#303 | Why Index Investing Won’t Give You Everything You Want From Diversification & Expected Returns: Factor Investing Explained - Financial Literacy, Financial Advisors & Wealth

You've only been in Canada for a few months.

Can I maybe ask you, Daniel, to take a moment to maybe offer a little more perspective and color on what you just explained? Because I'm familiar with the value proposition of your product and others like it and had it for some time.

But most people listening today would not be familiar with what might otherwise be called factor investing.

So just for the people listening at home, this is not like indexing where you try to replicate a benchmark and you're just buying all the names in the benchmark.

This is not like traditional portfolio management where you're doing fundamental or technical analysis and ultimately stock picking.

This is something that is a bit of a hybrid of both, but nonetheless altogether different.

But I will leave it for you to maybe explain the variations, the nuances, the wrinkles, the things that make it, in your opinion, better.

Yeah.

So what we're doing is buying companies or targeting companies that have high profits, good income statements, good balance sheets.

But despite the fact that they have these positive characteristics, they have low prices.

This is not a new concept.

I think traditional active managers are after the same thing.

They want companies with high profits and low prices.

But they go about it in a different way.

They're... highest conviction, best 50 stocks, and if you get them right, you're a hero.

If you get them wrong, you're a zero.

Now, what we're able to do is able to apply our analysis or targeting companies with high profits, low prices, via ratios that can be applied across many names, a lot more names than a traditional active manager.

So for example, thousands of companies in a core type of portfolio instead of hundreds.

So it's a way for us to, in a way, systematize active management.

We're after the same things, but because we're applying it Kind of via these ratios, companies with high profits for the equity you get, companies with high book value for the equity.

That's what we're targeting here.

But in very basic terms, we're buying companies with high profits and low prices at the same time.

And I

think that's the sort of thing that if I were to offer my thoughts is that instead of having analysts and hotshot portfolio managers and spenders doing their work in a quarter office, you're basically sorting with spreadsheets and looking at ratios that are applicable.

And basically any company that passes the screen can be purchased to a greater or lesser extent and be part of that opportunity set.

You've only been in Canada for a few months.

Can I maybe ask you, Daniel, to take a moment to maybe offer a little more perspective and color on what you just explained? Because I'm familiar with the value proposition of your product and others like it and had it for some time.

But most people listening today would not be familiar with what might otherwise be called factor investing.

So just for the people listening at home, this is not like indexing where you try to replicate a benchmark and you're just buying all the names in the benchmark.

This is not like traditional portfolio management where you're doing fundamental or technical analysis and ultimately stock picking.

This is something that is a bit of a hybrid of both, but nonetheless altogether different.

But I will leave it for you to maybe explain the variations, the nuances, the wrinkles, the things that make it, in your opinion, better.

Yeah.

So what we're doing is buying companies or targeting companies that have high profits, good income statements, good balance sheets.

But despite the fact that they have these positive characteristics, they have low prices.

This is not a new concept.

I think traditional active managers are after the same thing.

They want companies with high profits and low prices.

But they go about it in a different way.

They're... highest conviction, best 50 stocks, and if you get them right, you're a hero.

If you get them wrong, you're a zero.

Now, what we're able to do is able to apply our analysis or targeting companies with high profits, low prices, via ratios that can be applied across many names, a lot more names than a traditional active manager.

So for example, thousands of companies in a core type of portfolio instead of hundreds.

So it's a way for us to, in a way, systematize active management.

We're after the same things, but because we're applying it Kind of via these ratios, companies with high profits for the equity you get, companies with high book value for the equity.

That's what we're targeting here.

But in very basic terms, we're buying companies with high profits and low prices at the same time.

And I

think that's the sort of thing that if I were to offer my thoughts is that instead of having analysts and hotshot portfolio managers and spenders doing their work in a quarter office, you're basically sorting with spreadsheets and looking at ratios that are applicable.

And basically any company that passes the screen can be purchased to a greater or lesser extent and be part of that opportunity set.