Timeless Lessons

Our strategic partners at Dimensional are celebrating their 40^th anniversary as a firm, and Founder, David Booth, used the milestone as an opportunity to reflect on the lessons he’s learned from his decades in finance. We find that Booth’s reflections and beliefs align very closely with those of our own Founders, and use this space to highlight our thoughts on five investing lessons that Booth wishes every investor could know.

1. Gambling is Not Investing, and Investing is Not Gambling 

“Gambling is a short-term bet. Investing, on the other hand, is long term.” – David Booth

• We agree, and we emphasized this point when the GameStop mania took off in early 2021. As Lauren Stansell said, “This isn’t investment, it’s speculation… Wealth is built over decades with a commitment to a sound investment philosophy.”

“Investing, to me, is buying a little bit of almost every company and holding them for a long time. The only bet you’re making is on human ingenuity to find productive solutions to the world’s problems.” – David Booth

• At Yeske Buie, worldview drives everything. And to our core, we believe in human ingenuity. Our philosophical foundations for investing are…
  • Human beings are fundamentally growth-seeking, ingenious, and resilient, as a consequence of which . . .
  • The U.S. and world economy are ultimately resilient and biased toward growth, therefore . . .
  • The stock market, which mirrors the real economy, is also biased toward growth over the long run.

2. Embrace Uncertainty

“Stock market behavior is uncertain, just like most things in our lives. Over the past 100 years, the US stock market, as measured by the S&P 500, has returned a little over 10% on average per year but hardly ever close to 10% in any given year.” – David Booth

• We’ve shared a few visual depictions of this concept over the years…
  • Periodic Table of Returns: Can you spot a pattern? No? Neither can we!
  • Weekend Chart Challenge: Pop quiz! Can you match each market chart to its respective year?

“The way to deal with uncertainty is to prepare for it. Come up with a plan to get back on track in case things don’t go as expected.” – David Booth

• There are a number of ways that we help our Clients embrace uncertainty, one of which is by implementing policy-based financial planning^®.

3. Implementation is the Art of Financial Science

“Just as some sports teams can consistently execute their strategies better than others, investment professionals can consistently add value by dealing better with market mechanics.” – David Booth

• This belief is literally one of our core values. We call it Think Big: We believe that exquisite action demands the artful application of the best available science.

Tune Out the Noise 

“TV pundits handing out stock tips? Friends letting friends in on their next big investment? I see these more as entertainment than information.” – David Booth

• Whether the “noise” comes from your personal connections or mass media, we think this lesson is a good one, and we’ve made the case in several instances (like this one and this one) before.
• In noisy times, we often suggest filling your time with more positive energy. Like…
  • Perhaps the most beautiful flash mob ever
  • Stand By Me – Global Rendition
  • The Hope Chronicles

Have a Philosophy You Can Stick With 

“Discipline applied over a lifetime can have a powerful impact.” – David Booth

• There’s no way to predict the future. Therefore, the only way to prepare is through built-in resilience. Think about 2020, for example. When we assembled our Client portfolios, we didn’t know there would be a global pandemic. But we knew there’d be something. There’s always something. This brief video shows how we build a resilient, all-weather portfolio that can carry you through whatever storms may come our way. In the words of Dr. Dave Yeske, “It’s better to be resilient than nimble.”

More insights, videos, and photos from David Booth can be found here on Dimensional’s website.