You’re a Professional—So Are You Using Professional Tools?
How do you distinguish a professional from an amateur, aside from the obvious point that a professional gets paid?
“The difference between an amateur and a professional,” one of my mentors once told me, “is that the professional can make way more distinctions about their subject than the amateur.” This simple yet profound insight has stuck with me through the years and has had a significant influence on how I view expertise and mastery in any field.
There is another way that we can identify the professional, and that is by the tools they choose to do their work. Let me provide an example. Recently, my daughter asked me to help her install a flat screen TV on the chimney breast of her new house. Armed with my new drill from the local DIY store, I went straight to work. But, despite my best efforts, the drill made barely any impression on the reinforced concrete wall.
Finally, we admitted defeat and called in a professional installer. He arrived with a van full of serious kit and a drill that was clearly built for the job. In a few moments, he punched through the wall like a hot knife through butter and soon had the TV securely in place. The job was done efficiently and effectively, thanks to the right tool and someone who knew how to wield it.
Tools of the Trade
Learning and experience teach professionals to understand that not all tools are created equal. At Dimensional, we apply the same thinking when building investment solutions for clients. The design, implementation and ongoing management of our strategies is very different to those that are created to track simple, vanilla indices.
Whilst a passive index strategy might be diversified and low cost, Dimensional strategies offer similar benefits but are built on decades of insights derived from academic research and empirical data, allowing us to systematically, and reliably, target sources of higher expected returns.
Our construction process goes far beyond the obvious differences of size, value and profitability by thinking about how these long-term drivers of return interact with each other. There are potentially hundreds of other factors, from the short-term effects like momentum and corporate actions, to the flexibility that comes from daily trading. This attention to the details allows us to focus on beating indices, not matching them, without trying to pick individual winning stocks or time markets.
Whether you’re a TV installer, a professional adviser or any other kind of professional, mastery is achieved through a deep understanding of your field and by applying advanced tools for specific tasks. Dimensional has been making increasingly refined distinctions among and between the types of securities we select for over four decades now, and the solutions we create give the professionals we work with the tools necessary for delivering a successful investing experience.
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