The Truth About Leveraged ETFs

Benjamin Felix (0:04)

Welcome to Episode 430 of The Rational Reminder Podcast. We're hosted by me, Benjamin Felix, Chief Investment Officer, Dan Bortolotti, Portfolio Manager, and today joined by Kelly Thomas, Associate Wealth Advisor at PWL Capital.

Dan Bortolotti (0:18)

Good to have you, Kelly.

Kelly Thomas (0:20)

Thank you. I'm glad to be here.

Benjamin Felix (0:21)

By request, Kelly, you are here from the audience. We'll talk about that in a second. I do want to mention before we get into the main part of the episode, that we are hosting a private webinar to celebrate the launch of David Booth's book, Stay Calm, which you heard him talk about on a recent episode. That webinar is going to be hosted by me and Cameron. It's on November 4th at 12:50 PM Eastern Time.

The first 250 Canadian residents to sign up for the webinar event will receive a free copy of David's book, Stay Calm. Nice. Very cool. Yeah, kind of a neat little event and an opportunity to get a free copy of his book. So that should be cool.

In the main part of the episode, we are going to talk about Leveraged ETFs. It's a very nerdy discussion. We will get to that in a second. But before we get into that, I do want to debrief our recent episode on the finances of marriage. We received what I would call a comically accurate comment about the content of that episode. So I'm just going to read the comment.

The commenter says, guys, I respect you a ton, but this conversation would be much more interesting if you added at least one woman. I read that and I was like, oh yeah, that's so obvious. What are we doing? Even better if she was a financial advisor or a financial services professional. Because what you often label so easily as crazy is just not from another point of view. You do have a ton of blind spots. For example, to a woman spending two months salary on diamond might not seem crazy. Also for a woman who might have stepped into marriage with over one million dollars in assets, she is the one who has to pause her career to do IVF, to expand her family. It doesn't matter if she has more money. Certain things just matter to women and you guys are not ladies, which is in fact true Dan.

Dan Bortolotti (2:10)

Undeniable, yes.

Benjamin Felix (2:11)

Undeniable.

So to address that feedback, we are joined by Kelly Thomas, who is an associate wealth advisor at PWL. Kelly, you and I chatted about this when we worked together in person recently at a PWL event. You have listened to the marriage episode. You also read that comment. We laughed about it together. Can you help us with our blind spots? Talk us through it.

Kelly Thomas (2:33)

Absolutely. So it was a really interesting episode and it brought up some really interesting topics. The first one that I had some insights about was spend thrifts, tight wads, and the mental load of spending. So we talk about people being either a spend thrift or a tight wad. But I think there's more to it than how easily someone spends money. What is the money actually being spent on? Who is responsible for household spending? Who thinks of, do your kids need clothes, groceries, birthday presents, school supplies, activities? All of the little random things that keep the house running. One spouse may look like the spend thrift simply because they're the person doing most of the spending on behalf of the family. Meanwhile, the tight wad might just have fewer household purchases running through the account, or the spending might be mostly personal discretionary.

So are we really comparing apples to apples in this situation? Then how much of what looks like a spending personality is actually tied to household roles and the mental load?

So when we talk about financial compatibility, we should look at how much someone spends, what they're spending it on, why they're spending it, and who is carrying responsibility for making those purchases. Makes sense. So are spendthrifts and tightwads actually personality types, or can the roles people take on in a household make them look that way?

Dan Bortolotti (3:56)

Hmm.

Benjamin Felix (3:56)

Yeah, it's an interesting perspective.

Dan Bortolotti (3:58)

I think that's a great point. As you know, it may just be one partner or the other is just responsible for more expenses that are family related as opposed to individual. And those are very different things. I certainly know of people who spend quite generously on their kids or on family priorities, but don't spend a lot on themselves. So where do they fall in that height-wide spend-thrift continuum? I don't know. It's a good perspective.