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Why you Should Own Stocks w/ Apollo Lupescu


In this episode of the Science of Economic Freedom podcast, I speak with the “Secretary of Explaining Stuff,” Apollo Lupescu, Vice President of Dimensional Fund Advisors.

Apollo is one of the most-interesting guys in the industry, and that’s why I wanted to get his take on why investing, and why investing properly, is so crucial to the achievement of economic freedom.

In this interview, you’ll learn:

  • What a “Secretary of Explaining Stuff” actually does.
  • The role of simplicity in the understanding of complex financial concepts.
  • The real reason you need to own stocks, and what that actually means.
  • The role of debt and/or fixed-income investing.
  • The importance of concentration risk, and of having proper asset allocation.
  • How to look at global equity markets.
  • About how Dimensional Fund Advisors applies investment innovation.
  • The single, most-important lesson all investors need to learn.

Podcast Transcript Episode 22

Doug Fabian: Why do you invest in the stock market? Do you have any concentration risk? How should you look at your global stock market exposure? These questions are examined today on The Science of Economic Freedom.

Announcer: The Science of Economic Freedom is intended as an investor education resource. The views and opinions expressed on this program should not be construed as a recommendation to buy; sell, or hold any specific security. Consult your investment advisor and read any investment prospectus carefully before making any changes to your investment portfolio.

This program is sponsored by Mercer Advisors. Mercer Global Advisors Inc. is registered with the Securities and Exchange Commission and delivers all investment-related services. Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services.


Why you should own stocks

Doug Fabian: Welcome to The Science of Economic Freedom. I’m your host, Doug Fabian. This program is all about helping you achieve your economic dreams. We call that economic freedom. This program is about your journey to achieve economic freedom for yourself and your loved ones.

Today, we want to help you identify your next step on that journey. Today’s podcast: Why should you consider investing in the financial markets? An interview with Apollo Lupescu. Vice President of Dimensional Fund Advisors. The “Secretary of Explaining Stuff,” about investing.

Now, Dimensional Fund Advisors is a mutual fund company. Specializing in delivering academically based portfolios to institutional investors, and investment advisors. What is interesting about DFA, is they do not offer their mutual funds directly to the public. Mercer Advisors does offer DFA funds to clients as a part of our portfolio solutions. Now, here is my interview with Apollo.

Joining me today in The Science of Economic Freedom podcast, is Apollo Lupescu. Apollo works with DFA funds and he has a very interesting career path. Apollo, welcome to The Science of Economic Freedom.

Apollo Lupescu: Well, Doug, thank you so much for having me.


About Apollo Lupescu

Doug Fabian: Apollo, you and I are connected in many ways. Now, I just have to mention kind of, swimming and water polo were a big part of my life, and yours as well? Tell me a little bit about that?

Apollo Lupescu: Well, I started when I was five. At the time, my parents wanted to get me into some exercise, and I liked splashing in the water. The next thing you know, I started swimming. And, one of the coaches saw me playing with a ball when I was about six years old, and asked me if I wanted to switch from swimming to water polo. And, it seemed more fun to chase a ball than to chase other people just you know, swimming laps one after another. And, I’ve been somehow engaged in these aquatic activities for the last 40 years. It’s kind of, sounds like I’m old. Which, I probably am after doing 40 years of doing anything.

Doug Fabian: Well, it keeps us young. That is what it does. I’m still swimming as well. And, my water pollo coach made me still swim. I did enjoy water polo more than swimming.

Apollo Lupescu: Somebody pointed to me that you cannot play water polo unless you swim.


How Apollo Lupesco got to DFA

Doug Fabian: Exactly. So, now you’re, also I’m living in Santa Barbara now. You have a history in Santa Barbara. You were at the University of Santa Barbara, where you got your PhD in economics and finance. How did you get to DFA from there?

Apollo Lupescu: It is actually a pretty unique story. Turns out my wife has an identical twin. And, her identical twin lived in Los Angeles at the time, in Venice. And, she ended up having lunch, or some interaction with a gentleman that named Dan Wheeler, and called me up and said, “I met this fascinating person. He is very engaging, very intriguing.” And, I told him that my sister was about to move to the east coast where I had some job offers, and he said, “Well, I work in investment management. Why don’t you have your brother in law give me a call?”

