Dimensional Stories: Make Sure It Isn’t an Old Idea in Disguise
As Dimensional Fund Advisors embarks on its 25th year of working with financial advisors, they shared with us a series of Dimensional Stories, two minute videos featuring Nobel Laureate Eugene Fama and/or David Booth speaking on the themes and insights that influence Dimensional’s way of investing. So far we have shared the first two videos of the series, Dimensional Stories: Empirical Work and Dimensional Stories: The 200th Draft, accompanied by explanations and stories of how the videos relate to Yeske Buie.
Today, we share the third video of the five-part series, Dimensional Stories: Make Sure It Isn’t an Old Idea in Disguise. In this video, Professor Eugene Fama and David Booth highlight the importance of being open to new ideas without jumping on something new just because it appears to be different. They point out that the addition of new dimensions to a portfolio brings higher constraints on implementation, which is why Dimensional carefully weighs how the application of new research may impact expected returns or risk management of a portfolio.
At Yeske Buie, we embrace the same philosophy with regards to our investments. As explained in our recent post, An Investment Approach That’s Stable, Not Static, when it comes to our portfolios, we are constantly evaluating the shifting landscape of the global economy and looking for ways to capitalize on structural shifts in the market. However, we “look” more frequently than we take action. We do not churn the holdings of our Clients’ accounts or turn our approach upside-down based on the latest industry trends or fads. And this philosophy clearly follows suit with Dimensional’s approach as Eugene Fama says in the video,
“I think we’re very careful in looking at new stuff that comes along, and making sure it’s robust, and then thinking very carefully about whether and how we want to use it for our purposes.”