Market Simulations & Financial Planning | #411 (John Yang)
Listen to the original audio · Transcribed with NVIDIA Parakeet · Why times can differ in your player
This is the Rational Reminder Podcast, a weekly reality check on sensible investing and financial decision making from two Canadians. We are hosted by me, Benjamin Felix, Chief Investment Officer, and Braden Warwick, financial planning product architect at PWL Capital. Welcome to episode 411. Today we have a pretty nerdy but very interesting episode on expected returns. It is really interesting.
So it's like figuring out what to use as an expected return for. stocks and bonds, like what is the average return that you expect or any other asset class is super important. It's one of the most important parts of financial planning and portfolio management. It ultimately informs how you allocate your assets, how much you need to save or spend in your financial plan. Higher expected returns make an asset class more attractive, all else equal, but of course all else is not always equal.
Higher volatility makes an asset less attractive, all else equal, but again, all else is not always equal. and lower cross asset correlations make assets more attractive together in a portfolio all else equal, but there are always tradeoffs, it's never actually all else equal. Modeling those relationships is hard enough, but there are other aspects of expected returns that get less attention while being similarly important. The big one there is the shape of the distribution, and another one is the time series characteristics of asset class returns. So that's like volatility clustering in stocks, where a little bit of volatility tends to be followed by a lot of volatility, mean reversion in stocks, mean aversion in bonds.
We already have this episode, so unlocking it is cheap and permanent: the full transcript (77 minutes, 14,214 words), segment and word-level timestamps, and .txt, .srt, .vtt and word-level JSON downloads, as many times as you like, forever.
No account needed, we create one from your checkout email. With credits it is 1 credit; packs start at 5 episodes for $3.49, and monthly plans are cheaper still.