Understanding Scythe Core Portfolios: Evidence-Based Investing with Dimensional Fund Advisors

[Music] Hi everyone, I'm Ammon from the investment team at Scythe. I'm here

today with Dr. Apollo Leescu from Dimensional Fund Advisers, one of the pioneers in evidence-based investing.

Dimensional has been at the forefront of turning decades of academic research into practical realorld investment

strategies. And today we're going to talk about how those same principles have influenced how we've built our

Scythe core portfolios. Now, I've never worked at Dimensional myself, but earlier in my career, I actually helped

build some of the trading strategies they use to execute. So, I've seen firsthand just how thoughtful and

precise their approach really is. At Scythe, our core portfolios are designed to be systematic, globally diversified,

and built on the same kind of academic foundation that firms like Dimensional have championed for decades. This

conversation matters because we want to help investors build long-term wealth by staying invested and avoiding some of

the most common mistakes like trying to time the market or chasing the latest hot stocks. And ultimately, we want to

show you the why behind Scythecore, why it's built the way it is, and how those design decisions are made to give you

the best chance of long-term success. Could you tell us a little more about Dimensional Fund Advisor? Well, first of

all, thank you so much for the invitation to be part of this uh recording and also thank you so much for

uh inviting us to be part of your portfolios and the trust uh that that you've had with us. Um Dimensional Fund

Advisors is an investment manager based in the US. Currently, we managed anywhere between 750 or 800 billion US

dollars depending on the the market every day. Uh and we have been doing this for over 40 years. uh our expertise

is in both the public stocks as well as bonds and the client base is typically institutionally in nature either large

corporations investment funds or certain financial advisors um and I think what's interesting about dimensional is that we

have a very academic scientific approach to investing over the past 40 years we have had uh five different Nobel winners

who have been directly involved in the funds and development of the strategies. Uh and we are considered right now

probably the most successful crossization between the scientific rigorous research and the practical

world of investing. Uh and because of that the strategies that we have are quite distinct from what you typically

see out there which is either stock picking traditionally called active management uh or on the other side index

management. And we're somewhere in between. we're uh uh in the you know the the the middle ground where we're trying

to outperform but without the traditional way of of picking stocks or timing the market. Understood. And so

today we're going to talk about Scythe's core portfolios and the thinking behind how we build those and it it's very much

in line with Dimensional's approach. Um, I can speak firsthand helping build the some of the trading strategies which

Dimensional used to execute and I can um vouch for the precision and and care um and attention that is is taken in in

every detail. Yeah. And we've been doing this for so long and and I think uh it's it's gotten better. It's incrementally

gotten better. We learned and you know working with partners like you we we kind of how do we step up our game and

over 40 plus years uh we've just gotten better and better. It's a lot of experience embedded in those 40 years.

And and so the importance of today's conversation is to help our clients understand about how the Scythecore

portfolios help build long-term wealth making systematic um disciplined decisions over the long

term. Yeah. Which I think is really important because everything in life including investing changes. There's an

evolution in everything and uh and investment strategies have also evolved. Uh, and I think that what you're trying

to do is really make sure that whatever you offer to your clients, it is state-of-the-art, not what used to be

state-of-the-art, but what is currently state-of-the-art. Now, let's talk about stocks and performance. You you

mentioned their stock picking. Why do I need a scythe portfolio at all? Why can't I just pick stocks? Yeah. And I

think stock picking uh the way it's been known uh kind of goes back about a hundred years uh to Benjamin Graham who

was an investor in the US and and he had this realization that when you pick a stock uh it shouldn't be based on a

hunch or because your cousin told you or a friend said you should buy that but rather do some level of research. So

what uh Benjamin Graham did uh was try to look at at at uh is it a good deal to buy the stock based on what I expect uh

to to produce down the road. Uh and in that respect that gave birth to statistical analysis of stocks. Uh and

the name of the game has always been information. If you can get the information faster than other people, if

you can get better information, and if you can process it in a superior way, well, that ought to give you as an

investor a competitive edge. Uh, and that's what Benjamin Gran was really kind of getting at, like let's find a

way to get a competitive edge in the market by analyzing uh information better, by getting the information

sooner than other people, and then by having availability that perhaps others don't. And I think for many years uh

there was something that that that you can cling to. There was maybe uh reasonable to expect that some managers

or some investors can get better information uh can get it faster or they can analyze it in a superior way. And I

do believe that maybe there was a time when that was possible. But I want what I've seen over the past uh 20 years or

so is that investing has completely transformed because today information travels incredibly fast. Everybody has

access the same information and it's not legal to trade on something that you shouldn't know. And then you know

thirdly it is so hyper competitive that in the US there are more professionally managed funds than actual stocks trading

on the market. So today doing that analysis the question is can you get a competitive edge in a world when

information travels so fast when everybody has that information and it's incredibly competitive and what the data

seems to suggest is that the world has changed where this idea of picking stocks no longer is what it used to be.

