1 00:00:05,880 --> 00:00:08,559 Speaker 1: Welcome to the Fear and Greed Business Interview. I'm Suan Aylmer. 2 00:00:08,680 --> 00:00:10,680 Speaker 1: If the last few months or anything to go by, 3 00:00:10,760 --> 00:00:13,680 Speaker 1: investors are in for a bumpy few years. US President 4 00:00:13,680 --> 00:00:16,560 Speaker 1: Donald Trump has shown he's not afraid to cause volatility 5 00:00:16,600 --> 00:00:21,000 Speaker 1: in global markets, making major announcements then pausing altering them. 6 00:00:21,079 --> 00:00:23,920 Speaker 1: Who knows. So how does a global investment giant handle 7 00:00:24,040 --> 00:00:27,280 Speaker 1: turbulence in markets and what role do financial advisors play 8 00:00:27,520 --> 00:00:30,319 Speaker 1: in keeping every day investors on track. Dave Butler is 9 00:00:30,360 --> 00:00:34,400 Speaker 1: the co CEO of Dimensional Fund Advisors. Dimensional is a 10 00:00:34,440 --> 00:00:36,720 Speaker 1: global investment firm which by the end of last year 11 00:00:36,760 --> 00:00:40,120 Speaker 1: had reached one point three trillion dollars in assets under management. 12 00:00:40,120 --> 00:00:42,519 Speaker 1: He's visiting Australia at the moment and joins me in 13 00:00:42,560 --> 00:00:44,400 Speaker 1: the studio. Dave, welcome to Fear and Greed. 14 00:00:44,520 --> 00:00:45,800 Speaker 2: Thank you, Sean, appreciate it. 15 00:00:46,440 --> 00:00:50,280 Speaker 1: How do you tune out the noise in an investing 16 00:00:50,520 --> 00:00:52,360 Speaker 1: environment as we have at the moment. 17 00:00:52,720 --> 00:00:55,440 Speaker 2: Well, that's probably the most important thing to do if 18 00:00:55,480 --> 00:00:57,480 Speaker 2: you're going to be a successful investor, and that's one 19 00:00:57,520 --> 00:00:59,000 Speaker 2: thing that we spend a lot of time on with 20 00:00:59,080 --> 00:01:01,560 Speaker 2: our clients and with advisors that work with those clients. 21 00:01:01,560 --> 00:01:05,360 Speaker 2: So you know, the real point is avoiding the noise, 22 00:01:05,440 --> 00:01:07,760 Speaker 2: you know, avoiding the regular kind of short term kind 23 00:01:07,760 --> 00:01:09,760 Speaker 2: of fluctuations and noise that come with the markets, and 24 00:01:09,800 --> 00:01:13,680 Speaker 2: staying with a discipline, long term approach. We all have opinions, 25 00:01:13,680 --> 00:01:15,760 Speaker 2: we're all human, we all listen to the news. I 26 00:01:15,880 --> 00:01:18,759 Speaker 2: do too, but you know we always say, God forbid, 27 00:01:18,840 --> 00:01:21,480 Speaker 2: we don't invest your money based upon those opinions. So 28 00:01:22,160 --> 00:01:24,360 Speaker 2: the best thing to do is to step back, remove 29 00:01:24,360 --> 00:01:27,759 Speaker 2: the emotion, remove the fear, remove the greed, and try 30 00:01:27,800 --> 00:01:30,560 Speaker 2: to stay with your long term investment policy statement that 31 00:01:30,640 --> 00:01:32,280 Speaker 2: was set up by you and your advisor. 