This year marks the 15th time I’ve had the opportunity to vote for our nation’s leader. When I was growing up in Kansas, my family instilled in me the importance of casting your ballot. It’s a civic responsibility I continue to take seriously.

In many ways, this year’s presidential election feels like the most unusual one yet. In just the past few months, we’ve seen the attempted assassination of a former president who’s running again, the withdrawal of an incumbent president, and the elevation of a sitting vice president. Pollsters and commentators are still trying to make sense of the changes and what they might mean for the US and the global community. We have deep cultural divisions, the economy’s still recovering from the effects of a global pandemic, and there are heightened geopolitical tensions around the world. For many voters, this moment feels historic.

And yet as an investor, I’m fully confident in the long-term prospects for the stock market. And I know investors will continue to have opportunities to pursue their financial goals no matter who wins the White House, which party controls Congress, or what stocks do in November. Why am I so confident in this prediction? Because of history, and because of people.

CONTINUE READING

John “Mac” McQuown, a founding Director of Dimensional Fund Advisors in 1981, was a financial engineer, entrepreneur, and environmentalist with an insatiable curiosity and relentless drive that led him to start more than a dozen companies in his lifetime.

A self-described “data dog,” Mac was a pioneer in the transformation of investing from guesswork into a science guided by academic research.

In the 1970s, he assembled a team at Wells Fargo Bank that developed one of the first index funds—the investment vehicle whose rise would later revolutionize the financial world. And after helping launch Dimensional, Mac remained on the company’s board while he pursued interests that ranged from bond-investing innovations to sustainable farming to wine making. He died on October 22, 2024, at age 90. He is survived by his wife, Leslie, his son, Morgan, and his daughter-in-law, Alexa.

“To bring about fundamental change, you need great thinkers and researchers, but you also need implementers,” Dimensional Founder David Booth told Bloomberg Markets magazine in 2015. “People like Mac don’t win Nobel Prizes; they implement the ideas of the guys who do.” The descriptions of his life in this article are based on years of written and recorded recollections from Dimensional employees and others associated with the firm, except where otherwise noted.

CONTINUE READING

Do you invest in index funds because you want a passive, low-cost approach to investing? If so, you may want to take a closer look at your index fund. The indices these funds track sometimes make arbitrary decisions that look more active than passive. That can leave money on the table.

For many investors, choosing a fund that simply tracks an index may sound like an easy way to get broad, passive exposure to a market or asset class. But not all indices are created equal. In a recent paper, “Indices Acting Active: Index Decisions May Be More Active than You Think,” Dimensional looked at the active decisions that go into the design and management of indices. The takeaway for investors? Think carefully about whether decisions by index providers align with your financial objectives.

Here are three questions index fund investors should ask.

CONTINUE READING

Ask investors what kind of return they expect out of stocks in any given year, and many will respond with the market’s historical average return. For the S&P 500 Index from January 1926 through December 2023, that’s been a little over 12%. Unless you have a crystal ball, that’s a reasonable guess in any given year.

And yet, history shows us what we end up getting from stocks is likely to be far from the average. Since 1926, only 15 out of 98 years had returns within five percentage points of the 12.2% average. In the other 83 years, the average deviation was over 18 percentage points. Talk about an uncommon average!

Actual returns can deviate from expected returns because information and circumstances change. If the news is better than expected, markets may go up. Of course, the reverse is true if the news is disappointing. In a world with so many potential sources of news—the economy, elections, geopolitical conflict—it shouldn’t be surprising that we often receive returns either much higher or lower than the long-run average.

CONTINUE READING

At the end of August, the Bureau of Economic Analysis released new personal consumption expenditures index data showing that inflation has likely slowed enough for the Federal Open Market Committee (FOMC) to cut interest rates at next week’s highly anticipated meeting.

Now, many investors may be wondering whether they should adjust their bond allocations depending on the timing and pace of the expected rate cuts. Our research shows that it’s difficult to draw actionable conclusions from Fed watching. Per Exhibit 1, evidence shows that bond markets may move ahead of the Fed because markets continually process information that might factor into Fed decisions.

CONTINUE READING