We were pleased to have Dimensional’s Vice President Apollo Lupescu, PhD at a pair of events we held in Houston and St. Louis. Apollo spoke about the historical context of modern investing, the essence of an evidence-based approach, and the future of our community.

What does history tell us about how the financial future might look? Be on the look-out for a recorded version of Apollo’s St. Louis presentation, which we’ll be sharing soon via our blog/newsletter.

Dimensional Fund Advisors is a hugely important alliance for Hill Investment Group, and yet this is the first event we’ve done with a member of their team conversing directly with HIG’s clients and friends. Despite having a low profile, Dimensional currently manages $518 USD billion across eight countries (as of June 30, 2017). How have they done it? Through sharing ideas that make sense and by creating solutions that reflect their beliefs (and ours).

We also respect Dimensional as a thought leader, regularly publishing content that helps change the way investors think. We like one of their recent pieces, “Lessons for the Next Crisis,” which points out we’re nearing the ten-year anniversary of the beginning of the Great Recession. That’s not exactly an event to celebrate, but it’s important to apply what we learned from it the next time we’re in a bear market, once again feeling like there’s no end in sight. As Dimensional says (and buttresses with evidence-based illustrations):

“Capital markets have rewarded investors over the long term, and having an investment approach you can stick with—especially during tough times—may better prepare you for the next crisis and its aftermath.”

Well said, Dimensional.

If you’ve got about 50 minutes to listen to a half-dozen big-name perspectives covering nearly 50 years of efficient market theory, I recommend Freakonomics’ podcast, “The Stupidest Thing You Can Do With Your Money.” It’s a wide-ranging overview of the active-passive debate that won’t disappoint.

Here are some of my own takeaways from listening in.

John Bogle – Reminisces on when he founded Vanguard in 1975 and launched the world’s first publicly available index fund. The costs make all the difference. With active fund costs ranging upward to 200 basis points (after expense fees and trading costs), versus index funds’ typical 4–10 basis points, the expense hurdle is too tough to overcome. It took a long time for people to get the idea, but now there is a passive revolution.

Ken French – Points out that it took 50 years for passive investing to grow from zero to 20% market share. Then, it jumped from 20% to 30% in the last decade. “Only the top 2-3% of active funds have enough skill to cover their costs,” says Ken. “If you don’t think you are one of the best people out there doing this, you probably shouldn’t even start.”

Eugene Fama – Developed the Efficient Market Hypothesis in the late 1960s (i.e., prices reflect all available information), which led to his being a co-recipient of the 2013 Nobel Prize in Economic Sciences. The gap between his early academic inquiries and wide, practical application of the findings is telling. (My take: Remember, one important quality in evidence-based investing is ensuring the theories have withstood the test of time!)

Barry Ritholtz – Reflecting on the title of the podcast, Ritholtz commented: “Sophisticated investors refuse to admit they can’t beat the market. … Costs are a tax on smart people that don’t realize their propensity for doing stupid things.”

I’ve barely skimmed the surface of the many insights, large and small, shared in this fast-paced podcast. Want to know where Mr. and Mrs. Bogle buy their favorite sweaters? Tune in to find out!

One of the biggest challenges people often face in embracing evidence-based investing is figuring out what it means to them, and putting it into words to remind themselves or to explain to others. Not to worry – we’ve got that covered here at Hill Investment Group. Recently, we produced a nifty advertisement, as well as an infographic/poster (in collaboration with Wendy J. Cook Communications and Mineral Interactive), to tell it to the world. I hope you like the results! (Click on each image to enlarge it.)