Flight #43: With Dimensional Fund Advisors, Vice President Apollo Lupescu The Pilot Money Guys

Information about today’s podcast:
Dimensional Fund Advisors (DFA) - https://us.dimensional.com/
“The assets we(DFA)manage represent more than shares in a portfolio.  That money represents the savings, sacrifice, and dreams that investors have entrusted to us. We take this responsibility seriously. Founded in 1981, Dimensional has a long history of applying academic research to practical investing. We offer a full range of equity and fixed income strategies designed to target higher expected returns.”
 
Apollo Lupescu, PhD, Vice President, Dimensional Fund Advisors:
Apollo Lupescu is vice president at Dimensional Fund Advisors, one of the premier investment managers in the world, managing around $650 billion in assets. He is a nationally and internationally recognized speaker who has delivered hundreds of lectures and seminars to financial professionals and individual investors on various investment topics. Apollo is considered “secretary of explaining stuff”, because he has a knack for explaining complicated issues in a clear and understandable way.
Apollo has been with Dimensional in Santa Monica for over 18 years, and prior to that he taught at the University of California. Apollo also served in a variety of roles with the US Department of State, from which he formed his own consulting firm, Apollo Consulting Group.
He received his PhD in economics and finance from UC Santa Barbara. Apollo also holds a BA in economics from Michigan State University, where he competed and coached water polo. Rumor has it that even to this day he is still playing, and more recently he is not only in the pool, but also learning how to surf in the ocean.
 
Top Investor Myths... Common Questions & Lessons Learned:
What does the evidence tell us about what to do in down markets? What do our innate biases tell us to do and why are they the opposite?
1. Myth -Successful advisors need to “time the market.”
Common Question: “Clearly, the stock market is going down and going to get worse, why not just go to cash...?”
The idea that an investor wants to avoid downturns in the market is an understandable and reasonable response. The challenge in the execution.  Most of the time, it turns into a bigger loss and more stress than staying invested. In summary, mistiming the market comes with punishing consequences.  
From our experience, when someone sells their equity positions to relieve stress, they simply replace the stress of being in the market with the stress of being out of the market and wondering when they should get back in. There is no magic signal. In other words, they exchange one stress for another. 
We miss the best days in the market... therefore “portfolio performance could be decimated.”  See JPMorgan “The Case For (Always) Staying Invested”https://www.jpmorgan.com/wealth-management/wealth-partners/insights/the-case-for-always-staying-invested#infographic-text-version-uniqId1663780633203
This chart shows the annualized performance of a $10,000 investment made between January 2002 and January 2022. A fully invested investment returned 9.4% or $60,253. When the investor missed the10 best days, the return is 5.21% or $27,604. When the investor missed the 20 best days, the return is 2.51% or $16,414. Finally, when the investor missed the 30 best days, the return is 0.32% or $10,651. An added fact is that seven of the 10 best days occurred within 15 days of the 10 worst days.
2. Myth - The Fed funds rate changes and impacts on bonds and stock returns.
Common Question: “So, the Fed raises rates because the economy is strong enough to stand on its own and the stock market tanks? That doesn’t make sense?”
The expectations of the Fed’s actions, commitment, and plan to fight inflation are very important.  For example, if consumers, employers, and investors believe inflation is here to stay, then in many ways, it becomes a self-fulfilling prophecy. If we have confidence and believe the F