And the way that it manifests is that if you analyze the performance of managers to trying to who are trying to do this

and you see what's the evidence how good are they at analyzing how good are these professionals spend hours looking

through the books they go to Harvard MBAs and Stanford PhDs and they're just the smartest in the world. How good are

they at picking stocks given there's a lot of money they can make out of that and the evidence is not encouraging. If

you look at 10 years for example for uh a manager uh and you and you go back to uh uh the end of 2024 and then again

look back 10 years. Uh what's fascinating is that about a third uh of the managers don't even survive the 10

years. In fact, they just close shop. They the funds disappear. And out of the ones that actually survive, only about

one in four outperform. So think about this. three and four underperform the market because they have their fees and

and it costs money to do the analysis and by the time the all it's all said and done, you're just not outperforming.

The vast majority are not and giving them more time doesn't seem to lead to any better results. In fact, it's

exactly the opposite. If you look at 15 years, it's only one in five that outperform, meaning that four in five do

worse than than their benchmark. And you know only about half of them survive. And if you really look at 20 years which

is a more realistic time horizon for a manager it's less than uh fewer than one in five outperform 18%. Meaning that

82% underperform. So your chances looking at managers today is that you will pick somebody underperforming and

that has been the impetus for a big change in the industry. uh stockpicking is not what it used to be. And you know,

not to say that it was a bad idea. I think um when I grew up, when my kids were growing actually, more like my kids

than myself, there used to be a store called Blockbuster Video. I'm not sure if you remember those, the good old

days. I do. And you get a VHS tape. Get the VHS tape, you put in the VCR, you go pay the late fees, get another

one. that made sense in the '9s and and and maybe the early 2000s, but once internet streaming came along and

Netflix and uh uh Hulu and Disney Plus and all the other streaming channels, having a VHS tape is no longer what it

used to be. And to me, stock picking is a bit like Blockbuster video in the age of Netflix. It made sense at some point,

but not today. There's no evidence to suggest that uh it's it's it's worth doing it and there's no evidence to

suggest that that it's going to come back that somehow it's got legs for the next for the future. It's it's a thing

of the past. Um and uh there's a great hockey player uh Wayne Gretzky and he has one of my favorite sayings that what

made me successful is that I chase the puck not where it used to go but where it's going next. And I think that's a

lesson for investors. Don't chase something that is past its prime. So if investors were to to try and pick say

stocks that they think are going to to go well. Is there downside to that? There are pluses and minuses. Uh the

plus is that that that you could hit some winners and you can absolutely do that. Uh the negative is that that the

same winners might not repeat. Uh and just let me give you an example. uh in the US uh we have this metric of the

market called the S&P 500 and if you look for the first quarter of 2025 the performance in US dollars for the S&P

500 uh what you see that it was down about 4%. And how do we measure this? How do we get to the 4% also really

important for investors to know is that you measure the performance of 500 different stocks. Uh and that's one

thing that you're looking at. But the other thing that you're looking at is what is the size of the company? Signs

meaning how many shares of ownership and how much is each share worth it. And that gives you the market capitalization

that the business value of that stock. Uh and the way we measure performance as investors is not looking only at the

performance of the stocks but also how big is that company? How much emphasis do I put on it? And the way that you

measure performance is by assigning a greater weight, a greater percentage, a greater emphasis to the largest stocks.

And in the US, these large stocks, they're called the Magnificent 7. And they're companies that you probably know

about. There's Microsoft, there's Apple, there's Nvidia, Google, Amazon, Facebook, and Tesla. Uh, and these seven

stocks uh have been actually doing uh uh u you know, they've been gotten a nickname. First of all, when you get a

nickname because you're doing something well. And what's fascinating is that if you take these seven stocks apart, uh

you can look at last year in 2024. And what's fascinating is that on average in 2024, these stocks were up about 60%.

60% up. And that's what a lot of people said, "Boy, let me go get more of these stocks because they're doing so well."

