Ep # 156 - Outperform Without the Guesswork: A Conversation with Wes Crill
Joe interviews Wes Crill, Senior Client Solutions Director & VP at Dimensional Fund Advisors, to discuss how evidence-based investing can help retirees avoid costly mistakes. They break down the differences between index funds, active management, and systematic strategies, while diving into factors like size, value, and profitability that drive long-term returns. This is a must-listen for anyone near retirement looking to build a smarter, tax-efficient portfolio rooted in academic research.
Key Takeaways
· Evidence-Based Investing relies on decades of academic research and historical data, not forecasts or speculation.
· Why Outguessing the Market Fails: With hundreds of billions traded daily, market prices already reflect known information.
· Systematic Investing combines the benefits of indexing (low cost, broad diversification) with intentional tilts toward factors like size, value, and profitability.
· Hidden Costs of Indexing: Index funds can incur market impact costs during reconstitution events that aren't visible in their expense ratios.
· Diversification is Key, especially in retirement; it reduces idiosyncratic risk and increases your chances of capturing long-term market premiums.
Ideas Worth Sharing
· “Investing should be like watching paint dry—not chasing the latest shiny object."
· "The market is forward-looking, and by the time a recession is called, it’s already moved on."
· "You can create your own dividend—on your own terms and in a more tax-efficient way."
· "We don’t guess where markets are going—we build portfolios around what the evidence shows."
· "Diversification is your best chance of capturing market returns, not missing them."
Resources
Robert Novy-Marx’s research on profitability
Why Evidence-Based Investing is the Smart Choice for Retirees
When it comes to investing in retirement, the stakes are high.
You’re no longer trying to grow wealth—you’re depending on your portfolio to fund your retirement. Joe and Wes Crill, Senior Client Solutions Director & VP at Dimensional Fund Advisors, unpack how evidence-based investing can give retirees a more reliable foundation.
Wes explains that evidence-based investing isn’t about predicting markets or chasing trends. It’s about applying decades of academic research to build portfolios rooted in what has consistently worked over time. “We don’t guess where markets are going,” he says. “We build portfolios around what the evidence shows.”
What does the evidence show? That trying to outguess the market—through stock picking, timing, or reacting to headlines—doesn’t work. With billions trading daily, market prices already reflect all available information. Instead of speculating, evidence-based investors use systematic approaches to tilt their portfolios toward factors like company size, value (low price relative to fundamentals), and profitability—each of which is associated with higher expected returns over the long term.
However, it’s not just about what to include—it’s how it’s implemented. Wes points out that traditional index funds, while low cost, can carry hidden expenses. When indexes rebalance, large trading volumes can drive up prices for added securities or depress prices for removed ones. A more flexible, systematic approach like Dimensional’s can navigate this more efficiently by avoiding forced trades.
For retirees, diversification is key. “Without broad diversification, you might miss out on the very stocks delivering the market premium,” Wes emphasizes. Narrow strategies like dividend-only investing may seem attractive, but they often exclude a large swath of the market and may not