Ben Felix Model Portfolio (Rational Reminder, PWL Capital) Review & ETFs

Get this portfolio here: optimizedportfolio.com/go/ben...
I'm a huge fan of Ben Felix and his proposed factor tilts. Here we'll look at how to construct a U.S. version of his proposed model portfolio, ETFs to use, and why you might want to invest in it.
// TIMESTAMPS:
00:00 - Intro
00:10 - Who Is Ben Felix?
00:37 - What Is the Ben Felix Model Portfolio?
02:16 - Asset Pricing Models
03:08 - Risk Factor Premia
04:28 - "Factor" ETFs
05:05 - Model Portfolio Asset Allocation
05:39 - U.S. Translation
06:16 - Performance Backtest
06:44 - How To Build with ETFs
07:04 - Outro
// SUMMARY:
Ben Felix is a portfolio manager at PWL Capital in Canada. He is perhaps better known for his KZbin channel Common Sense Investing (‪@BenFelixCSI‬) and his Rational Reminder podcast (‪@rationalreminder‬) alongside Cameron Passmore.
Felix is a proponent of objectively looking at the evidence and data to inform and optimize investing decisions. For example, he is a proponent of index investing and small cap value, just like famous investors like Larry Swedroe and Paul Merriman.
The Ben Felix Model Portfolio, as the name suggests, is a lazy portfolio designed by Ben Felix and Cameron Passmore of PWL Capital that utilizes globally diversified index funds plus factor tilts, particularly for Size, Value, and Profitability. You can find the paper here for the proposed factor portfolio. They discuss the merits of this portfolio across many episodes of their Rational Reminder podcast.
Since Ben Felix and PWL Capital are in Canada, the proposed model portfolio is based largely around Canadian index funds:
30% iShares Core S&P/TSX Capped Composite ETF - XIC
30% Vanguard US Total Market ETF - VUN
10% Avantis U.S. Small Cap Value ETF - AVUV
16% iShares Core MSCI EAFE IMI Index ETF - XEF
6% Avantis International Small Cap Value ETF - AVDV
8% iShares Core MSCI Emerging Markets IMI Index ETF - XEC
A U.S. translation looks like this:
42% U.S. Stock Market
24% International (ex-US) Developed Markets
12% Emerging Markets
14% U.S. Small Cap Value
8% International (ex-US) Small Cap Value
► Get this portfolio here: optimizedportfolio.com/go/ben...
► Read the blog post here: www.optimizedportfolio.com/be...
► Factors guide blog post: www.optimizedportfolio.com/fa...
► PWL paper: www.pwlcapital.com/wp-content...
► Ben Felix KZbin: / benfelixcsi
► Rational Reminder podcast: rationalreminder.ca/
#lazyportfolio #modelportfolio #factorinvesting
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Disclaimer: This is not financial advice, investing advice, or tax advice. The information presented is for informational, educational, and entertainment purposes only. Investment products discussed are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here: www.optimizedportfolio.com/te...
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[@OptimizedPortfolio]

What do you think of Ben Felix and his and Cameron's model portfolio from their Rational Reminder podcast? Get the US portfolio here: optimizedportfolio.com/go/ben-felix-model-portfolio

[@theotherview1716]

If someone is diversifying US and international stocks, developed and emerging and large and small what is the expected rate of return over the long run (I get that one can’t predict the future…)

[@OptimizedPortfolio]

advisors.vanguard.com/insights/article/series/market-perspectives@@theotherview1716

[@鱼眼儿看美股]

I am Ben Felix follower as well. Thanks for your so much density information.

[@OptimizedPortfolio]

Thanks for watching!

[@Seoulsearch616]

Thanks always for your sensible, informative content! 👍🏼

[@OptimizedPortfolio]

Thanks for watching!

[@smalltalk.productions9977]

thanks for the effort and the sharing. i am a fan of paul merriman and ben felix adds his version to the value/size tilt. i am an appreciative subscriber. thumbs up.

[@OptimizedPortfolio]

Thanks!

[@blaupunkt1619]

Excelent content! Keep up the good work!

[@OptimizedPortfolio]

Thanks!

[@seanharrington4768]

Bro- great leadership FANTASTIC piece !!

[@OptimizedPortfolio]

Thanks!

[@pongop]

Great video! It's interesting to learn about Ben Felix's model portfolio, especially with US funds. It makes a lot of sense to me. Thank you for breaking down the portfolio! My model portfolio is somewhat similar: total US, total international, small cap value, US real estate, international real estate. I agree that international SCV and emerging markets funds should be part of it, too. Thanks again!