And, it turns out that Dan Wheeler is the Founder and the person responsible for having the financial advisor group here at Dimensional, the way it is. And, him and I talked a couple of times, and we connected. It seemed like it was a fit. And, that introduction to Dimensional, through my sister-in-law, turned out to be one of the best things that ever happened to me.

Doug Fabian: What attracted you to the firm? Once you started to get engaged, hey new job opportunities, staying here in southern California, all good. But, what really connected with you and this firm, and what it has to offer?

Apollo Lupescu: I remember, back in those days, I had never heard of Dimensional. But, when she mentioned the word, the first thing you do, you go on the web and you search for it. And, what amazed me was the fact that pretty much all the papers that I would teach, because at the time I was lecturing at the University of Santa Barbara, all the papers that were written by professors, and I used to teach them in my classes, well here’s a firm that takes all of those ideas, and brings them to life in real world investments.

I was mesmerized by the fact that there is a firm that has such a close affiliation with the academic community. And, to me, that was extremely intriguing because it aligned with my view of the world. Something that is more rigorous than just the opinions, and something that had to be robust and rooted in scientific evidence.


Secretary of Explaining Stuff

Doug Fabian: Talk to me about your role. As I read your bio, your role now is, “Secretary of Explaining Stuff.” So, what does that mean? What do you do?

Apollo Lupescu: Turns out, I had several roles at the firm. But, all of them involved talking to sophisticated institutional type investors. Whether they are institutions or financial advisors. And, several years ago, I switched to having client events where I am supporting advisors and their endeavors of communicating to retail investors, their own clients. And, what I realized that I needed to do was translate, basically, from scientific finance into plain English. And, that has been my job. It’s, how do you take these ideas, which can be intimidating, they do have a lot of numbers and math in them, and how do you convey them so the average person can understand them?

So, my job has been to translate basically, from finance into plain English. I don’t know if there is a right or wrong way of doing it. But, I have some best practices that I’ve developed along the way, and one of them is just to try and simplify things. It’s a lot harder to simplify than to bring complexity. You can always impress and dazzle people with jargon and big words, and they look at you, “Oh, you’re pretty tall. You have a suit and a PhD; you must know what you’re talking about.” The reality is, it’s a lot harder to distill down and boil, and do pretty much what Apple did. Where you can pick up a device they have, and you don’t need a manual. All you need to do is turn it on, and somehow, intuitively, you know how to use it. That has sort of, been my role. Simplify and translate all of the ideas that come from this academic research.


Why DFA only offers its products through advisors

Doug Fabian: Talk to me about the decision DFA made to, and this was quite unusual, especially when they started, or maybe they didn’t start out this way, but the fact that they are only offering their products through advisors. I find that fascinating. Because, most mutual fund companies will have advisor relationships, but they will also, I don’t want to say sell, but will offer their products directly to the public.


History of Dimensional

Apollo Lupescu: Right. Well, I think that looking back at the history of Dimensional. One of the things that the founders try to do, is take these very powerful ideas in finance, and implement them in the real world. So, it is about the ideas, but also, the implementation. One of the very valuable assets that Dimensional had in the early days, where there were no individual investors, no retail investors, just pure institutional, it was a level of discipline and strategic allocation that you have from these larger institutions.

They don’t move in and out of there. They tend to be pretty well organized in the way that they invest their money. That discipline turned out to be hugely valuable to the way you implement the strategy in the real world. Dan Wheeler, the gentlemen that came up with this idea of maybe starting a second distribution channel, he had a bit of a hard time convincing the founders of Dimensional that this is a viable business. Hot money, tends to bring in cash flows that might go out anytime. But, that ends up hurting all the other shareholders in these commingled funds.


Less liquid strategy

So, you know, the primary reason that this emerged, this strategy, is the fact that in order for these funds to implement most effectively, these theories, you need to have some discipline in cash flows. And, if you don’t have it, then it turns out that that could be detrimental to everybody invested in these funds. Particularly, in those days, we operated quite a bit into the micro and small value universe, which tends to be not as easy to trade.

