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SFB091 Academics of Investing with Special Guest from Dimensional Fund Advisors, Jake DeKinder

| February 13, 2018
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Episode Summary

Jake DeKinder is the head of all advisory communications and the VP of Dimensional Fund Advisors. Jake works with advisors across the world to help them better communicate to their clients in plain language the complex topics surrounding investing. He received his MBA from the McCombs School of Business at The University of Texas at Austin and he also holds the CFA designation.

In this conversation, Paul speaks with Jake about Dimensional Funds history and his role with the advisor and client, why trying to outguess the markets doesn’t work very well, how everyone's behavior in a mutual fund impacts your outcomes and much more. 

What Was Covered

  • 03:18 - Jake talks about the mutual fund industry
  • 06:16 - The origin of Dimensional Funds and how Jake’s role works with the advisor and client
  • 08:07 - The reasoning behind the decision to serve advisors directly instead of working with clients
  • 09:51 - Paul defines the term “active management”
  • 10:46 - The history of active managers trying to beat the index they compare themselves to
  • 14:10 - Paul recounts his talk with Michael Jensen about using Dimensional Funds to help his clients escape the rat race of chasing after active managers who are picking stocks and speculating
  • 15:06 - Jake praises the academic community and Michael Jensen’s study
  • 16:01 - Clients that have their money in stocks instead of mutual funds
  • 18:18 - Jake compares costly investing to starting a 100 yard dash 10 yards behind the start line
  • 21:30 - Cash Drag and how the behavior of everyone in a mutual fund impacts your outcomes
  • 26:15 - Paul talks about the four different types of investors there are
  • 27:38 - Another type of investor Jake has seen and the results he’s seen from investors
  • 30:10 - The results he’s seen from investors who take an active stock picking approach
  • 32:34 - The difficulty of identifying Asset Managers who can outperform their benchmark
  • 34:12 - Jake comments on the industry’s practice of killing off mutual funds
  • 37:14 - Index investors, DIYers, and robo advisors
  • 41:53 - What good advisors can mean for peoples lives

Tweetables

"Taking that approach of trying to outguess the markets, pick stocks, time when to be in, when to be out, there’s not a lot of evidence that it works on a regular basis."

"Very few active managers outperform their benchmark, outperform the index over an extended period of time."

"There are a lot of costs that are much more difficult to see that investors may not be aware of and a lot of those come in the form of implementation costs."

"You want to make sure that whatever investment approach you’re employing focuses on both those costs you can see as well as the costs you can’t see."

"If you want your wealth to grow over time you have to be willing, where appropriate, to commit your money to the capital markets to make sure that you can capture those returns."

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