Breaking Down My Investment Portfolio

0:00 This video explains exactly how I invest my own money and where my views on money and investing come from. My friend Brian Portnoy is releasing the second volume of a book titled how I invest my money, which is a collection of essays from people in personal finance media about how they handle their own money. I wrote a chapter for the book and parts of what I'm sharing in this video come from that chapter. The book is available for pre-order now and I will put a link in the description. To be clear, I have no financial stake in the book, but I am grateful that I was asked to contribute to it. I'm Ben Felix, Chief Investment Officer at PWL Capital and I'm going to tell you how I invest my own money. You might not be surprised that my portfolio is pretty boring. For the most part, I own one public equity fund, which I'll talk more about, and I I do have one private equity holding, which you may be surprised by. I have the house that I live in and I've got a bit more cash than I probably need. A couple of those might surprise you. I've been vocally skeptical of private market investments and I've explained many times why renting a house is perfectly fine.

0:59 Listen, personal finances are personal. I'll explain my thoughts on each one in a bit. Before I go into detail about how I invest, I think my upbringing, education, and early career provide important context for how I think about investing and money more generally. I grew up on the campuses of what I would call elite boarding schools in Canada. When I was a kid, my dad was a teacher and the housemaster of a boys dorm at Shawnigan Lake School in British Columbia, Canada. We lived on the incredible campus of the school in a house attached to the dorm that my dad was running. My family was not wealthy by any means, but we were comfortably middle class. I have nothing to complain about here, to be clear. But the interesting thing for me was that most of the students coming through that school were from very affluent families, while I was not. When I was in ninth grade, my dad took a job at Brentwood College School. Our family moved into a similar situation. We were again living on an elite boarding school campus and I was again surrounded by this extreme wealth without having it myself. Looking back on that time, it taught me a lot about money. Some of my peers who generally came from, again, very high-income families, had great families and stable lives, while others had very stressful family lives and a host of social and psychological problems to show for it. Looking back, I think some kids were sent to those schools to excel, while others were sent there because their parents didn't know what to do with them. This taught me firsthand that having access to lots of money does not necessarily create a good life for either adults or children. I didn't know it at the time, but I know now that there's research supporting this. An influential 2005 paper found that affluent kids in their sample showed elevated rates of substance abuse, anxiety, and depression. The authors pointed to two main culprits: excessive pressure to achieve and isolation from parents, both literal and emotional. Family wealth does not automatically confer mental well-being.

2:50 The authors also cautioned that parents should be conscious of the risks that can stem from wealth and status. Believing that Ivy League educations and lucrative careers are critical for children's long-term happiness can have costs to their mental health and well-being. What I find even more interesting is that the broader relationship between life satisfaction and income is a lot weaker than you would intuitively expect. A 2018 global study measuring income satiation, which is the income level above which happiness stops improving, found that in North America life evaluation leveled off around $105,000 of income, which is around $137,000 today, adjusting for inflation, and day-to-day happiness leveled off around $65,000 in the study, or about $85,000 today. In some regions, including North America, life evaluation declined in this study at the highest income levels. The authors speculate that this can be attributed to more demands on time, less leisure time, more materialism and social comparison, and living in more expensive neighborhoods, all of which tends to follow from a higher income. Counter to the idea of satiation points, a 2021 US-based study using smartphone check-ins found that both day-to-day happiness and life satisfaction kept rising with income with no plateau. A 2023 adversarial collaboration between two sets of authors set out to determine whether there really is a plateau once and for all. They found that happiness does keep rising with income for most people, but plateaus for the least happy people.