Uh but again the more you concentrate you can make a lot of money but you have to be ready for the flip side because

this year the same exact seven stocks that were flying so high uh they are down about 15%. On average between the

seven of them uh again the market as a whole was down about 4% they're down 15%. So a lot more a lot more. And if

you look at the remaining stocks in the S&P so let's just call that S&P 500 minus a 7. So the S&P 493, they're down

by less than 3%. So I think that the important lesson is that when you concentrate, you tend to hit more

extreme returns. And you can go on the positive side, but it can also be on the negative side. And I'm what's so

interesting that people need to understand is that when you concentrate it and the reason that these stocks have

such a big impact on the S&P 500 is because in the S&P these seven stocks together when you add them they amount

to roughly 30%. 30% of the value of the S&P 30% of the performance of the S&P is attributable to seven stocks. That's

quite a bit like a big chunk of the performance in a way to me like that's pretty decent. Uh and what's fascinating

is not as much as NASDAQ because the same seven stocks are also part of the uh NASDAQ index but not at 30% but

rather at 52%. More than half of NASDAQ comes from seven stocks. So last year when they're

flying high, well, guess what looked phenomenally good? NASDAQ. This year that they're not doing so well, guess

what looks really poor? NASDAQ. Um, and so I have to caution folks if if you choose to concentrate and try to pick

these stocks, you tend to hit more extreme returns. Uh now if you have these stocks not only part of the S&P or

NASDAQ but uh a global opportunity set which is what we encourage investors to consider the same exact seven stocks

will be part of that metric uh in this case called MSEI but the percentage of them is only about 20 right so it's it's

it's you're not missing out you're just not concentrating as much so I think one of the big things that that that

happened has happened over the past few years is investors realizing that I I want to participate in the success of

these companies, I just don't want to overdo it because the more I expose myself to a handful of stocks, I can

make a lot of money, but I can certainly lose a lot of money. And that's really dangerous. Uh and that's why when we

encourage folks to really have a global perspective to investing, not miss out, have these stocks, but make sure that

there others in which you uh partake just in case they don't work out and avoid these extreme outcomes. Yeah, I I

agree. I think diversification is is such a key point here. It's something we employ across our our scythe core

portfolios. In fact, the the same statistic, the the waiting of the magnificent 7 in our core equity 100

portfolio is just 13%. Um we're we're very conscious of just how concentrated these these other indices are and I

think it's important our clients understand that and it's paying off for them this year. It's paying off. I mean

I think that you know it's it's it's something that uh over the long run it's clearly going to benefit because it

avoids these extreme outcomes and they are so dangerous ammon because let's just take a simple example if you

started a year with $100 and you lost 50% which is pretty much what these seven stocks did in 20 I think in 2022.

So, if you start with $100 and then you lose 50%, by the end of the year, you only have $50. And now you start the

following year, let's say 2023 with $50 and you want to go back up to where you were at 100. Well, to go from 50 to 100,

you now have to double, in other words, go by up by 100%. So, if you drop 50% on the way down, on the way up, it has to

be 100%. And that's why these uh uh outcomes, the extreme outcomes are so dangerous because even if you see a

great year when they went up by 100%. All they're doing is catching up. You want to avoid extreme outcomes. I think

that's a really key ingredient of a successful investment experience. That that sounds very important. What what

what do we mean when we talk about geographical diversification then? Yeah. And I think it's important to know that

geographical diversification doesn't mean that you're investing in a country. You're not investing in any one country.

What you're doing is you're investing in companies. And companies can be based anywhere. And you just don't want to

limit yourself to just one region. And in fact, if you look at companies and where they trade and you redraw a world

map, not based on land mass, but rather the value of all companies that you can buy and sell in any one part of the

world, it's quite fascinating what you find. The US economy is pretty big. It's about a quarter of the value of all the

economies in the world. But the stock market in the US is about 65%. the 30 plus 3,000 plus companies

that you can buy in the US together, Apple, Google, Microsoft, McDonald's, Coca-Cola, all these companies in the US

on on stock exchanges amount to 65% of the value of all companies that he can buy as an investor. So uh you know an

important starting point would be well if I want to buy US stocks how much money do I want to put in there? uh and

this uh map this this basically this uh what's called world market cap allocation it kind of gives you a

starting point you see the next largest stock market would be Japan but Japan it's only 5% it's less than a tenth of

the value of the US market so it gives advisers like you and investment managers like you a primer on to how do

I allocate among uh different countries and I do think it's important to keep an open mind across countries uh Because

sometimes people say, "Why not just put money in the US? Buy just US stocks." You could do that. And you know, if you

take a simple example with cars, what it would mean is that you want to buy shares of ownership in companies like

Ford, GM, and Tesla. And they're great American car companies. You probably can see them in Singapore. Anywhere you go

in Asia, there'll be some some some of these cars. Uh now, if you also look on the streets, you don't only see these

American cars. You also see some BMWs, Mercedes, uh Porsches, uh and those are brands owned by German companies that

trade in Germany. Even Jeep and Chrysler, they're all famous American companies. Those brands are owned by an

Italian company, Stalantis, that trades in Milan. That's Italian investing. You're familiar with a Honda, Toyota,

all the Japanese car companies. And ironically, even great British brands are not owned by an Indian company. Uh

so you have to go to India to buy Land Rover Jaguar Volvo. My daughter drives a Volvo and that company is owned by a

Chinese company uh Gilly and then you have the Korean shops are also making inroads. Uh so ultimately what we're

suggesting if it's worth considering Ford and GM why not look at BMW, Toyota and Jeep for that matter because that is

global opportunity uh a global opportunity said that's global investing. You're familiar with these

brands. You're not buying something exotic again and you are investing in companies uh not countries. Now

diversification is something key to to Scythe's core portfolios and and we incorporate it into each of them.