32 00:01:33,280 --> 00:01:35,600 Speaker 1: Okay, but is there some noise you should listen to? 33 00:01:37,319 --> 00:01:40,280 Speaker 2: There's always noise, you know. I think everybody likes to 34 00:01:40,319 --> 00:01:44,120 Speaker 2: hear news and stories and information. We always like to 35 00:01:44,160 --> 00:01:46,720 Speaker 2: also think about you know, if you you've got a 36 00:01:46,760 --> 00:01:49,120 Speaker 2: specultive part of your portfolio, you've got an investment part. 37 00:01:49,200 --> 00:01:52,040 Speaker 2: So probably ninety ninety five percent of your portfolio for 38 00:01:52,120 --> 00:01:54,440 Speaker 2: most people is going to be an investment and five 39 00:01:54,480 --> 00:01:57,200 Speaker 2: to ten percent is speculative. So if you really feel 40 00:01:57,240 --> 00:01:59,440 Speaker 2: you need to scratch that itch and need to do 41 00:01:59,480 --> 00:02:03,120 Speaker 2: something about the noise and about the information of the day, 42 00:02:03,640 --> 00:02:06,320 Speaker 2: you know, do that in your specultive portfolio, but don't 43 00:02:06,440 --> 00:02:09,160 Speaker 2: speculate with your investment portfolio. That's the real key that 44 00:02:09,200 --> 00:02:10,880 Speaker 2: we need to make sure investors understand. 45 00:02:11,000 --> 00:02:13,080 Speaker 1: Now, I have been a journalist for about thirty years 46 00:02:13,120 --> 00:02:14,960 Speaker 1: and no one has actually put it to me that way. 47 00:02:15,320 --> 00:02:17,079 Speaker 1: That's a great way thinking about it. So it's your 48 00:02:17,360 --> 00:02:22,360 Speaker 1: investment portfolio and kind of makes intuitive sense obviously, but 49 00:02:22,520 --> 00:02:25,520 Speaker 1: it kind of makes sense to play the market because 50 00:02:25,720 --> 00:02:27,720 Speaker 1: it's almost impossible to tune out the noise. Totally. 51 00:02:27,840 --> 00:02:30,120 Speaker 2: Yeah, totally. People are human, you know, we all have 52 00:02:30,200 --> 00:02:33,000 Speaker 2: those emotions. We all think about, you know, the market, 53 00:02:33,160 --> 00:02:35,320 Speaker 2: the headlines or whatever you're going to see. But sometimes 54 00:02:35,360 --> 00:02:36,840 Speaker 2: it's easier just to say there's going to be a 55 00:02:36,880 --> 00:02:39,600 Speaker 2: portion of my portfolio. Like when I go to Las 56 00:02:39,720 --> 00:02:42,600 Speaker 2: Vegas and go bet or gamble, I'm not going to 57 00:02:42,680 --> 00:02:44,760 Speaker 2: gamble my entire net worth. I'm going to gamble some 58 00:02:44,800 --> 00:02:47,560 Speaker 2: portion of it. And that's what you need to make 59 00:02:47,560 --> 00:02:50,320 Speaker 2: a decision on before you start doing it. And oftentimes 60 00:02:50,360 --> 00:02:53,600 Speaker 2: it keeps people's eyes off the prize, which is really 61 00:02:53,600 --> 00:02:55,960 Speaker 2: the investment side of the portfolio, allows them to do something, 62 00:02:55,960 --> 00:02:58,200 Speaker 2: allows them to be active, allows them to have some 63 00:02:58,280 --> 00:03:02,679 Speaker 2: fun allows them to have cocktail party conversations, but they're 64 00:03:02,720 --> 00:03:04,919 Speaker 2: not doing that with the ninety five percent of portfolios 65 00:03:04,919 --> 00:03:06,040 Speaker 2: on the investment side. 66 00:03:06,639 --> 00:03:08,360 Speaker 1: I mean, I want to come to your former career 67 00:03:08,639 --> 00:03:11,600 Speaker 1: in a little bit, but you've been in this industry 68 00:03:11,600 --> 00:03:13,760 Speaker 1: for thirty plast years? Am I right in saying them correct? 69 00:03:14,639 --> 00:03:16,600 Speaker 1: How important is financial advice? 