facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
David Booth on How to Invest Better - and Live Better Thumbnail

David Booth on How to Invest Better - and Live Better

How to Invest Better — and Live Better 

by David Booth, Executive Chairman and Founder, Dimensional Fund Advisors

It can be challenging to start a conversation about investing. That’s why I encourage having a conversation before the investing conversation — what I like to think of as a “preamble.” Connecting life principles to investment principles is a powerful way to ground abstract principles in reality, and to connect over universal experiences and feelings. It can also help make sense of investment concepts often dismissed as overly complex for those who aren’t familiar with them.

Our lives are the cumulative result of the decisions we make every day. Just as in investing, the power of these decisions compounds over time. That’s why it’s so important to find a decision-making process that works for you — both in life and in investing. In my mind, this involves acknowledging that uncertainty can create both stress and opportunity, planning for what might happen rather than trying to predict what will happen, cultivating flexibility and adaptability, harnessing the power of compounding, and accepting your own limits. Embracing uncertainty by planning for the future can help you live life better now.

Uncertainty

Given life’s profound uncertainty, it’s sometimes hard to feel like an optimist. Most of what happens in our lives is unpredictable, and it’s impossible to forecast the future. But you can live your life fully without knowing what’s going to happen. And you can have a good investment experience without forecasting what the market is going to do, because you’re not trying to guess which companies will succeed and when. You’re investing in the ingenuity of people to solve problems and make their companies run better.

Planning

You don’t have to predict, but you do have to plan. You can feel empowered by uncertainty instead of beaten down by it. Without uncertainty, there would be no opportunity. Think about all the unexpected turns your life has taken and the possibilities those turns opened up. While you couldn’t have predicted the outcomes of decisions you made, you intuitively knew how to gauge your feelings about the risks and opportunities being presented to you. The same is true of investing in markets. People shrink away from investing because of uncertainty, but experience living life has given us the tools to deal with it. While you can’t control markets, you can control how much risk you take. And you can control whether you have an investment professional in your corner for help making financial decisions you can live with.

“Life prepares you for investing and investing prepares you for life.”


Flexibility

While it’s important to have a plan, in both life and investing, the road will be easier if you cultivate flexibility. Think about someone you know who’s successfully navigated major challenges. Were they rigid, or were they nimble?

Compounding

If you need motivation to stick to your plan and adapt accordingly, consider the power of compounding. And I’m not just talking about the financial benefits (although the market has returned an average of about 10% a year over the past 100 years or so).1 If you think about it, the life equivalent of compound interest is wisdom. Learning from the past helps you make better decisions in the future, and those lessons build on one another over time.

Live Life

Once you’ve done the best you can, go easy on yourself. Learn from your disappointments, and enjoy your successes. It’s not the decisions you make, but how you make decisions. Approach other people with empathy. Investing, like life, is a process. If you’ve followed a solid plan to the best of your ability, you’ve put yourself in the best position to achieve success. Don’t ruin your state of mind by obsessing after the fact.

I co-founded Dimensional Fund Advisors more than 40 years ago, at the beginning of a revolution in finance that transformed the investment business. Back then, I was excited about a strategy that focused on investing in human ingenuity rather than trying to find “mispriced” stocks. Today, I’m gratified to see so many people living better lives as a result. I’m proud of the role, however large or small, we played in that. But I’m even happier that we now live in a world where everybody can buy shares in a fund that reflects the broad market. That can help them make the most of the money they worked so hard to earn. And the first step on that journey is having an honest conversation about how life prepares you for investing and investing prepares you for life.

David Rappaport, CFP®
David is the Co-Founder and Chief Investment Officer of Rappaport Reiches Capital Management. He acts as personal CFO to entrepreneurs and corporate executives, providing organization and clarity in their finances. Please connect with David below. He loves to talk about investing, financial planning, and Aspiritech, a non-profit hiring individuals on the autism spectrum.


FOOTNOTES
1. In US dollars. S&P 500 Index annual returns 1926–2021. S&P data © 2022 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.
DIMENSIONAL DISCLOSURES
The information in this material is intended for the recipient’s background information and use only. It is provided in good faith and without any warranty or representation as to accuracy or completeness. Information and opinions presented in this material have been obtained or derived from sources believed by Dimensional to be reliable, and Dimensional has reasonable grounds to believe that all factual information herein is true as at the date of this material. It does not constitute investment advice, a recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. Before acting on any information in this document, you should consider whether it is appropriate for your particular circumstances and, if appropriate, seek professional advice. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorized reproduction or transmission of this material is strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein. This material is not directed at any person in any jurisdiction where the availability of this material is prohibited or would subject Dimensional or its products or services to any registration, licensing, or other such legal requirements within the jurisdiction. “Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., Dimensional Japan Ltd. and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.
The author does not intend to provide investment, legal or tax advice as these materials are for general educational purposes only. Please consult your legal, tax or investment professional for advice on your particular situation. This material is derived from sources believed to be reliable, but its accuracy and the opinions based thereon are not guaranteed. It is not intended to be a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any other transaction. Investing involves risk including the possible loss of principal. Past performance does not guarantee future results. Please refer to RRCM’s Form ADV Part 2 for additional disclosures regarding RRCM and its practices.