Doug Fabian: Less liquid.

Apollo Lupescu: Less liquid, and requiring that remediations to buy or sell, can actually hurt people. And, I think a great testament of the decision to go this way was sort of evident in the ’08-’09 timeframe, when so many mutual funds had redemptions. And, a redemption means an investor wants their money back. And, the mutual fund, by law, has to give them their money back within a day or so. And, at the time, because so many folks were selling on fear, the mutual fund had to sell whatever stocks, whatever holdings they had, to meet those redemptions. And, by doing so, what they did was create an opportunity for firms that had more discipline in their cash flows.

During that entire timeframe, we did not have, you know, you can look at Morning Star, anybody, there was not a quarter of negative cash flows from the equity funds. Because, the advisors were the ones who were maintaining the discipline and were making sure that the investors were disentangling emotions from actual decisions. And, at the time they were rebalancing, if anything, they would buy the stocks that had dropped in value, and they would maybe be rebalancing through selling some of the positions. Which, is sort of the opposite of what the typical investor did at the time.


Investing in general

Doug Fabian: Let’s talk about investing in general. I just want to get your take and your explanation to a group of people. It could be a group of young people. It could be a group of people who are sitting in cash right now. People who may have a tendency to give an opinion on what the market may do next. But, let’s just start with this concept.

Why invest in the stock market?

Apollo Lupescu: Stock market is a word that probably needs to be redefined. When you buy into the stock market, you are buying ownership into companies. And, from the largest Apple; Exon, Google, to some of the smaller ones, you know, GNC, Bank of Hawaii, I’m just naming companies, not for any particular purpose. Just to give you flavor. But, there are different companies, there are about 3,000 companies in the US who have decided to open up ownership and go public. And, when an investor buys ownership, they are basically getting a stake in capitalism. It’s probably the only way that all of us, the folks who have a 9-5 job, they are not business owners, that is our stake in capitalism, being part owners of these firms. And, that, to me, is a really important fact. That is the only way, in my case, I get a stake in capitalism, is by owning stocks.

So, stock ownership is hugely important because it does give people this stake in capitalism. And, from everything that is known out there, it is probably one of the better ways to grow your money in a way that is more responsible than just, gambling on a particular private investment. Or, if you don’t know anything about it. The other way being, you have your own skills that you bring to the table. But, if you look into a broad perspective, why should people buy into the stock market? Because, you’re not buying something that is Wall Street. You’re buying Main Street. You’re buying Main Street. You’re buying ownership in these companies with real people; real products, real profits, and that is what gives you the stake in capitalism, ownership in these companies.


Stock market vs fixed income market

Doug Fabian: Compare and contrast stock market with the fixed income market?

Apollo Lupescu: So, in the stock market you’re buying ownership. The reason people would want to have ownership in a company, is because they can partake in the profits the company makes. Now, the economy goes up and down, so these profits go up and down, and they are quite uncertain. There’s no certainty in what the profits will be. As opposed to that, bond investing means that you are lending your money to corporations and governments. And, when you lend your money, it’s a different dynamic because there is a contract in place. So, a bond is a contract that specifies exactly how long the money will be at the borrower before the principle gets repaid. It will also specify, specifically, the interest rate that the investor is to receive. And, some remedies if the entity doesn’t pay back. Which, could go all the way to bankruptcy, if you don’t pay your loans back.

So, it’s a different type of instrument. One is called, the stock market investing is called equity investing, because you’re buying equity. Whereas bond investing is called debt or fixed income investing. Because, you’re lending money where there is a fixed interest. That tends to get, particularly if you use very high-quality issuers, like the US Government, or corporations that are highly rated, that tends to provide more certainty around what to expect as an investor. Rather than, buying uncertain future profits from a company listed on the stock market.


How DFA developed its strategies

Doug Fabian: Let’s come back to talk about Dimensional Fund Advisors, DFA, a bit more. How did the firm develop its strategies? And, why are they still relevant today? Because, the firm has been in place for more than 30 years.