70 00:03:17,080 --> 00:03:20,160 Speaker 2: It's extremely important. I have a financial advisor, and I've 71 00:03:20,160 --> 00:03:23,320 Speaker 2: had one for twenty eight years, and that person is 72 00:03:23,320 --> 00:03:26,639 Speaker 2: somebody who not only provides the knowledge around a lot 73 00:03:26,680 --> 00:03:29,800 Speaker 2: of the wealth management aspects of state planning and tax 74 00:03:29,840 --> 00:03:32,680 Speaker 2: planning and charitable giving and so forth, but he also 75 00:03:32,720 --> 00:03:34,760 Speaker 2: is just a friend. He knows my family, he knows 76 00:03:34,760 --> 00:03:36,880 Speaker 2: my kids, he knows how I think, he knows my 77 00:03:36,920 --> 00:03:41,200 Speaker 2: wife's emotions around investments and money. It's just a nice 78 00:03:41,200 --> 00:03:43,120 Speaker 2: sounding board for us to have and it's a really 79 00:03:43,120 --> 00:03:47,120 Speaker 2: important part of our family dynamic. At this point. Didn't 80 00:03:47,280 --> 00:03:50,360 Speaker 2: know he has access to our dreams, our financial dreams, 81 00:03:50,400 --> 00:03:54,040 Speaker 2: and that's a really important role to play as an advisor. 82 00:03:54,040 --> 00:03:57,360 Speaker 1: And in times like this, is his advice similar to yours? 83 00:03:58,360 --> 00:04:01,400 Speaker 2: It is. Yeah, he's aligned. We think in the same ways, 84 00:04:01,720 --> 00:04:04,520 Speaker 2: but again, we don't speak on a regular basis about 85 00:04:04,600 --> 00:04:07,960 Speaker 2: the tariffs, about Donald Trump. I mean, we think about 86 00:04:08,200 --> 00:04:10,200 Speaker 2: you know what, we set up probably five to ten 87 00:04:10,240 --> 00:04:12,680 Speaker 2: to fifteen to twenty years ago, and we're looking out 88 00:04:12,720 --> 00:04:15,680 Speaker 2: five to ten to fifteen to twenty years. So today's movement, 89 00:04:15,760 --> 00:04:19,680 Speaker 2: in today's activity in the stock market, today's headlines are 90 00:04:19,880 --> 00:04:23,800 Speaker 2: nothing that I would invest upon. I'm certainly going to 91 00:04:23,839 --> 00:04:25,320 Speaker 2: be aware of it. I'm going to have an opinion 92 00:04:25,360 --> 00:04:27,159 Speaker 2: on it, but I'm not going to and he's not 93 00:04:27,240 --> 00:04:30,159 Speaker 2: going to change my investment portfolio in any way. Due 94 00:04:30,160 --> 00:04:31,680 Speaker 2: to the noise of the day. 95 00:04:33,360 --> 00:04:35,440 Speaker 1: I'm never quite sure what dimensional, to be honest, whether 96 00:04:35,480 --> 00:04:37,840 Speaker 1: you're passive or active, and I know I should know that, 97 00:04:37,960 --> 00:04:40,920 Speaker 1: but it depends who who you read, whether you're passive reactive. Yeah, 98 00:04:41,000 --> 00:04:43,440 Speaker 1: good investors, A great question. 99 00:04:43,480 --> 00:04:45,240 Speaker 2: I mean, David Booth, our founder says, you can call 100 00:04:45,320 --> 00:04:47,640 Speaker 2: us pact, passive or active just if you As long 101 00:04:47,680 --> 00:04:48,799 Speaker 2: as you call us, it's fine. 102 00:04:49,520 --> 00:04:52,440 Speaker 1: And that's very But my question actually comes to, is 103 00:04:52,520 --> 00:04:54,960 Speaker 1: now the time to be a passive investor though simply 104 00:04:55,000 --> 00:04:57,039 Speaker 1: because he can tune out the noise, or is now 105 00:04:57,320 --> 00:04:59,039 Speaker 1: exactly the time to be an active investor? 106 00:04:59,320 --> 00:05:02,120 Speaker 2: It's always a good time to be a passive investor. 107 00:05:02,120 --> 00:05:04,800 Speaker 2: And when I describe a passive investor, you know, you 108 00:05:04,800 --> 00:05:08,720 Speaker 2: start with some really basic fundamentals in the capital markets. 