Another uh investing phenomenon that we rely on is factor-based investing. Now I think there's no one better place to to

walk us through that. Could you give us a a simple overview of what is factor-based investing? What what are

factors? Yeah. So to summarize so what we discussed so far is that today's modern investor wants to participate in

the global productive uh u uh set and you should own as many companies around the world as possible. Let's start with

that point that you want to own as much of the global productive capacity as you can and that's what your portfolios do.

And once you decide that the second thing is that you want to look at country by country and decide how much

you want to put in each country. The third step afterwards is say well within each country how much should I buy out

of each stock? Uh and it turns out there is a uh some really rigorous scientific research going back to the 1980s that

delineate between different categories of investments and what's become known as asset class investing. Uh which

simply says these are stocks that have similar characteristics. uh and in the US if you go back uh again to the 1980s

what the uh the research uh found is that if let's say the square represents all the stocks in the US market the

first delineation that he can make is based on the size of the company and you have some very large wellestablished

mature companies called large caps or large companies and this is what you typically see in the S&P 500 these very

large well-established stocks but in the US they're also about 2,000 other smaller companies that are not part of

the S&P and those are called small caps or small companies. Uh and just to illustrate, I mean here in Singapore,

you certainly have McDonald's. Uh and that is an example of a S&P stock, large, well established, mature. Uh and

the example of a small company is another publicly traded stock called Shake Shack. And you probably have some

Shake Shacks right here on the island. Uh and uh Shake Shack is a publicly traded stock. They sell burgers and

fries like McDonald's. But if you think of the economics of these two companies, I can see Shake Shack growing and

perhaps doubling in size easier than McDonald's. So small caps typically have a more room to grow. On the other hand,

the large companies have a longer track record. They're they're a little bit more mature. Uh and you know, investors

might consider them less uncertain than the smaller ones. So economically you see there are some differences uh and

how they manifest as uh you know returns for investors uh is something that that you and I are very familiar with this

book. It's called the matrix book. It's one of my favorite books of data and numbers. Um and uh you know I'm sure

that that if anybody would like to get the numbers you can you can share these uh these uh the full set of numbers. Uh

but here gets interesting. We have data going back to the 1920s in the US. So, I'm going to I'm going to show you the

US dollars because I'm much more familiar with that data. It's the longest in the world. Um, and if you go

back to 1920s and if you had invested a single dollar, not 10 or 100, a single dollar in the S&P 500 over the long run,

what you see is that the growth of that dollar would have been roughly around $14,000. So, $1 grows to about 14,000.

14,000fold, which is a really phenomenal, if you think about it, that's a big growth. Now, if you had

invested the same dollar in the small companies, so the companies that are not in the S&P, but they're still part of

the stock market in the US, uh, and kept it invested without touching it, uh, and and every year you kind of go and redraw

the lines and every quarter like what exactly is a small versus large, the same exact dollar over the same time

period. uh if you look in the in the matrix book in the dimensional small cap uh index in the US the same dollar would

have grown almost to 49,000 but let's just say $48,000 over the course of uh 90 years

or so uh so a much uh higher growth if you think about small companies uh so you can delineate based on that uh and

then in the 1980s the question was what about all the large and what about all the small are they exactly the same and

a new delineation came based on the price at which you buy a uh a stock and this is the price relative to some

accounting fundamental and the lower price stocks they they are called value companies and over the long run they

outperform the more expensive counterparts called growth. So if you knew that small beats large, value

outperform growth over the long run, uh then obviously the one part of the market that ought to give you the

biggest bang for the buck over the long run is small and value. And if you look at the matrix book that that dimensional

small cap value index, what you would see that the growth of the same dollar, same time period would be over

$152,000. So quite significantly more. Uh so that adds another layer. So the first layer was like we want to own the

global productive capacity. Buy as many stocks around the world as possible. Uh that's the first layer. The second one

is assign different percentages to different countries based on the value of stocks in each country. And the third

layer that we're suggesting here is that within each country, it's up to you as an investor to choose whether you keep

it in the natural market capitalization weights and you buy each company in the percentage of the market there or if you

choose to emphasize small companies and value stocks. And the more you reshuffle the deck and you emphasize small and

value, the more you give yourself an opportunity to have a higher return over the long run. uh and uh and that's

something that you work with your clients and you decide how much do we want to reshuffle this deck or how close

do we want to stay to what's called a natural uh weights but that that's a that's a really important decision that