4:17 It's important to note that these studies measure income on a log scale, step up in happiness is a doubling of income. And even then, the relationship is weak. The correlation is 0.09, and the gap in median happiness between household incomes of $15,000 and $250,000 is about five points on a 100-point scale. A fourfold difference in income has about the same effect on happiness as being a caregiver for a disabled or elderly family member, roughly twice the effect of being married, about the same as a weekend, and less than a third the effect of a headache. In short, money helps, but it far from guarantees a good life from the perspective of life satisfaction. I saw this firsthand growing up surrounded by peers from families whose wealth far exceeded my own. This experience and the research supporting it shapes how I use and invest my own money today. It also shapes how I talk to my kids about money. Not all of my financial decisions are made with the sole intent of maximizing wealth. Following high school, I went and got a degree in mechanical engineering while on an NCAA Division 1 basketball scholarship at Northeastern University. I I wasn't very good at basketball. I'm 6'10" if you guys don't know that. after my degree, I continued both basketball and my education back in Canada. I knew I didn't want to work in engineering, so I decided to do an MBA with a concentration in finance. I figured if I couldn't play pro basketball, an MBA was the next best thing. Two experiences during my MBA shaped how I invest and really the rest of my life. Just like subscribing to this channel could shape the rest of your life. You should subscribe if you haven't already. The first experience was a year spent selling insurance and actively managed mutual funds, which stemmed from what started as an internship program through my MBA program. I had assumed, like many people do, that financial advice is all about advice, and that advisors act in the best interest of their clients in providing that advice. I learned quickly that many parts of the financial services industry are more focused on sales than advice. Unfortunately, high-fee actively managed mutual funds, which I was selling at the time, are the last thing most people actually need in their lives. I've got a pretty good story here. I was interviewed for a column in The Globe and Mail in May 2013. I talked about how I personally invested in the Fidelity Dividend Plus Fund, which was true. At the time, I was eking out a meager living selling mutual funds and insurance. I figured the interview would be a good way for me to get my name out there. Instead, I got eviscerated in the comments.

6:39 Eviscerated. The Globe and Mail have, unfortunately, since changed their comments engine, and those life-changing, in hindsight, comments are no longer visible on the article, but they were harsh enough for me to seriously question what I had learned in my brief time in the industry so far, which had mostly come from the fund companies themselves. Having come from an engineering background, I I did have a feeling that something was missing from what I was being taught about investing. I wanted rigorous analysis and evidence, but instead, there were lots of sort of vibes, platitudes, and cherry-picked data to support different narratives. I guess it's obvious in hindsight. I I was trained as an engineer and had barely started taking finance classes for my MBA program when I was working selling mutual funds and insurance. Listening to the experts at fund companies seemed sensible enough. After my comment section evisceration, I did what I should have done from the get-go and dove into the academic literature.

7:33 Research on mutual fund performance goes back to at least Michael Jensen's 1968 paper, which found that actively managed mutual funds, on average, failed to beat a buy-and-hold market portfolio after costs. The finding has held up remarkably well since then. A 2010 paper asked whether the funds that do beat the market are skilled or just lucky. After fees, most funds in that study did worse than you'd expect from luck alone, and even the funds with strong track records mostly looked lucky rather than skilled. Very few managers showed enough skill to cover their costs. A 2023 paper looked at nearly 8,000 US equity mutual funds from 1991 to 2020. Over the full sample period, 69.7% of the funds trailed a simple S&P 500 index ETF. When they adjusted for how much market risk each fund took, most funds had negative returns relative to the index. Once I started to understand this, I figured I needed to just get out of this industry altogether because what I was seeing in practice was so far away from the decades of academic literature that I had then read. The second personal breakthrough during my MBA was a corporate finance lecture where I learned about the Fama and French three-factor asset pricing model. Fama and French found that the price of risk in the overall market did an insufficient job of explaining why different portfolios earned different average returns, but adding a size factor and a value factor explained most of the remaining difference. During some casual Google searches for Fama and French, as one does probably on a weekend, I learned that their research was actually being used to create investment products that were available in Canada. This was very exciting for me at the time. Their approach made sense.

9:08 It was what my engineering education told me an investment product should look like. Instead of vibes and sales pitches, it was based on theory and evidence. So, I called Dimensional Fund Advisors and they shut down the prospect of me using their funds at the firm that I was working for at the time. That call, honestly, almost ended my career in financial services, but Dimensional called me back a few months later asking if I wanted to meet Cameron Passmore at PWL Capital. This was in 2013. Cameron's wealth management practice managed around 120 million in Canadian dollars at the time, but his practice was growing and he needed to hire someone. I joined him in the same year and I I never left. I'm still at PWL as as many of you know.