109 00:05:08,720 --> 00:05:11,599 Speaker 2: One is you want to be diversified yep. Two you 110 00:05:11,640 --> 00:05:14,920 Speaker 2: want to have your cost below and three you want 111 00:05:14,920 --> 00:05:17,080 Speaker 2: to believe that the markets work and the markets function 112 00:05:17,160 --> 00:05:18,919 Speaker 2: properly so that the price that you see in the 113 00:05:18,960 --> 00:05:20,960 Speaker 2: market is the price is a pretty good predictor of 114 00:05:21,279 --> 00:05:24,560 Speaker 2: actual price. And that's kind of the market efficiency hypothesis 115 00:05:24,680 --> 00:05:27,240 Speaker 2: we talk about quite often. But the important point is 116 00:05:27,279 --> 00:05:30,520 Speaker 2: you start with those foundational theories. I mentioned a story 117 00:05:30,520 --> 00:05:33,000 Speaker 2: this morning about Martin Miller, who is a finite Nobel 118 00:05:33,000 --> 00:05:35,359 Speaker 2: Prize winner and on our board of directors. In my 119 00:05:35,440 --> 00:05:38,400 Speaker 2: first interview at Dimensional thirty years ago, he said, you know, 120 00:05:38,560 --> 00:05:40,320 Speaker 2: you just need to know three things to be a 121 00:05:40,320 --> 00:05:44,839 Speaker 2: successful investor. One is diversification as your buddy, two cost 122 00:05:44,920 --> 00:05:47,600 Speaker 2: matter in three markets work. He says, if you can 123 00:05:47,640 --> 00:05:49,279 Speaker 2: get those three things in your head, you're going to 124 00:05:49,279 --> 00:05:51,320 Speaker 2: be in a pretty good position to have a good 125 00:05:51,760 --> 00:05:55,080 Speaker 2: successful investment experience. And that's been very very true. 126 00:05:55,279 --> 00:06:02,640 Speaker 1: Stay with me, Dive. We will be back in a minute. 127 00:06:03,520 --> 00:06:05,839 Speaker 1: My guest this morning is Dave Butlck. How Cel of 128 00:06:05,839 --> 00:06:09,360 Speaker 1: Dimensional Fund Advisors. Before the break, you were telling us 129 00:06:09,480 --> 00:06:11,719 Speaker 1: about the three things you learned on your first interview 130 00:06:12,000 --> 00:06:15,320 Speaker 1: prior to starting Dimensional that you. I mean, you've very 131 00:06:15,360 --> 00:06:18,960 Speaker 1: successful academically, but you're also drafted by the Boston Celtics. Correct. 132 00:06:19,040 --> 00:06:21,720 Speaker 2: Yeah, I was drafted by the Celtics in nineteen eighty seven. 133 00:06:21,800 --> 00:06:26,640 Speaker 2: So Larry Bird and Bill Wlattin and Perish and McHale, 134 00:06:26,640 --> 00:06:28,200 Speaker 2: all those guys were on that team at the time. 135 00:06:29,200 --> 00:06:31,640 Speaker 1: What sort of buzz is that to not just get 136 00:06:31,760 --> 00:06:34,240 Speaker 1: drafted but with sort of people who are legends. 137 00:06:34,400 --> 00:06:36,640 Speaker 2: Yeah, So being drafted by the Celtics has been a 138 00:06:36,680 --> 00:06:38,520 Speaker 2: lot of fun. So for me for the last thirty years, 139 00:06:38,520 --> 00:06:40,320 Speaker 2: being able to say I was drafted by the Celtics 140 00:06:40,360 --> 00:06:42,640 Speaker 2: was fun. I wasn't in the league of those guys. 141 00:06:42,920 --> 00:06:45,960 Speaker 2: I was a good player, not a great player. The 142 00:06:46,080 --> 00:06:48,320 Speaker 2: year that I got drafted, they had a strike, so 143 00:06:48,400 --> 00:06:50,320 Speaker 2: I didn't even get a chance to try out with 144 00:06:50,400 --> 00:06:53,640 Speaker 2: the Celtics. I went right overseas. I went to Istanbul, 145 00:06:53,640 --> 00:06:56,159 Speaker 2: Turkey for my first year, playing in Tokyo, Japan my 146 00:06:56,240 --> 00:07:00,479 Speaker 2: next year, turned down an offer in Sydney, Australia for 147 00:07:00,480 --> 00:07:02,839 Speaker 2: one year and ended up playing in England my last year, 148 00:07:02,880 --> 00:07:05,680 Speaker 2: and that was about the end of my career. 