Name: Billionaire David Booth Lost To the Market for 9 Years. He Never Changed His Mind.
Uploaded: 2026-08-21T14:00:17+00:00
Duration: 2303 s

Speakers

David Booth — Founder, Dimensional Fund Advisors

Meb Faber — Co-Founder & CIO, Cambria Investment Management

Summary

David Booth discusses the origins of index funds, Dimensional Fund Advisors' early small-cap struggles, and the Fama-French factor model. He argues for staying invested in broad markets, expecting small-cap and value premiums over long periods, and avoiding short-term timing and AI winner-picking. The conversation also covers tax-managed strategies, equities versus gold, and long-term compounding. Meb Faber adds the long-run case for US stocks and a historical small-cap value seasonal setup.

David Booth recounts how index fund ideas emerged from University of Chicago research and Wells Fargo.
Dimensional started with a small-cap fund and endured the worst 9-year small-cap underperformance on record.
Fama-French three-factor research added size and value dimensions and led to Dimensional value strategies.
Booth says AI will produce big winners and losers, so diversification beats picking individual AI companies.
Booth highlights tax-managed strategies as an emerging way to improve after-tax returns.
Booth contrasts S&P 500 compounding with gold's smaller long-term gain.
Meb Faber notes historically favorable 12-month seasonality for small-cap value into January 2027.
The episode emphasizes judging investment decisions rather than short-term outcomes.

Ideas

David Booth Founder, Dimensional Fund Advisors 3:00

Own cheap broad market index funds.

Since Dimensional started about 45 years ago, one dollar put in the S&P 500 became worth over $100, while gold went from about $800 to roughly $4,400, only a fivefold gain. Long-term equity compounding massively beat gold, so gold-focused investors missed the bigger market return.

David Booth Founder, Dimensional Fund Advisors 6:35

Small caps offer higher expected returns.

Small-cap stocks are a distinct asset class. They are riskier than large-cap stocks, and because risk and return are related, they have higher expected returns. Dimensional's first nine years were poor, but that was a period of extreme small-cap underperformance, not a broken thesis.

David Booth Founder, Dimensional Fund Advisors 14:56

Value is separate source of returns.

Fama-French research identified value versus growth as a separate dimension of returns, alongside market and size. That insight led Dimensional to create value strategies because value is a distinct source of expected return.

Meb Faber Co-Founder & CIO, Cambria Investment Management 19:43

Small-cap value enters best seasonal window.

Using Fama-French data over the last 100 years, the next 12 months are historically the best seasonal window for small-cap value, with January 2027 the single best month. Meb says he would not use it as an explicit forecast, but it is a clear historical setup to monitor.

David Booth Founder, Dimensional Fund Advisors 21:52

Tax-managed strategies improve after-tax returns.

The next generation of investment improvement is coming from tax-managed strategies that improve after-tax returns without trying to outguess the market. Booth sees these as emerging, differentiated, and exciting.

David Booth Founder, Dimensional Fund Advisors 22:25

AI winners unknown; buy all companies.

AI will be a big deal, but that does not identify which AI companies will win or lose. Like the California gold rush, the obvious winners are hard to predict, so investors should own a broad diversified basket rather than try to pick individual AI winners.

David Booth Founder, Dimensional Fund Advisors 28:02

Equities beat gold over long horizons.

Billionaire David Booth Lost To the Market for 9 Years. He Never Changed His Mind.

Summary

Ideas

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