[@OptimizedPortfolio]

Thanks! Glad you found it useful!

[@GregK235]

Thank-you for a thorough and concise presentation of this portfolio and its underlying rationale. It seems the FF-3 model provides sufficient explanation of the variance in returns, which makes fund selection and allocation a bit easier. As you alluded, this portfolio looks similar to the aggressive Ginger Ale portfolio.

[@OptimizedPortfolio]

Indeed, Greg. Thanks for watching!

[@robinimpey101]

Ben Felix is the BEST! 👍🏻👍🏻👍🏻

[@OptimizedPortfolio]

Indeed!

[@brianferris1]

Excellent stuff. Fidelity breaks down the Size by Large, Mid, & Small Cap? Should I assume Mid is Large or Small for this excercise?

[@OptimizedPortfolio]

Thanks! Not sure what you're referring to with Fidelity.

[@NivHaramati]

Hi, thanks for the great video. Question here: There are 5 factors (Market, Size, Value, Profitability and Investment), and it seems this portfolio only focus on 3 of them (Market, Size and Value). So what about the other 2? (also I don't understand what "Investment" means...") - are they included in "Value" automatically? Thanks 🙂

[@OptimizedPortfolio]

Avantis funds jointly consider those others.

[@billgrabbe9992]

Hi, I just ran into this question and was happy to find you. I also tried to find funds at Blackrock that were closely aligned to their Canadian international funds on the list. It appears that EFA is an American version of XEF and SCZ is an American version of XEC, but I'm not positive. Thoughts?

[@OptimizedPortfolio]

Not sure.

[@pomme4moi]

I have an interest in factor ETF’s and do have a factor tilt. But what I care most about is the return after all costs. As such, I disagree with the DFA/Vanguard comparison in the video. For most of its history, DFA imposed an advisor fee on all shareholders, which is not reflected in the historical return data. With this fee, DFA underperformed (or, at best, kept up with) comparable Vanguard products.

[@matthiaslipinski2826]

Hm, this comment could have been appropriate in the past. Now, we have DFA and Avantis ETFs. So, there is no need to pay an advisor just to get access. Without the advisor’s fee the difference in cost is very small and it can be expected that the much stronger size and value tilt of the DFA and Aventis products more than make up for the slight cost disadvantage.

[@christopherriccobono1419]

My portfolio is this! Give or take a few % using all Avantis funds.

[@OptimizedPortfolio]

Thanks for sharing!

[@zino123]

Hi, appreciated much the video, could you suggest the EU based allocation of this portfolio? Thanks!

[@OptimizedPortfolio]

Sorry, I'm not familiar with specific options outside the U.S.

[@blumousey]

With my psychology and situation, I prefer IWFQ and GGRG for my factor tilts. The quality factor just makes more sense to me and is much more consistent in delivering a small premium 👍

[@OptimizedPortfolio]

Thanks for sharing!

[@talmiller19]

Great video, thanks. Can you please explain why Felix tilts 16% to factors, and you 22%? What is the best allocation for maximal return or maximal risk-adjusted return, based on the historical data (based on some statistical analysis like rolling periods / bootstrap etc)? If the data shows that the Felix-factors bring an additional premium on-top of the market premium, then would the rational choice be 100% factor tilt (meaning pure AVUV and AVDV)?

[@OptimizedPortfolio]

Adjusted for geo exposure. His is Canada-centric. It's not exact. "Best" can only be known in hindsight. "Rational" might be 100% small cap value but most don't have the stomach for that. Historically highest risk adjusted return is about 30/70 stocks/bonds.

[@ehochmuephi8219]

Thanks dude, really well done again. How do you have only 11k subs?! Anyway, because you answered so friendly last time. Sober now and tinkering. Can you do a quick model portfolio for this for a German investor? I think I got all but 2, the names are really confusing ... :D Thanks a lot in any case and have a great day!

[@OptimizedPortfolio]

Unfortunately I don't know what specific products are available for those outside the U.S.

[@ehochmuephi8219]

Thanks anyway for the insight and response. I guess I have to do my own reasearch then ... urgh. ;) Take care!

[@chriso.8551]

Why not replace the VTI, VEA, and VWO with VT? Is it so that we don't like the ratio VTI to VEA to VWO that's inside of VT?

[@OptimizedPortfolio]

Could definitely do that too to simplify a bit, Chris!

[@ninir914]

Do you have any thoughts on further diversification with a real estate index (vnq) and best strategy for factor tilting it?