Apollo Lupescu: Right. I think it’s important to distinguish between, I mean the evolution, it’s important to go through the evolution.

Doug Fabian: Yes, please do.

Apollo Lupescu: There are certain elements of investing that are really big changes. And, those innovations happen every few years. There are a lot of smaller innovations that happen, you know, not every day, but much more frequently.

So, when it comes to these really big innovations that we’re talking about, the first one, the Dimensional pioneer was there from the beginning. It was taking the academic work from Chicago that distinguished the different categories of stocks in the market, and put some dimensions around asset classes. And, at the time, the very first distinction was between the size of larger companies, versus smaller companies. And, the size, it’s called the size effect, or the capitalization, that was the very first distinction. And, it turns out that from an economic perspective, if you look across the world, there is a clear evidence that these two types of companies, large or small, they have different dimensions of expected returns.


Small vs large company

Doug Fabian: It makes sense, too, to understand that a small company has a much better chance to grow; to double in size, to have significant change, than a large company would. It’s just logic.

Apollo Lupescu: Oh, absolutely. Absolutely.

Doug Fabian: It really fits.

Apollo Lupescu: If you take a big burger chain, I’m not going to name it, it’s hard to imagine that that big burger chain can double in size. Whereas you have some of the newer ones that are listed on the market, that they haven’t just penetrated much. It’s still in the beginning. Now, with that being said, there’s also the element of, the maturity of the cash flows and the customer base that a large chain would have, versus one that really hasn’t gotten to the same level. So, you’re right, there’s an argument about the growth potential, but also the certainty associated with these different types of companies.


How do you implement this?

That was one of the big innovations that came. And, you know, along with some of the smaller innovations that came afterwards was, how do you go and implement this? And, along the way, this idea of creating some flexibility around the weights. And, not even a fixation with exactly, what is a proportion that stock A; B, C, should have in the portfolio? And, give a little bit of latitude, but that allowing you to trade better.

That was an innovation that is still pertinent today. The innovation of the time to have, instead of buying into smaller positions, to buy into larger positions and perhaps, you know, get the seller to give you a discount because of your position. What was, at the time, called block trading. There are so many smaller innovations that happened after the big one of, let’s distinguish large from small.

So, I think it’s really important, because I think too often people think, “Well, where is the innovation? I haven’t seen anything coming out.” There are things coming out constantly, you just have to be careful that you don’t just put things on the board to show that you’re doing something. They have to be well thought out. And, those innovations happen much more on the implementation side, than they happen in how you define the different asset classes. And, perhaps the last comment, if you think about a football game, where is the innovation of a football game? Does it mean that the game that is played today is exactly the same way it was played 20 years ago? Well, of course there’s innovation. But, the fundamental that you throw the ball and you run with it, hasn’t changed much. What’s changed is how you execute. How you implement.

And, that’s been a constant innovation. I would argue that every season there are new innovations; the types of plays that get put on the field, and what’s in the play book. So, there’s constant innovation but you know, unless you have a trained eye to see this, to somebody that’s not in the business, the guys are just throwing the ball and running with it. What is the difference from 25 years ago? Well, there is a big difference.


Academic research DFA began

Doug Fabian: Talk to me more about the academic research the firm began, micro-cap, small cap, what came next? How did the firm develop? Start to gain traction? What new innovations happened along that timeline after small cap?

Apollo Lupescu: So, that was in the 1980’s, early 1980’s. So, the research came out in the late 70’s, it was Rolf Banz at Chicago who basically first published the paper that delineated these two different asset classes. Then, in the 80’s, and I can’t say I wasn’t exactly in the academic world at the time, but my understanding talking to people who were there at the time, is that there was a quest to get a better feel for these two specific asset classes.

So, you know you have large, you know I have the small, but then you have to ask, are all of the small caps exactly the same? Are all the large caps exactly the same? So, what is the distinction?

