Today we welcome Rob Arnott to the show! Rob is the founder of Research Affiliates and is a prolific writer who has published hundreds of articles for many different journals. We know firsthand, the power of Rob's work, and how it can alter the way you think about investing, and this depth of knowledge, coupled with his ability to make complex topics understandable makes him a dream guest for us! Rob is the co-author of The Fundamental Index, and we get some insight into this subject along with many other groundbreaking areas he has worked on. We cannot stress enough the rarity of Rob's gift for getting difficult ideas across in a deliberate and approachable way, and this is apparent through this illuminating conversation. For us, it was quite surreal to speak to someone so influential, and listeners can expect to come away with a greater understanding of 'smart-beta', intangible assets, forecasting, and some insight into the interesting areas of earnings dilution and 'the big market delusion', before Rob shares some very surprising information on factor momentum at the end of our chat. So for this and a whole lot more, in a truly stand-out episode, be sure to listen in! Timestamps: 0:00 - 2:40 Intro 2:41 - 6:50 Can you talk about some of the drawbacks of cap weighted indexing? 6:51 - 12:31 Can you compare that to tilting towards the traditional Fama–French factors like size, value and profitability? 12:32 - 15:17 Talk a little bit more about fundamental indexing? 15:18 - 19:24 How much weight do you think investors should put on the back test when they're deciding to invest in something? 19:25 - 26:30 How normal extreme factor drawdowns are in investing. 26:31- 29:26 How important are intangibles? 29:27 - 32:40 Is it different this time for value stocks? 32:41 - 38:20 Is that story important to stick through times of under-performance? 38:21 - 42:26 What is big market delusion and how it plays into bubble formation? 42:27 - 46:12 What is earnings dilution and how it can relate to a bubble formation? 46:13 - 50:35 Do you think investing in revolutionary or these disruptive industries is a good idea? 50:36 -56:39 How do you go about forecasting the expected returns of a factor portfolio? 56:40 - 1:04:21 Paper looking at mutual funds, live funds have not looked so great. 1:04:22 - 1:18:26Trading costs earlier and commission costs 1:18:28 - end How do you define success in your life? Books From Today’s Episode: The Fundamental Index — https://amzn.to/3qT81c1 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/ 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 Rob Arnott - Research Affiliates— http://www.researchaffiliates.com/en_us/home.html Research Affiliates on Twitter - @RA_Insights Research Affiliates on LinkedIn - https://www.linkedin.com/company/research-affiliates/ Asset Allocation Interactive - https://interactive.researchaffiliates.com/asset-allocation#!/?currency=USD&model=ER&scale=LINEAR&terms=NOMINAL Smart Beta Interactive - https://interactive.researchaffiliates.com/smart-beta#!/strategies?region=DEV RAFI Indices - www.RAFI.com Jack Treynor — https://www.cfainstitute.org/en/research/cfa-magazine/2016/jack-treynor-and-the-birth-of-the-quants 'Alice’s Adventures in Factorland' — https://www.researchaffiliates.com/en_us/publications/articles/710-alices-adventures-in-factorland-three-blunders-that-plague-factor-investing.html 'The Big Market Delusion' — https://www.tandfonline.com/doi/full/10.1080/0015198X.2020.1730655 'Earnings Growth: The Two Percent Dilution' — https://www.researchaffiliates.com/documents/FAJ-2003-Two-Percent-Dilution.pdf 'Can Momentum Investing Be Saved?' — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3099687