What Is the Difference Between Index and Market Cap Weight of Strategies?

Toronto Riley, CIO and Co CEO of dimensional funds explains the difference between an index fund and a market cap strategy. The benefits are transparency, low cost, you know what you're getting; drawbacks are lack of flexibility,. You're not building your rules for every type of market environment we've left behind. And then start to deviate from those market cap weighted strategies in order to improve returns.

Transcript

chevron_right

Play full episode

chevron_right

Transcript

Episode notes

It has been an amazing year for the podcast. We have had some incredible guests during 2022 who have provided us and listeners with insights and thought-provoking ideas about the world of finance. We covered a lot of ground and to wrap up the year we decided to recap some of our favourite moments for listeners. In this episode, we highlight the many themes covered during this year, such as the basics of investing, stocks and bonds, how to make wise investment decisions, gender inequality, asset management, index funds, market trends, and portfolio management. We also highlight some of the indirectly topics indirectly related to finance such as the value of happiness, enjoying the pursuit of happiness, the importance of goal setting, and much more. Join us as we reflect on some of our best moments from the year and provide an overview of the many vital lessons we have learned in this final episode of the year for the Rational Reminder podcast.

Key Points From This Episode:

Mac McQuown explains how the data revolution changed the game of investing. (0:09:05)
Robin Wigglesworth and tracking the performance of portfolios in the 60s. (0:12:56)
Professor Fama shares what it is like to see the impact of his academic work on the practice of asset management. (0:16:02)
Gus Sauter tells us about the role the University of Chicago played in the index fund revolution. (0:18:41)
Professor Fama unpacks what it means for a market to be efficient. (0:20:52)
Gerard O’Reilly and the differences in the types of market strategies available. (0:24:27)
Professor Betermier shares his research from multiple papers concerning tendencies towards growth and value stocks. (0:28:50)
Eduardo Repetto tells us whether having a portfolio consisting of 100% small-cap value stocks makes sense. (0:36:06)
Professor Koijen explains whether index funds distort market prices and make markets less efficient. (0:40:30)
Professors Berk and van Binsbergen discuss if it is possible to find skilled fund managers before they are absorbed by their fund. (0:43:44)
Professor Cederburg explains how data sets can be upwardly biased and why you need to be aware of it when looking at data. (0:48:15)
Bill Janeway describes the three-player game regarding investments. (0:50:51)
Professor Phalippou compares the performance of private equity relative to public equities. (0:53:42)
Antti Ilmanen tells us how investors can stick with an investment strategy during times of low performance. (0:59:10)
Professor List tells us how often people should check their investment portfolios. (1:01:56)
Leonard Mlodinow explains how the rational mind and the emotional mind are intertwined. (1:04:56)
Professor Edmans’s Grow the Pie and making the world a better place. (1:07:27)
Rebecca Walker outlines the effect learning about money has on people. (1:11:15)
Colleen Ammerman describes the current state of women in the workplace. (1:13:21)
Find out why the pursuit of a goal should be enjoyable with Professor Fishbach. (1:15:40)
Andrew Hallam talks about life satisfaction after middle age and how to get there sooner. (1:20:28)
Jay van Bavel details the effect of group identity on goal setting. (1:23:08)
Professor Frank unpacks the relationship between the consumption of luxury goods and happiness. (1:26:55)
Professor Bohns provides insight into why people are under-confident in their social lives. (1:31:01)
Professor Fama reveals how many hours a day the brain can handle deep work. (1:34:24)
Cassie Holmes and why happiness is a good thing from a scientific perspective. (1:35:30)
Colonel Chris Hadfield shares the lesson he learned as an astronaut that he applies to his everyday life. (1:38:52)