FINDING INSPIRATION IN A 50-YEAR FRIENDSHIP

I first came across Eugene Fama’s (and Ken French’s) academic research on financial markets in 2000/2001.  For a young broker trying to pick stocks and generate enough commissions off clients to stay employed, Fama’s findings were eye opening to say the least.  Nobody had taught me that you didn’t have to try to outguess the market to have a successful investing experience.  I certainly didn’t understand the true underlying sources of investment returns, let alone how to design and manage a portfolio to capitalize on them.

But my greatest frustration came from the fact that, even after I learned more about proper investing and modern portfolio theory, I still lacked a way to put my knowledge into practice for clients.  I understood that actively-managed mutual funds were destined to underperform the market, and even traditional index funds were less than optimal when it came to fully capturing the small cap and value premiums globally. 

Finding Dimensional Fund Advisors (DFA) was a lifeline for me.  They were (and still are) the only investment management/mutual fund firm I could find that embraced the Fama/French research as much as I did.  So it was only natural that they also managed a suite of stock and bond mutual funds that sought to translate the Fama/French academic research into real-world investment portfolios.  I had the will, Dimensional provided the way.

I owe a lot to Eugene Fama, Ken French, and David Booth; at a time when I was having serious doubts about a career as a financial advisor around the turn of the century, they provided a different and more meaningful path forward for myself and my clients.

Take a minute to watch this video about the friendship between Eugene and David–two of the three people who have had the greatest influence on how Servo clients (including my own family) invest their life savings.