The reason Dimensional has been so successful, according to Booth, is because “we have connected the leading academics and caught the new wave of thinking about finance and investing. We were able to take those ideas and implement them very well.”
The academic work began in the 1960’s and was headquartered at the University of Chicago. It was pioneered by the work of Eugene Fama, who is best known for his empirical work on portfolio theory, asset pricing and stock market behavior. Fama is referred to as the father of the efficient-market hypothesis.
The research that Dimensional was founded on may be bigger than the firm itself. The term “evidence based practice,” which is often used in the healthcare setting, applies to the practical application of research that helped create the exceptional investment solutions offered by Dimensional.
As David Booth discusses the future of investing, he talks about accessing and connecting with the average person. Originally, Dimensional’s solutions were offered mainly to large clients. But with the average account balance in a 401k plan around $60,000, Booth asks, “How can we help people make meaningful decisions with that level of assets? We need to figure out ways of delivering good financial services to the average person.”
Booth also states that “there is less emotion around the active/passive debate.” His belief “is that if we are going to have progress, particularly in the area of investing and finance, then innovation has to come from better and safer financial services. That is what will lift us all up.”
About Christopher Jones
Christopher Jones is the Founder and President of Sparrow Wealth Management, a fee-only financial planning and investment management firm. Before entering the investment field, Chris was a management consultant for Deloitte Monitor. He graduated summa cum laude from Brigham Young University with a B.S. in Economics and a minor in Business Management.