149 00:07:06,080 --> 00:07:08,279 Speaker 1: I like talking to people who have been successful in 150 00:07:08,320 --> 00:07:10,800 Speaker 1: sport and then bringing into business because often there are 151 00:07:10,840 --> 00:07:16,960 Speaker 1: disciplines in both that seem to suit investing, particularly because 152 00:07:17,080 --> 00:07:19,600 Speaker 1: you have to be extremely disciplined to be a successful 153 00:07:19,920 --> 00:07:23,400 Speaker 1: sports person and extremely disciplined to be a successful investor. 154 00:07:23,680 --> 00:07:27,520 Speaker 2: Absolutely, I think you all the I guess learnings apply 155 00:07:27,720 --> 00:07:31,720 Speaker 2: in both sports and investments and in the firm. You know, 156 00:07:31,760 --> 00:07:34,600 Speaker 2: when we think about our mission, we think about culture, 157 00:07:34,720 --> 00:07:37,520 Speaker 2: we think about collaboration. You know, all those things are 158 00:07:37,560 --> 00:07:40,640 Speaker 2: things I knew and loved in the sporting world, and 159 00:07:40,680 --> 00:07:43,840 Speaker 2: now I bring those back to my corporate life now, 160 00:07:43,880 --> 00:07:47,240 Speaker 2: which is really important. Any successful entity is going to 161 00:07:47,240 --> 00:07:49,800 Speaker 2: have to have those ingredients to be really good and 162 00:07:49,880 --> 00:07:51,800 Speaker 2: be a place where people want to be involved, They 163 00:07:51,800 --> 00:07:54,800 Speaker 2: want to be participating, and they want to be excited 164 00:07:54,800 --> 00:07:56,280 Speaker 2: about what they do on a regular basis. 165 00:07:56,560 --> 00:08:00,840 Speaker 1: Culture matters in both absolutely. Okay, which is more fun? 166 00:08:02,960 --> 00:08:05,600 Speaker 1: I think you just answered it there. 167 00:08:05,520 --> 00:08:07,760 Speaker 2: You go, Well, sports you have a little bit of 168 00:08:07,800 --> 00:08:11,240 Speaker 2: an outlet. You have that physical outlet, right, and sometimes 169 00:08:11,280 --> 00:08:13,400 Speaker 2: it's it's fun to be able to go one on 170 00:08:13,400 --> 00:08:17,280 Speaker 2: one and see who wins. And oftentimes in business you 171 00:08:17,320 --> 00:08:19,320 Speaker 2: have a lot of different kind of components that actually 172 00:08:19,320 --> 00:08:21,880 Speaker 2: come into play and in a discussion. But it makes 173 00:08:21,920 --> 00:08:27,080 Speaker 2: it a more challenging environment and one that keeps your interest. 174 00:08:27,120 --> 00:08:27,480 Speaker 2: For sure. 175 00:08:27,720 --> 00:08:30,240 Speaker 1: You're in Australia for three or four days, why and 176 00:08:30,320 --> 00:08:34,000 Speaker 1: I know you have an office in Sydney. Why Australia. 177 00:08:34,040 --> 00:08:36,160 Speaker 1: So I often think it's interesting that really big global 178 00:08:36,200 --> 00:08:40,040 Speaker 1: managers come to the Australian market, which it has a 179 00:08:40,080 --> 00:08:43,520 Speaker 1: massive superannuation pool. That's very attractive, I'm sure, but at 180 00:08:43,559 --> 00:08:45,320 Speaker 1: the end of the day, we're not a massive market. 