Dimensional Fund Advisors Chairman David Booth Talks Embracing Uncertainty

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Caroline Hepker** (0:07)
Bond markets this morning with major moves higher as global bond sell-off yields the highest level in about 2008 And who better to discuss than our next guest who joins us in the radio studio this morning? This is David Booth, of course, a pioneer in the investing space. We are so delighted to have you on Bloomberg Radio.

**David Booth** (0:32)
Well, it's very exciting to be here.

**Caroline Hepker** (0:34)
Yeah.

**David Booth** (0:34)
That's when you get to be my age, that's what they call you a pioneer.

**Caroline Hepker** (0:39)
Well, I can't think of anything better. And of course, we want your view on what is happening in bond markets. Why are yields moving? Is this a longer term trend? How do you see it?

**David Booth** (0:52)
Well, we think it's very difficult to predict long term trends.
We come from the viewpoint that you want to have a long-term investment philosophy and pay attention to what's going on and look at the movement the last few weeks, really, and say, well, how does that impact my long-term plan? And generally, there aren't that many times that you have to make adjustments based on that, but you ought to pay attention.

**Caroline Hepker** (1:24)
Yeah, David Booth, of course, founder and chairman of Dimensional Fund Advisors and one of the pioneers of index investing. So the question that flows from the kind of introduction around the bond markets is what that means for stocks. Now, what is your view given the run-up, given the amazing strength that we've seen in US stocks, two and a half percent plus gain for the S&P 500 just in August, the nine months of strong performance, does that continue? How do you see the run in stocks?

**David Booth** (1:55)
Well, I think here in, over the long haul, stocks are really hardened to beat.
And it's also based on all the evidence, it's difficult for people to time short-term movements in the market. And I think based on all the evidence that even the pros can't seem to be able to time short-term movements, I think stick with your long-term plan and check your personal situation. Have things changed at home? Do you have a new job or win the lottery? Those are the kind of things that you want to focus on in terms of making changes.

**Judy Lagrou** (2:33)
I have a bit of a behavioral economics question to ask you. When you think about staying calm, at what point does it represent discipline? And at what point does it represent stubbornness in the face of new information?

**David Booth** (2:46)
Well, one of the keys is you always want to be flexible and adaptive and pay attention to what's going on. And that's how you deal with uncertainty. Rather than, and it ties in with, instead of trying to predict markets, you want to plan for markets. So you come up with your best idea. You can call it a forecast or whatever, but you've got to come up with a solution. Then you pay attention to what's going on and make the best choice as you can.
If you make the best choice as you can, then you'll be more like to be able to stay calm.
That's the whole idea. Sorry, in life as well as investing.

**Caroline Hepker** (3:28)
Yeah.

**David Booth** (3:28)
It doesn't, this is not just an investing.

**Caroline Hepker** (3:30)
No, I love that, the life advice. I'm going to ask you one of the simplest and one of the first Bloomberg questions that I learned coming here, which is what do you do with $100,000?
Bring it down to the basics for our listeners. What would you do now? I mean, there's AI, there's so much uncertainty. There's all that's happening in the oil markets, the bond markets. What would you do with $100,000? Let's say your personal circumstances at the kitchen table look pretty good this year.

**David Booth** (3:56)
Well, it depends on, at my age, it's different than somebody that's just coming out of school. I think for people, let's start with people coming out of school. Yeah, you pretty much need to be pretty heavily invested in the stock market, and I would buy the whole market. There are a lot of market index funds or market portfolios out there that you can buy very inexpensively, very tax efficient, and just, you know, the key to it, of course, is saving. It's not the investing side when you're starting out. It's being able to save enough money to, now you have $100,000, but then keep up with the regular savings program. Now at my age, I've gone through different cycles here. Where I am now is that I'm really, eventually what's going to happen with my money is it's going to go into nonprofits and charities. So I'm basically, I'm kind of saying, if I were an endowment fund, how would I invest? So I'm not 100% equities, but I still have a big chunk in equities, even though I'm an old person.