Low-Risk Fantasies
Don and Tom expose the seductive illusion of “wealth without risk” by dissecting the explosion of equity-hedged ETFs and mutual funds. They tear into the high fees, low returns, and false promises sold by funds claiming to protect investors from market drops while capturing the upside. With support from recent Wall Street Journal coverage and AQR data, they explain how these “hedging” strategies—especially options-based ones—often underperform simple stock/bond portfolios. Listener questions tackle Roth conversions, AVGE vs. GLOV, and the myth of magical investing pills.
0:04 Investing dreams and chocolate dreams: both come with a price
1:31 Wall Street sells “protection” from volatility—Americans are buying
2:37 Hedged funds as “stock insurance”? More like expensive illusions
3:57 Comparing VOO to PHDG: 13% vs. 4.3% returns
4:54 Downside protection claims fall apart under scrutiny
6:18 Lower volatility, far lower returns—does it help you sleep or retire?
7:34 How these funds work: options-based “protection” explained
8:48 Options decay and premium costs crush performance
9:56 Simpler is better: most “safety” funds fail to beat basic stock/bond mix
11:03 5-year S&P 500 returns: mostly up, and up a lot
11:50 Hedged funds underperform in up years—and still lose in down ones
12:22 Hidden costs in options-based funds aren’t in the expense ratio
13:30 Bottom line: no panacea, no magic. Just smart allocation
14:05 Investor responsibility: no one will protect your money but you
14:12 Listener Q&A intro and apology for delay
15:05 Backdoor Roth vs. regular Roth when income is uncertain
16:59 AVGE vs. GLOV: performance vs. philosophy
17:55 GLOV’s returns look good—but it’s far less diversified
19:21 Passive label vs. reality: GLOV is focused, possibly active
20:38 Short track record makes comparisons tricky
22:04 Don and Tom favor massive diversification over short-term wins
23:42 Set expectations low and you’ll be pleasantly surprised
24:49 Ask us anything—and yes, crypto guy left another bad review
26:02 Crypto is “generational”? Maybe, but Don still won’t use money he can’t spend