Dimensional’s David Booth says young investors should focus on passive funds

CNBC Pro Exclusive: David Booth and Bob Pisani discuss passive investing at Future Proofing Conference

David Booth, executive chairman of Dimensional Fund Advisors, said younger investors should focus on passive investing rather than the short-term strategies with unrealistic expectations that have become common in the landscape. crazy meme stock, said David Booth, executive chairman of Dimensional Fund Advisors.

“You have to be smarter than the market to beat the market,” Booth said in an interview with CNBC’s Bob Pisani at the Future Proofing Conference on Tuesday. “And it turns out the market is smarter than me and smarter than any individual investor.”

According to Booth, young investors have unrealistic expectations, often focusing on short-term strategies rather than long-term goals.

Despite their more boring nature, passive funds can have better returns in the long run than actively traded when taking into account additional fees, Booth said. In particular, index investing offers better alternatives and more diversification to a portfolio, he added.

“These young investors think they have somehow created a new revolution with investing but they don’t realize that the revolution happened 50 years ago with indexing etc. ‘, Booth said. “The ideas that led to indexing have really transformed the investment business.”

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