Episode summary
50 Years of Evidence-Based Investing (with David Booth) | Rational Reminder 424
The Rational Reminder Podcast
· · 1 hr 31 min · Hosts: Benjamin Felix · Guests: David Booth
Summary
David Booth makes the case that the last 50 years of evidence-based investing turned market uncertainty from something to fear into something to understand and use. He traces the field back to Eugene Fama, early data collection on stock and bond returns, and the realization that public markets broadly reward investors over time while professional stock-picking usually fails after fees. His core argument is that the science mattered, but implementation mattered just as much: trading, portfolio construction, and keeping costs low are where investors actually capture returns.
He also stresses that investing is really about behavior and trust. Booth says investors need a process they can stick with, because life changes, goals are fuzzy, and the right portfolio is often the one you can stay invested in through different phases of life. He connects that to his own experience as a shoe salesman, his outsider perspective, and the importance of honesty with clients.
Booth argues that optimism is rational because human ingenuity keeps compounding through shocks, from the pandemic to long-run innovation. He sees advice as valuable not for predicting markets, but for helping people avoid mistakes, stay calm, and focus on what they can control.
Key takeaways
- Booth says stocks have delivered about 10% a year over long periods, while professional managers generally fail to beat the market after fees.
- He argues that implementation is decisive because trading costs, portfolio construction, and execution can add or destroy real return.
- Booth says trust is the product in financial advice, and investors need a process they can stick with rather than a perfect forecast.
- He believes human ingenuity is the reason market economies grow, which is why broad market investing is more reliable than stock picking.
- Booth says the main job of an adviser is often preventing clients from doing something stupid and losing the benefit of compounding.
Notable quotes
“I believe it and I have data. You don't believe it and you don't have data”
“stocks have higher returns in bonds and because they're riskier and and um bonds keep pace with inflation”
“I think you're willing to challenge the assumption”
“the most important thing about an investment philosophy is you have one that you can stick with”
“trust is um is really what our business is about”
How the episode opens
Yeah, indexing is okay, but uh there have to be better ways to invest. — You just you're just guessing and hoping. — You're just guessing and hoping. — I believe it and I have data. You don't believe it and you don't have data. So, uh
Once you get some data, come back to me.
Welcome to episode 424 of the Rational Reminder podcast. I'm Ben Felix, chief investment officer at PWL Capital. And I'm Cameron Passmer, chief executive officer at PWL Capital.
Today we're joined by David Booth, who co-founded Dimensional Fund Advisors in 1981 in the spare room of his Brooklyn apartment. And today, that firm manages roughly 1 trillion in global assets. And today we discuss his new book, Stay Calm, Learn to Embrace Uncertainty in Investing and Life.
And we dive into insights from his 50 plus years at the center of this evidence-based investment world. Make sure you stick around to the end to hear Cameron and my thoughts on the conversation. But for now, let's get into the episode.
David Booth, it's a great pleasure to welcome you back to the Rational Minder podcast. — Well, it's great to be here again. Thanks for having me. — And congratulations on your fabulous just released book. I uh I read it twice and I think it's a terrific piece of work and a terrific representation of your career quite honestly.
Oh, well, thanks. You know, that was it was um it was kind of tough writing, but um we slugged our way through it and I'm I'm pleased with what came out. — Oh, no kidding. So, I have to ask you, what lesson did your job I believe it was Arensburg Shoe Store. So, what lesson did that teach you?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- evidence-based investing
- efficient markets
- implementation vs ideas
- trust and financial advice
- private vs public markets
Companies and tickers mentioned
- Dimensional Fund Advisors
Watch the episode
Watch “50 Years of Evidence-Based Investing (with David Booth) | Rational Reminder 424” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Finances of Marriage | Rational Reminder 426 -
The Biggest Myths in Personal Finance | Rational Reminder 423 -
Bill Bernstein: The Money Decisions That Actually Matter | Rational Reminder 422 -
Barry Ritholtz: How Not to Invest | Rational Reminder 421
The Rational Reminder Podcast, this episode and its artwork belong to Benjamin Felix, Cameron Passmore, and Dan Bortolotti. Octagon is not affiliated with the show; this page is an independent summary.
