"A Little Bit of Judgment Can Make a Difference"
Submitted by Desmond Wealth Management, Inc. on December 12th, 2016These words of wisdom were recently expressed by Dimensional Fund Advisors’ David Booth in an October 2016 Wall Street Journal series about “passivist” investing. The sentiment is drawn from Dimensional’s 35-year well of experience offering a structured family of funds according to this same ideal.
“A little bit of judgment can make a difference.”
Forget all the complexities involved in being a successful investor through thick and thin. Disregard the dizzying number of ways you can try to earn returns in our global markets. Think instead, about the powerful import of Booth’s simple statement, and how it applies to making the best possible financial choices we can.
Note how each part contributes to the whole. Yes, we want to use judgment in our decision-making, but a little bit often goes a long way. Given our psychological biases, too much thought can become overthought, which can turn into second-guessing an otherwise sound course.
Yes, a rational approach can make a difference… but we must be mindful that even the best-laid plans might not play out as expected. That is why we are optimistic about our evidence-based investment strategy… but we also want to temper the very real risks of the unknown with a sturdy safety net.
In a financial industry overpopulated with product, it’s often difficult to differentiate sensible solutions from the choke-hold of choices available. This is especially the case with Dimensional Fund Advisors’ offerings. That “little bit of judgement” they apply (which is indeed expected to make a positive difference, and historically often has) can be more than a little complicated to explain in detail.
Fortunately, we have some excellent materials to help with that. Here, you will find:
- The Active-Passive Powerhouse by Jason Zweig.pdf: An excerpted reprint of The Wall Street Journal piece I cited above, so you can read the rest of the coverage for yourself.
- A November 2016 Pension & Investments reprint, Dissecting Dimensional.pdf. If you’re more into seeing than reading, you may prefer this series of quick-take charts.
- Power of Quotes.pdf: Excerpts from Dimensional’s little book, 35 Quotations on a Better Way to Invest. Published in 2016 to commemorate the firm’s 35th anniversary, it contains 35 more inspiring investment insights.
If you'd like to find out more about how Desmond Wealth Management seeks to apply our own “little bit of judgment” to improve on your and your family’s life, feel free to reach out to us at any time.