181 00:08:45,520 --> 00:08:48,680 Speaker 2: Yeah, it's an important market. And I think Americans love 182 00:08:48,880 --> 00:08:51,559 Speaker 2: love Australia anyway, and they love being down here. And 183 00:08:51,559 --> 00:08:53,880 Speaker 2: and I think it's uh, you know when you think 184 00:08:53,920 --> 00:08:56,480 Speaker 2: about our mission a Dimensional you know, started out as 185 00:08:56,480 --> 00:08:59,760 Speaker 2: a capital market mission. So all the academics for the 186 00:08:59,840 --> 00:09:02,760 Speaker 2: night teen sixties looked at stock market data, they looked 187 00:09:02,760 --> 00:09:05,319 Speaker 2: at active management performance. They looked over the last fifty 188 00:09:05,360 --> 00:09:08,880 Speaker 2: sixty years and said active managers don't add value above 189 00:09:08,920 --> 00:09:11,520 Speaker 2: and beyond chance. So that led to the indexing movement 190 00:09:11,600 --> 00:09:15,679 Speaker 2: in nineteen seventies, and then nineteen eighty one is when 191 00:09:15,679 --> 00:09:19,480 Speaker 2: Dimensional was launched, so we've been doing that for fifty years. 192 00:09:19,520 --> 00:09:21,160 Speaker 2: We have a long, long track record. We think it's 193 00:09:21,160 --> 00:09:23,880 Speaker 2: a track record that's important for Australian investors to have 194 00:09:23,920 --> 00:09:27,480 Speaker 2: access to. And secondly, we have this advisor component which 195 00:09:27,520 --> 00:09:30,040 Speaker 2: we started working with advisors back in nineteen eighty nine 196 00:09:30,080 --> 00:09:33,240 Speaker 2: in the US, and we think the independent advisor who's 197 00:09:33,760 --> 00:09:37,240 Speaker 2: working on behalf of the client and working as a fiduciary. 198 00:09:37,280 --> 00:09:40,000 Speaker 2: We think that model is really really important for clients 199 00:09:40,000 --> 00:09:42,760 Speaker 2: to have a great investment experience. So we sort of 200 00:09:42,800 --> 00:09:46,560 Speaker 2: separate out the expertise. Dimensional is the capital market expert. 201 00:09:47,200 --> 00:09:50,240 Speaker 2: Advisor is a client expert. The combination we think is 202 00:09:50,280 --> 00:09:52,480 Speaker 2: going to give the client the greatest chance that a 203 00:09:52,480 --> 00:09:55,079 Speaker 2: great investment experience, and we think that can happen in 204 00:09:55,120 --> 00:09:57,280 Speaker 2: the US, it happens in Australia. We have offices in 205 00:09:57,320 --> 00:10:00,240 Speaker 2: London and Tokyo and all over the world, so we 206 00:10:00,280 --> 00:10:03,600 Speaker 2: think it's important for investors to get that kind of experience. 207 00:10:03,800 --> 00:10:06,000 Speaker 1: In that word, fantastic, Dave, thank you for talking to 208 00:10:06,040 --> 00:10:06,560 Speaker 1: Fear and Greed. 209 00:10:06,920 --> 00:10:07,280 Speaker 2: Thank you. 210 00:10:07,640 --> 00:10:10,920 Speaker 1: It was Dave Butler, co CEO of Dimensional Fund Advisors. 211 00:10:11,120 --> 00:10:13,320 Speaker 1: This is a Fear and Greed business interview. Remember This 212 00:10:13,400 --> 00:10:16,040 Speaker 1: is general information only, and you should seek professional advice 213 00:10:16,400 --> 00:10:19,079 Speaker 1: for investing. Join us every morning for the full episode 214 00:10:19,120 --> 00:10:21,240 Speaker 1: of Fear and Greed. Daily Business us but people who 215 00:10:21,240 --> 00:10:25,600 Speaker 1: make their own decisions. I'm Jane elma Enjoy your day.