FEAR & GREED | Business News Q+A: The father of index investing on strategy, life, & Warren Buffett
Nov 19, 2025
David Booth, the founder of Dimensional Fund Advisors and a pioneer of index investing, shares his invaluable insights. He discusses how indexing arose from poor active management outcomes and quantifies the long-term benefits of compounding returns. Booth contrasts strict index funds with active strategies, highlighting trading frictions. He explores the impact of AI on market efficiency, the unpredictable risks posed by government actions, and his legacy of democratizing investing through lower fees. Plus, he offers intriguing thoughts on Warren Buffett's unique place in the investment landscape.
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Indexing Born From Data, Not Hype
- Academic studies in the 1960s showed professional managers rarely beat the market after fees.
- That finding sparked the idea of buying the market via index funds as a simpler solution.
The Power Of Long-Term Compounding
- Long-term returns since the first index fund have actually exceeded early estimates, closer to 11% annually.
- Compounding at that rate makes dramatic wealth accumulation over multidecade horizons.
Improve Returns With Trading And Market Skills
- Avoid strict index-only approaches when trading mechanics create crowded buying events.
- Develop trading and market-structure skills to capture small edges that compound over decades.