[@OptimizedPortfolio]

REITs tend to become highly correlated the broader stock market during crashes and don't provide much of a real diversification benefit. They may also be able to be replicated with lower credit bonds and small cap value stocks. See Kizer here: papers.ssrn.com/sol3/papers.cfm?abstract_id=2965146

[@arielardila5953]

What about using dimensional ETFs like DFSV and DISV?

[@OptimizedPortfolio]

Those would be solid choices too!

[@BW-kv9wj]

Can you make this Felix Factor Portfolio using DFA ETF’s? Which ones would you pick and the percentages each? Thank you…

[@OptimizedPortfolio]

It would just be DFSV for AVUV and DISV for AVDV.

[@BobTheCat412]

How about holding zprx from germany and ussc in london instead of aventis etfs?

[@OptimizedPortfolio]

I don't know anything about those.

[@batardglouton5455]

What do you think of QMOM/IMOM, given that MOM is an anomaly, but still very real.

[@OptimizedPortfolio]

If I were to specifically target Momentum, those would be the funds I'd go with. Wes and the gang at Alpha Architect have a solid, nuanced methodology that is detailed in a lengthy PDF on their website if you're curious to check that out.

[@ebrahimhabib477]

I would like to thank you for your videos and your efforts , but after i watched punch of your videos I noticed you are a fan of Avantis Funds ? Is that for a specific purpose.?

[@OptimizedPortfolio]

Thanks! Avantis provide solid factor funds to retail investors at pretty affordable prices.

[@revenge9431]

Used your link on your website for m1. Didnt know they offer 5% on deposits

[@OptimizedPortfolio]

Thanks!

[@tomasvaclavicek2641]

Why not lower cost VBR instead of AVUV? Just 0.09% annual fee last time I checked

[@OptimizedPortfolio]

I explained that here: kzbin.info/www/bejne/qWS6fXp7rLd5rq8

[@TalGalili]

Why not use vxus instead of the non us cap m part?

[@OptimizedPortfolio]

You could, though here we're using a 2:1 ratio of ex-US Developed to Emerging Markets. VXUS is 3:1.

[@TalGalili]

@@OptimizedPortfolio thanks! What's the benefit of this tilt? Which factors does it serve?

[@iz1907]

I just entered your portfolio in the portfolio visualizer and compared with s&p500/total us bonds standard 80/20 and 60/40 assets allocation portfolios. I can see 80/20 has higher returns and lower Stdev, where the 60/40 portfolio has similar returns but significantly lower Stdev. I still don't understand why you need this complexity. 5factor CAGR 8.58% Stdev 15.98% 80/20 CAGR 9.41% Stdev 12.6% 60/40 CAGR 8.43% Stdev 9.42% I'd like to better understand this topic

[@OptimizedPortfolio]

Feel free to link your backtest. I'm guessing it probably doesn't go back very far. This also isn't my portfolio. I made the case for my own here: www.optimizedportfolio.com/ginger-ale-portfolio You can learn about factor investing here: www.optimizedportfolio.com/factor-investing/

[@MrScoodles]

What do you think about VXUS, AVDV, AVUV for ex-us exposure for someone who doesn't want to invest in emerging markets?

[@OptimizedPortfolio]

VXUS is roughly 25% Emerging Markets. AVUV is U.S. small cap value.

[@daveschmarder-1950]

Which way you end up going with, give it a good long time.

[@OptimizedPortfolio]

Definitely.

[@ipohertroyanov464]

Why not Dimensional?

[@OptimizedPortfolio]

That would work too. At the time, I don't think they had released their ETF lineup yet.

[@douglaswallace7680]

Due Diligence . Please click the link in the description . A few changes since video 2023 posting date .

[@OptimizedPortfolio]

What?

[@douglaswallace7680]

@@OptimizedPortfolio *** >|< *** >|< LEVERAGE ! >|< *** >|< *** portfolio allocation is good for a long term "Buy - And - Hold" time frame . Over YEARS of "Set It And Forget it" investing , It will offer decent returns . I will take advantage of LEVERAGE . Emerging Markets starts to go down . Do I simply WATCH my profits dwindle away ? {{"Gosh , I sure hope it comes back."}} No . I buy EDZ , whose price goes UP 3% each time the E.M. index goes DOWN 1% . Several new models of ETFs have come out since 2023 . YieldMax offers ETFs that follow options-based strategies . Higher Risk ? Yes . More hands - on trading , tightly following Market Action ? Yes . Higher ROI ? YES !