You know, intuitively, you know, there are some large companies who might have a larger profile than others. So, how do you distinguish what is the one equivalent, not equivalent, what is the one way to distinguish between the two of them? And, I think back in those days, as well as today, this valuation formula that came out way, way before, has actually been applied and actually provided the insight into the second dimension.

So, you have large versus small. Then within the large and within small, you can look and observe at what price can an investor buy, you know, the book value of the company? Or, it could be the cash flows. Or, it could be the earnings. And, when you look at this and realize, even if you have two companies, just a pure example, they both have $5 a share in earnings. They don’t sell for the same price. One might sell for $40 the other might sell for $80. Well, it turns out that the companies that have a lower price for a company fundamental, they tend to be called value stocks. And, historically, what they’ve shown, and through this valuation formula, which also backs up the theory, they should have higher expected returns than the more expensive counterparts. Then, not only when the theory got laid out, but also when people started looking at the data, the data seemed to confirm that particular theory.

So, that was a, it was a major milestone back in 1992. And, at the time, we actually had value strategies before we had, before even the main paper was published. Because, two of the folks who actually put together this theory, at the time it was called the three-factor model, professor Simon French, were working with Dimensional and were very well aware of that research.

Doug Fabian: Then, from there, another factor has been added.


Smaller innovation

Apollo Lupescu: Before that factor, maybe I can make another quick note.

Doug Fabian: Please.

Apollo Lupescu: In terms of the smaller innovation, it’s not like, huge distinction between categories of investments, was the introduction of a strategy that I think, implemented these ideas in a more efficient way.



And, that was the idea of Core. And, up until the Core came about, you had the different asset classes. So, you would have a fund for the large company stocks.


Small company stocks

Another one for small company stocks. One for large value. One for small value. And, if advisors wanted to implement this, they would have to buy all these separate pieces, that together, would come up with a comprehensive portfolio.

Now, it turns out that when stocks move from one asset class to another, let’s say from small to large, if you’re a manager who is looking to deliver pure small capital exposure, then you need to sell that particular stock from the small and buy into large. But, that, you know, means transaction costs and taxes. And, a way to mitigate that was to create market wide strategies that did have an increased exposure toward small end value, but they did not require an entire stock to be sold. You might need to absolutely make adjustments every day, but it, they are more efficiently done than having separate pieces.

Doug Fabian: So, it was a blended strategy. The core became a combination of value; small, the whole philosophy of the firm, from the innovation standpoint, that was the next piece of the puzzle.

Apollo Lupescu: That’s right.

Doug Fabian: Okay.

Apollo Lupescu: That was one of the biggest decisions, and one of the most important and consequential at Dimensional had, because it allowed advisors to create much more streamlined and efficient portfolios, and at lower costs. And, it allowed Dimensional to be able to grow, because these are really broad strategies that cover you know, thousands of stocks in the US market. Then, you have the Internationally developed, you have the merchant markets, so now, it’s really comprehensive. An investor can get really broad, efficient, exposure to the markets with a, you know, enhanced exposure to these dimensions of higher expected returns.


How should investors be looking at the international markets today

Doug Fabian: How should investors be looking at the International markets today? And the opportunity in International markets?

Apollo Lupescu: I meet a lot of people who, they speak about companies that they are familiar with. Or, companies they work for. And, in their neighborhood, and they’re really proud. Like, “I know this company. I feel really good about it, so I’m going to own it.” And, sometimes, “I work there, and I want to own that company.” And, that level of comfort, I think, made some folks really concentrate into what did they know? Whether it’s regional, whether it’s in their city or their state, and if you look at it now, there is a Global marketplace. Whether it’s for the products that a company makes, or a shopping cart for an investor. And, you know, the way I think about International markets is, if it makes sense for me to own GM and Ford, why not BMW and Toyota? If you have Kraft in your pantry, why not Nestle?

So, in other words, these opportunities exist all over the world, and there are some very robust companies all over the world. And, you know, I think the, my thinking right now, is that the starting point for any investor should be, “I’d like to own a piece of every single company in the world, and then you can argue me out of maybe holding some.” But, the starting point, “I want to own them all. Give me a reason why I shouldn’t own them all.” And, that to me is a starting point. And then, you can argue, “Okay, maybe I should emphasize this part versus the other. Maybe there is a subset I should exclude all together.”