you make uh when you do your research and and figure out for your clients what's appropriate. Absolutely. And I

think a natural question uh from a client might be okay so over the long term small and value and in particular

small value stocks are going to get me uh outperformance over the long term. Why do I not just only hold those

stocks? Yeah, absolutely. What's the catch here? I mean because it seems like why not put all the money in what grows

the most? Um well it what's interesting about this is that there is no right answer. What we tell investors is this

is that medicine investing everyday life is not about certainty or guarantees. These numbers are rock solid. Uh what

you need to know is that even if you are looking at something that seems obvious like for example working out or eating

healthier that improves your odds of having a healthier longer life but it doesn't guarantee one. And it's the same

here. This is statistics and probabilities. What you want to understand is like how likely is it for

me to see this? And this is where it gets interesting because if you look not in a quarter, you look at an entire

year, uh what you see is that value companies, value stocks have beaten growth about 60% of the time on a

one-year basis. So even if you have a one year, 60% of the time value beats growth. So even if you had one year and

you ask, well, which one should I emphasize? Well, emphasize the one that outperforms value in this case. Now you

can think about the other way. Four in 10 years is not there and you can go through that period and see well it's

been a year and I don't see value beating growth. What's wrong with the strategy? Nothing. Nothing. I expect

that to happen the same way that you know in life again you have the odds. Now if you give this strategy more time

and you go to five years the odds improve to about 70%. So you're now at 69 70%. Which is again it's a better uh

uh probability. Is there a guarantee? No. 30% of the time or so it's still not there. But if you see these odds kind of

begs the question, what part of the market would I emphasize uh given that I know I'm I might run into a 30% chance

of not seeing it. And that's why this strategy requires an advisor who really has done their homework and ma can

maintain the discipline because over and over we see investors basically bailing out. Oh, it's been 5 years. I'm not

seeing this. Something must go wrong. Nothing goes wrong. I expect that to happen. The same way that if you uh quit

smoking doesn't mean that you might not develop some lung issue. Doesn't mean that you're going to live forever. No,

it's you're a lot better off if you stick with a program than say, well, I've given it some time is it that

doesn't work. Uh so to me, even if you give it 10 years, you're still going to have better odds and the more you give

time, it's still not going to be 100%. Uh so this is all about odds, statistics, and probabilities. And

because there are times when growth beats value, then it is good to have growth as well and not just go all in

into one uh one investment class. And that's where our our portfolios come into play, ensuring that that discipline

and that long-term focus. And I think that's really important for for clients to understand. And I think that what

gets me so excited to be here today is that in the US we've seen a group of adviserss really embrace this much more

institutional much more scientific approach uh and be able to you know basically be a coach for their clients

and help them you know guide them through all these market cycles. Um and to see that in other parts of the world

this is not only gaining traction but really advisor becoming extremely successful by doing the right thing for

their clients is incredibly satisfying uh because it is becoming more and more mainstream in the US. Uh and we are

seeing it kind of you know emerging around the world and and and at this moment very few advisers have done the

homework that you've done the research that you've done. uh and uh and it's incredibly gratifying to be uh uh on

this webcast and talk about these things because again not many advisers have have done the homework and and put in

the work that you have done. Thanks. No, it's it's great to be part of the movement for for us the devil is a

movement. Yeah. Yeah. Now zooming out um how can we think about other asset classes? We we've talked about stocks.

Um how should we be thinking about the other asset classes in terms of managing the risk of our portfolio?

This is a great question because so far we've talked about stocks as you said and stocks basically mean that you own a

piece of a company. So stocks are about ownership and you did not you might have not started Microsoft or Tesla or you

name it and somehow you can participate in the ownership and partake in the earnings of those companies which I

think is an amazing thing. it gives us all a stake in capitalism and free markets uh and in the success of of of

companies that we use every day. So I think if stock investing is phenomenal uh and and it's driven by this idea of

ownership and profits that companies are expected to make down the road and that's where the value of a stock that's

where the price of a stock comes from. Now as we know no business is guaranteed success. uh there are fluctuations in

earnings and profits and and that's why you see fluctuations in the stock market. So you are buying quite a bit of

uncertainty in the stock market and you should embrace it because it's totally fine to be there. There's nothing wrong

with that. People sometimes don't want that. They're like I'm close to retirement. I don't have the stomach for

that. My risk capacity is low. So what else can I do with my money? And it turns out if you don't want to buy

ownership, there's an alternative and that is lending your money. Turns out that the US government, companies, maybe

the Singaporean government, they want to borrow money. They need to borrow money. Uh, and they are willing to write up a

contract and in that contract to specify an interest rate for how long you get the interest rate and at the back end

you get your money back, the principal back. That form of lending is called bonds. So, as opposed to the ownership

in stocks, you can lend your money in bonds. And the beautiful thing about bonds is that there's a contract that

