You Can Do Better than Indexing

How would you say Dimensional differs from a pure index fund company? Indexing is pretty good. There's things you can do to improve upon that, and that's what we set about trying to show people. An index, every time they announce a change in the index then everybody knows what they're gonna buy and what they're gonna sell, and their trading costs could be pretty high to accomplish that. But if you have total flexibility in what you'll buy and what you sell and you can react to the market, you'll have that benefit. And this was a part of Dimensional from the start. If you're going out there and buying roses on Valentine's Day is that probably the highest price you're ever gonna pay for those roses? Yeah, most likely. And that's what indexes do. They're buying when everybody else is buying and the price goes up, price goes up. So it's just an expensive way to go acquire or sell shares. And so Dimensional says, well, why would you ever wanna buy it on Valentine's Day? Buy it when we can get a better price. Buy it at a lower price, you get a higher expected return. Look, we're like an index fund in the same philosophy, low cost, diversification. We're gonna try to beat the index, but not by trying to be clever and pick just the right stocks, but just be thoughtful about how do we go about actually implementing the purchase and sale of all these thousands of stocks that we're going to own. Because we're not tied to an index, we can use the information that's being presented to us in the marketplace. The market is gathering this information. People are gathering information, acting upon it. We think that there's value to having portfolio managers look at the portfolio weights every day, figuring out how the market's moving and incorporating that information real-time into the portfolios. That's what I'd say is the major difference over an index is the flexibility to rebalance the portfolios every single day. Why Dimensional can beat indexing is because it's not slavishly having to follow a particular mechanical rule. When they're compared to indexing, they have better performance. Our funds are designed to offer higher returns over time. It's not gonna be every year, but over time, we think we can do better. What we've demonstrated over 40 years is that taking advantage of flexibility has value. If you had one message to give to future investors, what would you say to them? Here's our set of beliefs. Here's our track record of implementing these ideas. And if those two things together work for you, we would love to have you as a client.