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Animal Spirits Podcast

Talk Your Book: Factor Investing with Dimensional Fund Advisors

Oct 21, 2024
Rob Harvey, Co-Head of Product Specialists at Dimensional Fund Advisors, dives into the world of factor investing. He discusses how DFA distinguishes itself in asset management and shares insights on converting mutual funds to ETFs. The conversation explores the impact of the meme stock craze, the cyclical nature of value investing, and the ongoing relevance of small cap strategies. Listeners will gain an understanding of the importance of adaptability and informed decision-making in optimizing portfolio performance.
36:17

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

  • Dimensional Fund Advisors emphasizes a factor-based investment approach that prioritizes systematic active management over traditional stock-picking strategies to enhance investor outcomes.
  • The cyclical nature of small cap value investments highlights their potential for recovery, indicating that underperformance can occur but does not signify a permanent decline in value.

Deep dives

Small Cap Value Performance Overview

The discussion highlights that small cap value investments have faced challenges over the past decade, particularly when compared to mega cap growth stocks. However, it's revealed that, over the last five years, small cap value actually kept pace with the S&P 500, with only a slight difference in performance. While concerns about long-term underperformance are common, data shows that small cap value has still yielded positive returns in absolute terms, reinforcing the notion that investment performance can be cyclical rather than consistently negative. This cyclical nature suggests that small cap value investing isn't dead but may provide opportunities for recovery in the future.

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