tells you exactly what interest rate do you make on your money. And global bonds is pretty much like stocks is is not

limited to the US. In fact, if you redraw that map that I mentioned earlier, not for stocks but for bonds,

uh it gets quite interesting because when you look at at at at bonds, uh uh there is a global opportunity set and in

that set the US is not 65% but it's rather about 40% of the value of all bonds uh that are available to

investors. uh in Japan and China are now a lot bigger players and you look at the Japanese for example most of the bonds

are issued by the government in other words the government borrows the money in the US it's a much greater balance

because you have companies who want to borrow money in this way uh and there different interest rates based on how

risky they are uh so bonds are a huge opportunity uh and the benefit again is that they don't fluctuate in value as

much and that's what investors tend to like now there's a trade-off and there certainly all these are the trade-off

you know we mentioned over the long run you can invest money in the S&P and $1 since the 20s grows to

$14,000 if you had invested the same dollar in what's considered to be one of the safer bonds issued by the US

government. So you you enter into a contract of the US government and uh after 30 days you get interest and your

money back. So it's very short-term. It's a US government never missed an interest payment or a principal

repayment. So relatively I mean no nobody can can say hey that's high risk investment very low risk over the long

run in these investments that are called the 30-day US Treasury bills. There has never been a single calendar year in the

US Treasury bill 30-day uh index where you would have lost money. Not a single negative year. So you kind of have a

confidence that hey data shows that that it's it's a relatively safer investment to stocks. Doesn't fluctuate as much.

Never a negative calendar year. But there's a trade-off. You're not going to make

$14,000. How much you going to make? The same dollar, same time period would have grown to roughly about

$23. A very different outcome. So you can have stability, but there's a trade-off. And that is the fundamental

trade-off in investing. Stability versus growth. Uh and I have to say there is no right mix. So there is no right mix. As

I said, there's trade-off. Stability versus growth. Now these bonds, they're not all like 30 days. You can lend the

money to the government for a longer time. So if you look at longerterm bonds, uh instead of $23, the same

dollar would have grown to about $109, which is certainly more than T- bills, but not nothing compared to uh to

stocks because if you look at stocks, uh that would have been about $11,000. Uh this is because we started rather in the

20s like in in Mitrix book, it starts a couple years later in the in the late 20s. Uh since we have good data, uh but

still a very big difference in the growth of stocks versus bonds. And then you can look at small and you can look

at small value and you see that as an investor you now have a primer and this is what advisers do. They have a primer.

I have not only the idea of global productive capacity but there's a way to control risk and uncertainty by using

bonds and uh uh and how you mix that. It's that's that's the art and the science of investing and I know that's

what you do for your clients. Um, and the big kind and again I come back to this. You have to understand what you're

getting into because when I'm showing you that small value shut the lights out compared to T- bills, your expectation

will be that every day I'm going to see that. That's what I expect too. It just turns out that I also know that's not

always the case. And if you look, for example, over the past um 15 years or so, year by year to see what investment

category out of the five that I just showed you does the best, well, you would see that that uh these one month

treasury bills, they outperformed three times uh bonds, longerterm bonds, they outperformed twice about five, you know,

of the the years. The the best performing uh investment in that particular year was a bond. even though

there's such a vastly different uh uh performance. So, you have to be aware that this is not going to be the case

every single year. I expect that's going to be the case over the long run. Uh and if you have an investment portfolio that

combines these bonds, these stocks, small value, you have so many moving pieces that you're ultimately going to

have the best performer as well as the worst performing asset class uh um in the world.

And this I think is is something really important to us at Sciphon. It's why our core portfolios there are actually four

portfolios. We have our core equity 100 which is an 100% equity portfolio but we have core growth, balanced and defensive

which include bonds and gold as as well uh as a as a safe haven commodity which really balances out those those

portfolios over the longer term. That's really really smart. I mean, I think that's that's the way to do it and

that's that's that's really the way to do it and and and at that point once you have the portfolios, I mean, I'm sure we

can spend a whole day thinking about how do you keep those portfolios in balance and how do you adjust uh as as things

change because things do change and you have to make adjustments uh and and I think it's but it's a right you start

with the right idea. Let's look at what matters. You have stocks, bonds, gold that's mixed in different proportions

based on what somebody's risk capacity or needs might be and then kind of stick with that program and make adjustments

as things change. Exactly. I mean we we rebalance twi twice a year to ensure that those asset class mixes are

reasonably stable um so that the the client's outcome is is constant through and they have again I mean at that point