But, the starting point is you know, I’d like to be part of this Global productive capacity that exists and to me, the benefit there is both in terms of mitigating concentration risk. Because, if you do go to your company that you know at home, just this week there was an article in the Wall Street Journal, and it was a very sad story about a gentleman who worked for 40 years, I forgot the exact number of years.

But, a very long time, for GE, and he was such a loyal employee that in the employee stock option program, and throughout his investments, he was like, “Well, GE is my company.” And, after retirement he has to go back to work, because that stock through such a big hit. And, he’s not alone. There are stories about AT&T. There are people in Canada, when I go to Canada, and people are telling me about Nortel and other companies. You have Exxon. I mean, it doesn’t have to be as extreme as a company going away, but there is no reason today that somebody should create so much risk by concentrating into a particular stock. Because, if it’s a publicly traded company, then everybody knows the same thing. There is nothing that you know, just because it’s in your neighborhood. And, by the way, if you do know something that other people don’t, be very careful, because there is trouble in that.


International markets

Doug Fabian: Apollo, I know you just returned from an overseas business trip to Asia, to Singapore. What did you see overseas? And, maybe you’ve been there many times, I have not been to Asia myself. But, what did you see that was exciting? What did you see that concerns you? How would you communicate to investors following with this stream of discussing international markets? Again, I’m amazed that one third of Americans don’t have passports. So, they never plan on leaving. So, there’s a lot of people who listen to this podcast and go, “You know, I’ve never been there.” But, you certainly can invest there. So, are you excited about the international markets?

Apollo Lupescu: I’m actually extremely excited. And, I’ve been quite impressed by the level of entrepreneurship that exists in these places. In Hong Kong, for example, it’s incredibly entrepreneurial. And, you know, even if it’s part of China, it doesn’t feel that way. Everybody is looking for a business. Everybody is looking for opportunity. Everybody is a go getter. And, it’s very competitive. It’s very, very competitive. And, somehow, they do have the free range to do it. I mean, I am sure there is a limit where things might go astray, but at least the fundamental level of running a business, it’s very, very competitive. So, I think I have been really impressed by the competitiveness that exists there.

Singapore, I was really impressed by the way that they’ve made it work where they somehow blend Democratic values with some form of government control. It’s somewhere in between China and the US. It’s really fascinating to see a city that is basically thriving, and is a great hub for business, but on the other hand, it’s not exactly a Democracy.

But, when it comes to investing, it is becoming the hub. And, the investors there, the advisors that I’ve dealt with, we’re building a business right now in that area, and it’s been fascinating to see that some of the challenges are very similar to where the US advisors were maybe 15-20 years ago. Very, very similar. Where, a few advisors are stepping outside of the idea of a product sale, and they are really looking to provide a service.

And, they have a set of ideas, a philosophy, that they want to put forth. Those are the advisors that we are cultivating there. But, it’s the product is still dominant. People, they still have the perspective that they had in the US a while ago, that to be a successful investor, tell me where the market is going to go, and tell me which stock I should buy. And, that is still prevalent, but I can see the tide turning. I can see that the mass of advisors there are now looking to provide a service that is more comprehensive than just a product, or making a prediction, is really gaining ground.



Doug Fabian: Talk to the audience about innovation. I was thinking about this question, you know, ten years ago. There’s been a lot of innovation in the last ten years. There’s been a lot of innovation in the last three years. I mean, I think we can all remember when Uber was not a service that we used on a daily basis. But, sometimes, people have the tendency to think, “Everything has been invented.” You know? And, what a great way to participate in innovation, by being an investor. And, being in these companies.


Relating innovation today vs ten years ago or 20 years ago?

So, how would you relate innovation today, and the pace of innovation today, versus ten years ago or 20 years ago?

