In today’s episode, we beg the question: is factor investing worth it? Factor-tilted portfolios tend to perform independently of the market and today, we break down a few of the characteristics associated with higher expected returns, as well as the challenges of factor investing. We give a brief history of pricing models and walk step-by-step through a hypothetical factor investment; taking the Fama and French five-factor model into account. Additionally, we discuss liability duration and bond returns and speculate whether pooling finances results in greater relationship satisfaction. Tune in to hear our take on everything from book clubs and the impact of inflation on consumption liability assumptions to our final verdict on whether factor investing is, in fact, worth your while. Participate in our Community Discussion about this Episode: https://community.rationalreminder.ca/t/episode-213-expected-returns-and-factor-investing-discussion-thread/18536 Book From Today’s Episode: Way of the Warrior Kid 3: Where there's a Will... — https://amzn.to/3zJN6gy Links From Today’s Episode: Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/ Shop Merch — https://shop.rationalreminder.ca/ Join the Community — https://community.rationalreminder.ca/ Follow us on Twitter — https://twitter.com/RationalRemind Follow us on Instagram — @rationalreminder Benjamin on Twitter — https://twitter.com/benjaminwfelix Cameron on Twitter — https://twitter.com/CameronPassmore 'Podcast Guests Are Paying Up to $50,000 to Appear on Popular Shows' — https://www.bloomberg.com/news/articles/2022-08-03/podcast-guests-can-pay-big-money-to-be-on-top-shows 'Pooling Finances and Relationship Satisfaction' — https://static1.squarespace.com/static/55f0b7a4e4b09dbc6cb88499/t/62338c02b9c68e13c12e45bb/1647545347300/PSP-I-2021-0326+%281%29.pdf 'Canadian pension plans see improved financial health, despite volatile markets' — https://www.theglobeandmail.com/business/article-canadian-pension-plans-see-improved-financial-health-despite-volatile/ 'Size matters, if you control your junk' — https://www.sciencedirect.com/science/article/pii/S0304405X18301326#:~:text=Small%20quality%20stocks%20significantly%20outperform,simply%20raise%20the%20size%20premium. 'Settling the Size Matter' — https://jpm.pm-research.com/content/early/2020/11/04/jpm.2020.1.187.abstract 'A Wealth Management Perspective on Factor Premia and the Value of Downside Protection' — https://jpm.pm-research.com/content/43/3/33.short 'Volatility Lessons' — https://www.cfainstitute.org/en/research/financial-analysts-journal/2018/faj-v74-n3-6 'Model Comparison with Transaction Costs' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3805379 'Is There a Replication Crisis in Finance?' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3774514 'Does Academic Research Destroy Stock Return Predictability?' — https://onlinelibrary.wiley.com/doi/10.1111/jofi.12365 'Which Alpha?' — https://academic.oup.com/rfs/article-abstract/30/4/1316/2758634 'Choosing factors' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X18300515