I given what I what I just heard they have exposure to 10 you know like 10 14,000 different companies in 40

different stock markets you're never going to miss out on something and on the other hand not any one company is

ever going to have a meaningful impact on your wealth which is amazing cuz you know my father-in-law he happens to own

uh uh one stock and I actually think that he owns the stock. I think the stock owns him cuz every single day he

wakes up and the first thing is like oh my gosh how much money he made a loss but it's draining it. It must be so

terrifying to have your entire wealth in one stock. But in this approach it doesn't really matter if that stocks

goes under. I got 13,000 others. Who cares? like none none of them are going to be a meaningful enough part to really

uh be devastating to my to my wealth. And so it's not only good for your financial wealth, but it's also good for

your mental health. Yeah, I think my grandfather used to write down the uh the nav of his portfolio each day. Um I

think I've I've seen my dad checking on his uh portfolio most days and I've I've said to him that probably he'd do better

checking it less often. That's the reason. Now let's focus on investment

discipline. What should clients be thinking of in terms of their investment approach? When it comes to discipline,

I think they need to start with an acknowledgement that when you invest in the stock market, I can tell you right

now that there will be down periods. So manage your expectations. Don't think that that that markets always go up. We

know that the nature of the markets is to fluctuate in value. There's nothing really tricky about that. In fact, if

you redraw the timeline of the S&P 500 in the US going back to the 20s based on bull and bare markets, uh what you

clearly see is that bare markets when the market drops by about 20% or so, they're not terribly unusual. They do

happen. You know, the good news is they don't happen as frequently or as long as the bull markets, and that's where the

growth comes in. But you have to expect that's going to come. It's a little bit like an earthquake. I might know here

that where I live in Los Angeles, there's an earthquake coming and at the same time that's not valuable because I

don't know when. So I can tell you right now the market's going to drop at some point. I just don't know when. And that

is a key insight is that expected market's going to drop. There's nothing really unusual about that. And if

anything, when you have some of these big drops, uh, that might present an opportunity rather than a threat because

we know that these things happen. Uh, you got to be ready for them. And when that opportunity presents, that's the

time to do what you just mentioned a second ago, which is rebalance. Uh, so manage your expectations and when the

market drop, you know, maybe the tongue and cheek is to say, "Hey, something went on sale." If you see something

going on sale, you can say, "No, no, I'm going to wait for that to come back at full price or when I get it now that

it's on sale." So, in in some that's not always kind of the right way to think about it, but just conceptually, if

something drops in price, perhaps there is a better price that you buy it at. It's an opportunity to uh to get it

rather than wait till, oh, I'm going to wait till it goes back to uh to where it used to be in price. Uh so to me that

that's that's the first thing that I would tell folks is that you do have to um uh to uh um uh to look at the markets

over the long run realize that there's nothing unusual about the market dropping and in fact it's a sign of

strength. I'm on a few weeks ago in the US uh the new president I mean the new the you know uh the the administration

announced tariffs and it was you know the tariffs were a little bit unexpected in their scale and and and and breath uh

and it took a lot of folks by surprise. They didn't expect it was unexpectedly large uh uh uh tariff that that that the

administration imposed. So at that point that clearly would have had a very negative impact on company's earnings

because it would have been harder for them to run their business and make money. If they're not going to make as

much money and this is disruptive to their business, what exactly do you

expect the value of the company in the stock market to do? Stay the same or go up? No. The expectations go down. So

when the market went down to me that is a sign of strength because it reflected the reality and not soon after the

reality changed and and it reflected that. So when you see market volatility I would not say the markets are crazy.

They're doing exactly what they're supposed to do which is reflecting the new information about the potential for

companies to make money. And what's interesting is that if you go back 30 plus years, there was always a moment in

time when the market, the S&P 500 was down at some point. It was down at some point. There was never a year when the

market was always up and sometimes these drops were quite significant. Uh and uh what's interesting is there was also a

moment in time even in terrible years when the market like like 08 the market was down quite a bit. uh it was up down

about 30 plus percent in the US in the S&P and yet there was a moment in time when the market was up that year. So

within a year you can see them wild swings in what the market does the largest entry or gain the largest entry

or loss. Uh and the question is how much does it matter when it comes to the ultimate outcome for the year and uh

take the pandemic. It's a good illustration because during the pandemic in 2020, there was a moment in time in

probably a few weeks where the market had dropped by about 34%. Lost a third of its value. So an

investor panic is like, whoa, this is not good. We're all stuck at home and market lost 34%. In the same year in

2020, there was a moment in time when the market was up about 70%. 70%. So the largest point was up

70% for the year, lowest negative 34. That's a huge spread and where the market ended up was positive

18%. Again, this says nothing. In fact, if you go back through all this time frame and you look at the largest intra

gain, the largest loss and where the market ended up, there is no pattern. It doesn't say anything. The fact that the

market dropped so much or they went up, that means nothing. Uh so that's the second point that I want to make to

investors is that first of all expect volatility and that is a show of strength for the market not a weakness.