Apollo Lupescu: I think the pace is faster in some ways because you have computers, and you have faster flow of information. And, you have to take account of that. I’ll give an example in terms of innovation, how it’s changed, when I started at Dimensional, this is back in 2004, quite a few trades were done using individuals, brokers. And, this is at the firm level. And, if you look at how it evolved over time, these innovations have led us to find newer and newer trading venues, and trading strategies that didn’t exist back then.

Even the last ten years, or five years, the way that we interact with the markets, the way that we find the stocks that we want to buy and sell, has tremendously evolved. And, every day there is innovation there. Some of these innovations are quite technical and quite detailed, but there are some others that you know, an individual might be able to understand. Recently, we put out a paper talking about how you can use information in prices of securities being loaned out. And, you can use that information to make a decision about the timing of different purchases. I think that type of innovation is coming out and you have to be careful. You don’t want to innovate just for the sake of innovating.

Doug Fabian: Sure.

Apollo Lupescu: But, when it is worthwhile; when it’s vetted, and you make sure it’s robust, it’s persistent, it’s pervasive, then you start taking some action.


The single most important lesson about investing

Doug Fabian: Apollo, this has been great. I am going to ask you one more question. This is for, really for all investors. I’ve got young investors and I’ve got retirees that listen to this show. What is the most, what is the single most important lesson that you’ve learned in your career about investing?

Apollo Lupescu: Oh, boy. I think the most important lesson that I’ve learned is to know your limitations. And, this has different meanings. The first one is, know your limitations as an individual investor, when it comes to handling the emotions of investing. It means knowing your limitations in terms of the knowledge that you have, relative to other people you trade with. Because, if you’re buying a stock, you think it’s going up, then the limitation is knowing who the party on the other side is. Which, they might be more sophisticated than you.

But, also, knowing your limitations into, you know, when you go invest your family’s money. And, that is your kids and your own financial security, are you in the best position to do it, or should you go and have an advisor help you with that? And, I think the biggest limitation is that people are overconfident and they think, “I can do it. Why can’t I do it?”

And, investing involves a lot more than just going and picking a stock. It involves more than just placing a bet on where the market is going. There are all these taxes; estate planning, financial planning, there are all these emotions, there are so many things that go into having a successful investing experience. And, my biggest kind of, surprise, has been too many people don’t know their limitations and they dabble in something they probably should go and get some professional help, in the form of a financial advisor.



Doug Fabian: Apollo, this has been a great interview. Thank you very much for sharing your knowledge with us. I hope to do it again sometime.

Apollo Lupescu: I look forward to it, and thank you Doug, for having me.

Doug Fabian: Great. The Science of Economic Freedom is always about what to do next on your journey to economic freedom. Our goal with every podcast is to help you formulate what that next step will be. From this interview with Apollo Lupescu of Dimensional Fund Advisors, here are some things to ask yourself.

  • What is my exposure to stocks; bonds, and cash? This is the simple asset allocation question. We encourage all listeners to know, but I ask you this in the context of your exposure to capitalism. As Apollo explained, your stock investment is your capitalism exposure. Your fixed income investment is your lender portfolio. You’re going to get some interest gained, but very little upside potential.
  • Think global. Apollo thought, a starting point would be to expose yourself to all stocks globally. And, then, back off from there. I have one question for you, what is your exposure to global markets?
  • Do you have any concentration risk? That means a high allocation to a single security. Could that risk significantly hurt your overall economic freedom if that position were to go against you? Think about that story that Apollo mentioned. General Electric. Or, what about Bitcoin?
  • Do you know your limitations? I thought this was an interesting perspective. Know yourself. Hold yourself to a high standard. Think about your past investing mistakes. Think about how you are not only investing for yourself, but for your family.

Now, you know I always encourage comments; questions, show topics. My email address is This is Doug Fabian, thank you for listening.

DISCLAIMER: The Science of Economic Freedom is intended as an investor education resource. The views and opinions expressed on this program should not be construed as a recommendation to buy; sell, or hold any specific security. Consult your investment advisor and read any investment prospectus carefully before making any changes to your investment portfolio. This program is sponsored by Mercer Advisors. Mercer Global Advisors Inc. is registered with the Securities and Exchange Commission and delivers all investment-related services. Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services.

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