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Monday, March 14, 2011

Investors Need Long-Term Perspective

Below is a brief overview of the market since the end of WWII by David Booth, founder of Dimensional Fund Advisors. The overview gives a longer-term perspective and stresses the value of staying with a strategy. The times that seem to be the worst for investing oftentimes turn out to be the best and vice versa. In the early 1980s, equities were avoided by many just as they were poised to make an historical run. BusinessWeek, in fact, published their infamous "Death of Equities" cover during this period.

On the other hand, early 2000 looked to investors like a great time to invest. Investors predicted a stock market return of more than 30% for 2000. The subsequent 10 years, which we have recently completed, are now referred to as a "lost decade." As David Booth points out, equities were down 20% on an inflation adjusted basis.

Source: Arianna Capital


  1. Loved the video. Wish I'd found it first :-).

    Investors have to invest contrary to their emotions. The likelihood of future investment returns has an inverse relationship to returns of the immediate past (i.e., great recent market performance means the probability of decreased future performance).

  2. Thanks for posting. I enjoyed the video. As a Chicago Booth alumni, I'm always especially interested to hear what David Booth has to say.

  3. re: The Grouch & Chad DFA guys are really smart and market savvy. Like Bogle they blazed paths in the face of significant resistance. I wish their funds were available to do-it-yourselfers at low cost.

  4. The only low cost broker I know that provides DFA funds is Scottrade, but the commissions on these are pretty steep.