The Dimensional Fund Advisors (DFA) documentary 5Tune Out The Noise9 made its U.S. debut earlier this month at the Roxy Hotel in New York, shining light on the often misunderstood world of investing. The film encapsulates the ideas of market efficiency and passive investing, aiming to shift the narrative from traditional, active strategies where stock picking reigns supreme to the more efficient, evidence-backed methods promoting index funds and passive strategies.
According to the S&P Dow Jones Indices9 annual SPIVA U.S. Scorecard, the stark reality of active management emerged recently, with 65% of all active large-cap U.S. equity funds lagging behind the performance of the S&P 500 during 2024, underscoring the arguments presented within the documentary.
Founded back in 1981, DFA has been at the forefront of enriched financial thinking, employing academic rigor from the University of Chicago to reshape the investing experience. The documentary features the journeys of notable figures such as co-founders David Booth and Rex Sinquefield, who have played pivotal roles alongside the education pioneers like Eugene Fama, Robert Merton, and Myron Scholes. The film tracks how these influential characters worked to highlight the limitations of traditional head-based investing models.
Robert Merton, who grabbed the Nobel Prize for Economics in 1997, provided special insights during the film’s screening, noting how challenging the prevailing views of finance during their early days was not always welcomed. 5What the film excelled at was showing the notion of challenging 5what was taken as gospel at the core of finance at the time,9 he remarked.
Merton reminisced about the hurdles they faced: 5Walking... it was not a slam dunk, it was all very strange.9 His perspective emphasized how investing mindset transformation was more than just about numbers; it was about challenging deep-seated beliefs.
Another key voice, Yale professor Roger Ibbotson, reiterated this sentiment, reflecting on their time at the university: 5I was with David Booth in Eugene Fama's class when we first learned about efficient capital markets,9 he shared. Understanding market efficiency fundamentally changed the approach many took toward investing: 5Everybody is worried about every piece of information... I didn’t have to worry about any of it. So to me, it changed my life.9
The documentary also aims to reshape what investment advisors offer, advocating for passive investing over the predictions of market fluctuations which were typical of the industry’s previous practices. Ibbotson pointed out to the audience, 5It could change the advisor's role... including estate and tax planning and charitable giving.9 The potential benefits of incorporating these changes could offer clients greater certainty and streamlined financial management.
David Booth also participated, reinforcing the challenges viewers face today. He remarked, 5What we’re really saying is maybe there are people out there... so it doesn’t really do anything for the objective.9 The emphasis here is on market efficiency; as Booth stated, ensuring one doesn’t get lost trying to beat market models — which decades of research suggest is exceedingly difficult.
Adding to this dynamic conversation, Merton interjected by asserting, 5There is zero- or negative-sum game,9 cautioning viewers about the fallacy of trying to outsmart market dynamics which often lead to unfavorable outcomes like high costs from trading and management fees.
Directed by Oscar-winning filmmaker Errol Morris, and aimed at average investors seeking straightforward financial advice, 5Tune Out The Noise9 is now freely available on YouTube, allowing anyone to access its invaluable insights and lessons.
The documentary not only recounts the history of steady evolution within financial strategies but aims to incite meaningful conversations about where the investment industry is heading as it seeks to engage ordinary investors with truthful strategies. With the odds stacked against those who aim to beat the market, inviting the general audience to explore these efficient investing strategies positions the film as timely and necessary. Financial freedom through education and informed decision-making remains at the heart of its message.
Through Jacob's comment, 5This is on film forever,9 the film encapsulates the rich dialogue surrounding investing's history, showcasing monumental shifts and philosophies shaping tomorrow's investing practices. Investors are urged to tune out the noise, engage with the possibilities of index funding, and embrace the teachings of those who challenged conventional wisdom. This documentary promises to resonate for years to come, paving the way for more informed investment decisions.
