Recent Insights from DFA - You Know More about Investing than You Think You Do

Dimensional offers six principles of?investing that can help as you reflect on the challenges and options of creating habits in life and investing. Over the next six weeks, Wealth Teams Alliance?will offer these principles for your consideration.?As always, please reach out to Wealth Teams?if you have questions. ~~ Dr. Guy

You Know More about Investing than You Think You Do, Principle #1

Originally posted September 21, 2023

No matter how familiar we are with investing, we’ve all navigated uncertainty, weighed risks and rewards, and made carefully considered tradeoff decisions. Just by being human, we’ve been compelled to tackle the central challenges of life—which also happen to be the central challenges of investing.

At Dimensional, we believe that having a good investment experience is about more than returns. What matters just as much is how someone feels along their financial journey. And that’s really what the investment business should be about: helping people live better, more fulfilling lives.

Investing better means living better. Not just because it can lead to having more money, but because many of the habits that serve us well as investors serve us well in life, too. By integrating our life and investment philosophies, we can see money as a tool that empowers our plans rather than as a goal in and of itself. Here are six principles that can help you in life and in investing.

Principle # 1 -- Uncertainty Creates Opportunity

Uncertainty can be uncomfortable, but we often forget that, without it, there would be no opportunity. When we decide to move to a new city or change career paths, we don’t know exactly what will happen. There’s always a risk that things won’t work out the way we had hoped, yet these experiences help us grow and can change our lives in amazing ways.

When you invest, returns are compensation for taking on uncertainty. Without risk, there would be no reward. But there’s also risk in choosing not to invest because if your money doesn’t grow over time, it won’t go as far in the future. Cash hidden under a mattress can’t keep up with inflation.

As investors, it’s easy to get caught up in worrying when markets drop. But when we realize that investing means getting paid for accepting risk, we can start to see uncertainty as a source of opportunity, even during times of market volatility.

Embracing uncertainty rather than trying to avoid it can help us live better. This approach to life and investing guides us through uncertain times and helps refocus our attention on the opportunities ahead.

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