9:48 we now manage around 8 billion dollars for Canadian families, business, and institutions. So, we've we've grown a lot. Okay, after all that background, hopefully not too much background, I can now tell you how I invest my own money. I will tell you about my actual investments, my my assets that I own, but I want to emphasize that we also place my family also places a high priority on investing in our lives today. We have four kids.

10:11 Time flies by as anyone with kids knows. We try to create memorable experiences for our family while still being responsible about our future. It's the same way we approach planning with clients at PWL Capital. Money is a tool for funding a good life, and a good life is about more than the size of your portfolio. This shows up in our long-term decisions about spending versus saving. We're also deliberate about investing in our health and using our money to buy time by outsourcing certain tasks. Okay, now I'll tell you about my my actual assets, which is probably what you want to hear about.

10:41 Most of our liquid long-term financial assets are invested in one fund. Very simple, which I like. The Dimensional Global Equity Portfolio. This is a fund that PWL uses for many of our clients as well, though of course not every client is in an all equity portfolio like I am. The fund holds stocks from around the world with a larger allocation to Canada than its share of the global market. About a third of the portfolio is in Canadian stocks versus about 3% of the market. People love to debate whether home country bias makes sense. I did a video a while ago on why I think it does, at least to a point. Dimensional funds and therefore my own portfolio look a lot like index funds. They're low-cost, broadly diversified total market portfolios, but Dimensional funds are not technically index funds. They tilt towards smaller companies, lower priced companies, and more profitable companies. They also exclude certain stocks in in small-cap segment of the market. The tilts are based on research from Fama and French's 2015 paper, which updated their three-factor model that I learned about during my MBA to introduce two additional factors, profitability and investment. It improved the explanatory power of the three-factor model, and it's now what I would call the workhorse asset pricing model in academic finance. I do not own bonds. I have nothing against bonds. Many of PWL Capital's clients do own bonds in their portfolios, but bonds just don't fit with my personal tolerance or capacity for volatility in my investments. I've been all equity for a long time, but did get some sweet, sweet confirmation bias from a 2025 paper that supports a diversified all equity portfolio with about a third in domestic stocks and two-thirds in international stocks as the optimal portfolio over the life cycle for most people. To be clear, this paper does not mean that stocks are safe. Stocks are volatile, and an all equity portfolio will have deep drawdowns over time. In my view, flexibility in spending goes a long way to addressing this. We don't live an extravagant life, and our spending can be flexible if we need it to be. Okay, that part of my investments is pretty boring and what you might expect if you've been watching my videos for a while. This next piece has surprised a lot of people when I've talked to them about it. A sizable part of my portfolio is in private equity, specifically equity in PWL's parent company One Digital.

12:53 I don't go looking for private market investments, and I've been vocally skeptical about private equity funds and private credit funds. And I think for good reason, research from Ludovic Fallopeau consistently finds that since at least 2006, private equity funds have delivered net of fee returns in line with public equities. While that's true, equity in PWL and now One Digital has been my most successful investment so far. Don't get me wrong, I know that a lot of that outcome comes down to luck.

13:21 Some of it also has to do with the fact that it's not the type of private equity I usually talk about. There was no fund, no layers of fees, and no manager between me and the business I was investing in. It was a direct stake in a company I knew well and was personally helping to grow. Still, a lot of luck. Like trust me, I understand that. I received some stock options in PWL early on. I got some shares in exchange for formal ownership of the Rational Reminder podcast and this YouTube channel, neither of which anyone expected to amount to much when we started them.

13:51 But, they went on to play a non-trivial role in the growth of the firm. And I bought some shares later on when I was permitted to do so. In 2025, PWL was acquired by One Digital for a valuation multiple above what employees had been allowed to buy shares at. When we were acquired, I rolled a large portion of my PWL equity into One Digital equity, which I continue to hold today. That was partially to defer tax, but it was also a very deliberate decision. You guys don't need to tell me that it's not wise to invest in the same company that pays your salary. That's like classic personal finance advice.

