Dimensional tops $1 trillion as passive investing cements dominance

Dimensional Fund Advisors crossed $1 trillion in assets under management, a milestone founder David Booth says shows passive, follow-the-market investing has gone from a fringe idea to the default choice for U.S. savers.

"If you get the market return, you've done about as well as the pros. That's a miracle," Booth, chairman of Dimensional Fund Advisors, said in an interview with The Wall Street Journal. "We ought to have a ticker-tape parade for that kind of conclusion."

The firm, which Booth launched 45 years ago from his Brooklyn Heights apartment, reached the mark as index funds have come to dominate U.S. investing. Booth, who turns 80 later this year, is marking the moment with a book, "Stay Calm: Learn to Embrace Uncertainty in Investing and Life" (Authors Equity, 220 pages), published Sept. 1.

The milestone lands as U.S. stock indexes carry historically high concentration in megacap technology and AI names — a risk Booth argues investors can blunt by holding half their money in international markets.

Booth, who finished school in 1971, spent decades arguing that markets are too hard to beat and that most investors should simply own the whole market. The idea drew open hostility early on. "You'd talk to fund managers or journalists, and they'd say, 'You eggheads. You don't understand markets,'" he recalled.

The shift since has reshaped the asset-management industry, pressuring active managers at firms such as BlackRock and Vanguard to cut fees as index strategies captured a growing share of client money. Yet Booth cautions that not everyone has absorbed the lesson. Trading volumes have climbed alongside index-fund growth, he said, a sign that some investors are still trying to time the market rather than stay invested.

On concentration, Booth acknowledged the U.S. market's heavy weighting toward a handful of megacap technology and AI stocks but said the risk is manageable through diversification. "If you hold half your money in the U.S. and half internationally, a large part of that concentration risk goes away," he said. He drew a parallel to the 19th-century gold rush, noting that Levi Strauss fared better than many miners — a case for owning the whole market rather than betting on individual winners.

The book, Booth said, is less about how to invest than how to think about investing. His parents, who grew up during the Great Depression and fought in World War II, never invested in public markets and "probably had a more difficult retirement than they should have," he said. They viewed themselves as outsiders who would be taken advantage of by insiders.

Booth's optimism rests on the view that markets price in bad news quickly and that human ingenuity tends to pull economies back on track. Every down market he has lived through over 55 years, he said, triggers the same reaction — investors seeing a 20 percent or 30 percent drop and wanting to get out. "When bad things happen to firms and individuals, they don't just sit there and take it," he said. "They figure out how to get back on track."

The broader message for savers is that uncertainty is not something to fear but the source of the returns they earn. "If there were no uncertainty, there'd be no risk, and all investments would yield the exact same riskless return," Booth said. "Uncertainty creates the opportunity."

This article is for informational purposes only and does not constitute investment advice.