David Booth: ‘The Markets Work Well for Everybody, Not Just the Insiders’

The founder of Dimensional Fund Advisors explains how financial science made investing more accessible and why ordinary investors don’t need to outguess the market.

Today’s guest on The Long View is David Booth. David is a repeat guest, the founder of Dimensional Fund Advisors, and has just released a new book titled Stay Calm: Learn to Embrace Uncertainty in Investing and Life. One of the interesting through lines on the episode really centered on data. David explained that without data, people are just arguing beliefs. There was so much time within the industry where investors really were in a data desert. That foundational layer was critical to everything that David, his colleagues at Dimensional, and so many others around the broader investing industry have ultimately brought to bear for the benefit of so many investors over the years. Plus, David explained that having access to a more complete dataset can really help provide a sense of calmness and reassurance for investors, even in an uncertain environment.

Stay Calm: Learn to Embrace Uncertainty in Investing and Life https://www.staycalminvesting.com/

Episode Highlights

00:00:00 Introduction

00:03:21 How Market Data Revolutionized Investing

00:09:22 Learning From Eugene Fama

00:16:16 Communicating Financial Science

00:20:40 What is the Efficient-Market Hypothesis?

00:24:11 Diversification and the Limits of Indexing

00:32:37 Is Dimensional Active or Passive?

00:34:24 The Science Behind Factor Investing

00:40:29 Trusting Markets and Embracing Uncertainty

More From The Long View:

David Booth: ‘Usually the Great Ideas Start Out as Small Ideas and Then You Build on Them’ https://youtu.be/AlZ79ApSnbE?si=ml8VBRDK_fqjqJ6V

Don Phillips: Encouraging Better Outcomes for Investors https://youtu.be/U1JNp6Ot4EQ?si=nPlyYESiOLN9_DGx

Charley Ellis: Indexing Is a Marvelous Gift https://youtu.be/da9Cy4XqNlw?si=-Qw4TATjn3MhIrKk

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This episode is sponsored by Vanguard: https://advisors.vanguard.com/engagement/fixed-income