14:23 I think it's a little bit different when the company's not public, and especially when it was PWL. We we traded at a valuation way below market prior to being acquired by One Digital. Valuation aside, the reality is I put a lot of my blood and sweat, figuratively most of the time, into this firm, working more hours than an employee would and personally directly driving clearly observable growth in the business. I know I'm taking on lots of idiosyncratic risk or company-specific risk by holding on to this one equity holding, but as weird as this may sound, it's idiosyncratic risk that I want to take. I'm not saying everyone should do this, and it would probably be considered bad advice if I encouraged others to follow my lead. But again, personal finance is personal. I've got enough diversified that I'll be okay.

15:09 You guys don't need to worry. I have also put a lot of blood, sweat, and tears into the next asset, our home that we live in. I bought our house in late 2020 after renting for my my adult life prior to that. Renting was great. And unlike a lot of traditional financial advice would have you believe, it is not throwing money away. The flexibility of renting had been incredible. As my family grew, we bought a home for two main reasons. We were moving out of the city we were living in during COVID, and we couldn't find rentals we liked in the more rural area we we wanted to move to.

15:41 And the other thing is that we were ready to stay in one place for a long time. Owning a home effectively locks in the cost of housing yourself in that specific home. So, an owned home behaves like a long-term bond indexed to the cost of living in that house. The longer you plan to stay there, the more valuable that protection becomes. Renting avoids the risk of house prices falling, but it leaves you exposed to rising rents. For a family planning to stay in one place for a long time, owning reduces that risk. I like my house a lot. Purely from a financial perspective though, owning our home has been by far our worst investment. The amount of money we have invested into the house to keep it up and running and to improve it, which we would never do to the same extent as renters, makes me want to Honestly, makes me want to throw up. When we rented, we knew exactly what our housing would cost each month. The cost of owning a home is a wild card. I don't even want to run the numbers on what we would have counterfactually invested in public markets and in PWL equity because of the way that the timing worked with that with that timeline, if we had just kept renting for a little bit longer.

16:45 But I know, without running the numbers, that the opportunity cost of owning a home for for my situation, and again, a lot of that comes back to just luck and timing, but I know that opportunity cost has been astronomical. Now, that said, numbers aside, opportunity cost aside, owning a home has been the right decision for my family. Our kids love our home, they love their school, and they love our community. And as planned at the time when we made that decision, we have been in one place for more than 6 years at this point with no intention of moving. The last asset that I hold is cash. Well, technically a interest savings account that's paying some interest, not literal cash under the mattress.

17:21 We currently hold more cash than we probably need to be holding, and I know that's suboptimal or could be viewed as suboptimal. Part of the reason is that we're still recovering from recent unpredictable renovation costs. It's not a strategic allocation. We have no specific plan for it. It's not a tactical allocation. I'm not timing the market with it. And really, it may not stay forever. But having a chunk of cash is is comfortable. We might invest it in the market eventually. Again, not from a market timing perspective. We just might We might spend it on the house. There's still more things we want to do around the house. We might spend it on experiences like like trips with our with our kids or or maybe some combination of those things. I don't really know. But for now, it simply feels good to have probably a bit more of a cash buffer than we realistically need. There is, of course, just like I mentioned with the house, an opportunity cost to having more than the necessary amount of cash, but there's also a psychological cost to a potential liquidity crunch. We're comfortable with our current trade-offs. That's the whole balance sheet. One low-cost, broadly diversified public equity fund, which is super simple to manage and think about.

18:25 One meaningful private equity holding in the business that acquired the business that I helped to build. A house that has been a a bad financial investment, but a great home to live in. And some cash that provides enough psychological comfort to justify its opportunity cost for us. Not every one of those decisions is rational, and that's fine. There's more to a good life than the perfect portfolio, and nobody can agree on the perfect portfolio anyway. I've talked a lot in other videos about how money can and can't improve our lives and make us happier.

18:55 Check this video out to learn more.