and investment strategies have varying degrees of risk and are not suitable for all investors. You should consult with a professional advisor to see how the information contained herein may apply to your individual circumstances. It might not apply at all. Honestly, you can probably ignore most of it.

1:04:56All market indices discussed are unmanaged, do not incur management fees, and cannot be invested indirectly. Which is a shame, because it would be awesome if you could. All investing involves risk of loss, including loss of money, loss of sleep, loss of hair, and loss of reputation. Nothing herein should be construed as a guarantee of any specific outcome or profit. Past performance is not indicative of or a guarantee of future results. If it were, it would be much easier to be a Leafs fan. All statements and opinions presented herein are those of the individual hosts and or guests and are current only as of this communication's original publication date.

1:05:37No one should be surprised if they have all since recanted. Neither OneDigital nor PWL Capital has any obligation to provide revised statements and or opinions in the event of changed circumstances. See you next time.