[@blackfiree91]

Additionally, listen to Rick Ferri’s 2 episode podcast with the white coat investor and paul merriman. Factors are the icing or the sprinkles. Ben likes to make factors appear more relevant than they are.

[@OptimizedPortfolio]

Thanks!

[@stoicdarwin]

Commenting for the algorithm

[@OptimizedPortfolio]

🙌

[@Bobventk]

Why so much in VTI?

[@OptimizedPortfolio]

Diversification and moderate tilts.

[@giuseppebellomo165]

Hi I guess Ben Felix dropped the SCV from his portfolio. He tells about it in one of the Rational Reminder video

[@OptimizedPortfolio]

His personal portfolio or the model portfolio? Almost certain they haven't dropped it from the model, as that's sort of their entire thesis. Can you link me a source?

[@Bobventk]

AVUV 100%?

[@OptimizedPortfolio]

Likely unsuitable for most investors.

[@grumbla1]

compared to the SP I would say it is a wash.

[@OptimizedPortfolio]

Only time will tell.

[@HondaS2000kid]

Just buy Xeqt/veqt and call it a day…

[@OptimizedPortfolio]

Thanks for watching!

[@missouri6014]

His portfolio looks more and more like Dave Ramsey’s who is the very person that been and others like him criticize

[@OptimizedPortfolio]

The implementation thereof is the important part and differs pretty significantly. Ramsey basically advocates for buying active mutual funds that performed the best in recent years, which itself should be a red flag.

[@missouri6014]

I wasn’t referring to the mutual fund part, but rather the asset allocation It is splitting hairs compared to a Ramsey recommends No I’m not a fan of Ramsey. I’m just saying because Ramsey takes the hit from people like Ben, and it is just not justified because Ben’s allocation is no better or worse and if you look up his funds, they are not on low cost. At least there’s certainly not the lowest cost in their category. That’s all I’m saying

[@OptimizedPortfolio]

@@missouri6014 We don't criticize Ramsey for his asset allocation. We criticize him for his objectively terribly advice on things like fund selection, 401k contributions, SWR (see the recent rant that went viral), and return assumptions, not to mention his dogmatic approach and megalomaniacal attitude.

[@missouri6014]

In fairness, what is wrong with his funds that he has every time that they’re mutual funds because it’s hard to complain about his success that he’s had with those funds

[@OptimizedPortfolio]

@@missouri6014 I already told you. He suggests buying whatever funds performed well recently, which we know is horrible advice. Investing 101. He also steers people toward a certain group of advisors from whom he gets kickbacks. He won't show the specific "success" of his own investments because he lies about his returns.

[@grigorirasputin425]

Wonderful video! Thanks a lot. I follow his podcast and like his approach. If Brandon is reelected I will have to add international exposure… Socialism sucks ass

[@OptimizedPortfolio]

Thanks!

[@SKITTLELA]

US president has almost no effect on the stock market. Look it up.

[@grigorirasputin425]

@@SKITTLELA you saying that because you are woke and have your head in Brandon's diaper 24/7 and from all the fumes that come out you became delusional. The fact that Powell had to please democraps with his policies have nothing to do with the stock market? Everything woke turns to shit!

[@stiffeification]

Your other comments do not sound you like Bens approach very much. He likes his Ex-US

[@grigorirasputin425]

@@stiffeification he lives in the ExUS

[@blackfiree91]

I argue: Rick Ferri is smarter than Ben Felix. Rick admits a 30% factor tilt MAY improve returns by .25% over a lifetime. You have to suffer under performance for decades for a chance to beat the market by a quarter of a percent. What a dumb tilt. Ben ain’t that smart. And he’s kind of a jerk to people who disagree with him.

[@OptimizedPortfolio]

Not really a battle of who's "smarter."

[@blackfiree91]

@@OptimizedPortfolio ah, yes, but life is.

[@cbqmrbqm8972]

0.25 annually. Do the math.

[@blackfiree91]

@@cbqmrbqm8972 lol bitcoin averages 100% a year. You do the math

[@OptimizedPortfolio]

@@blackfiree91 Wut

[@blackfiree91]

Ah - so you are imitating Ben. You should slow the talking speed down. Its a little too fast. Ben is arrogant and rude and disrespectful in his community. Not a great role model

[@OptimizedPortfolio]

Others used to say I spoke too slowly. Can't please everyone. Thankfully KZbin allows you to adjust playback speed.

[@blackfiree91]

@@OptimizedPortfolio slower listeners: PFFFT those fast listeners need to adjust. Fast listeners: NO the slow people need to adjust.