Number two is that within a certain year you can have a huge divergence and number three you really um ought to pay

attention to the market um and give it some time to work for you because if you're trying too hard it might actually

be detrimental. Uh and uh maybe I'll maybe I'll kind of share a story. Uh a while ago I was asked by an adviser uh

like you in the US um to go present to a group of retirees in Northern California and uh she had some of those clients uh

coming from the retirement community and uh they said, "Well, we have an investment club and they would like to

have an investment manager come and talk to them about what the market's doing, where it's going, and what they should

do with the money." And I wanted to get more details on that investment club. And it turns out that they uh would wake

up, they would have breakfast, watch the market every single day, and then when the market closed, they would go play

tennis. Those are the activities that they did over and over again. Um and uh uh and I was trying to share with them

that because what they wanted me to tell is like what the market's going to do. And I was trying to share something with

them that would be um kind of reassuring that that this is not necessarily the right thing to do. watching CNBC and

Squawkbox and Bloomberg and I don't want to pick on any of my channel, but generally speaking and trying to infer

something, it's not productive. So, here are some statistics that that kind of help those folks uh kind of understand a

little bit what does it mean to give the market time to work for you. Uh, if you look at the um uh the uh uh the S&P 500

and whether it's in 2024 or the last 50 years, it's remarkably similar. on a daily basis. If you watch the market any

given day, what you see is that 53% of all trading days in the market are positive and 47% are negative. Meaning

that if you watch the market daily, it's a bit of a flip of a coin if it if you make or lose money. There's no clarity.

Oh, I'm going to make money. No, it's just not clear at all. Now that's why half the days are depressed and half the

days that are springing their step because that's it's what you get if you watch the market daily. Now if they had

waited for the quarterly statements and you look at the data over the past 50 years at the S&P on a quarterly day uh

basis not daily what's fascinating amount is that instead of seeing these uh instead of seeing the the these these

uh percentages what you see is that about 71% of the quarters have been positive and only 29% negative. So

simply switching your time horizon, letting the market work for you from daily to quarterly, you are a lot more

likely to see a positive outcome. A lot more likely. And all you have to do is just give the market a little bit of

time to work for you. Makes sense. Makes sense. And and and but a lot of people are so hyperfocused on, oh look, the

market dropped this year. Look at the or this week or it's it you have to give the market some time. Uh, but it's also

interesting that if you decide, I want to get out because things don't look good. You have to acknowledge that you

could miss a bad quarter, but what is it more likely for you to miss? It's a positive quarter. If you get out of the

market, it's as if you play a game where you stand to lose 71% of the g of the time. That's not you will never know the

the sands and the marina to go play those games. It'd be silly. But why would you do that with your money in the

market? because you're a lot more likely to miss a positive quarter than a negative. Uh and if you give it the

whole year, if you're patient enough for the annual statement, what you see is that on annual basis over the past 50

years, uh the S&P 500 was up about 78% of the years and only down 22%. So big difference in uh uh uh even

on the on a quarterly basis for from quarterly to annual. Uh and I wanted to somehow connect this with the other

hobby they had, which is tennis. Uh, so I ended up kind of digging up some statistics on a player that had just

retired. Uh, and I and I did like watching him. I thought he was a class act. His name is, um, Roger Federer. Uh,

arguably the all-time best male player. And I say arguably because even people on this call might have a different

opinion. Uh, I'm with you. Yeah. Uh, but I was curious, how do you get to become a champion? And he's not an average

player. Just make it, he's the best of all times. And if you look at his statistics, uh what you see is quite

remarkable is that in his career, Roger Federer won about 54% of the points that he played.

Meaning the best male player of all times, arguably lost roughly half the points

that he played. And he was the best of all times. In other words, to be the best of all times, you don't need to win

90%. You just need to win a little bit over half. And that's what he did. But what Roger did, he stuck in there,

played all the points, won the big ones. And if you give him more time and you ask, well, okay, I'll wait for the whole

set. What you see is that if you give him some time, he won roughly about 75% of the sets that he played. And if

you really are patient enough for the whole game, you see that he won about 81% of the matches. And that's what

we're talking about. That's the same with the market. If the market drops any one day, don't be panicked any more than

Roger Federer losing a point. Oh, I'm going to pack my bags. He lost the point. He's done. No, we know that he

loses roughly half the points the same way that roughly half the times you're not going to make money in the market.

But the more time you give Roger, the more time you give the market to work for you, the more likely it is for you

to see a positive outcome. And I think that's a really key ingredient of a of a successful investment experience is just

don't get carried away with the short term because we know the markets are very very choppy particularly on the

short-term basis and the more time you give them to work for you the more likely it is for you to see a positive

outcome. Pretty much like with Roger as well. No, I love this stat on Roger. Um, I'm a keen paddle player and I have

learned the hard way that um, consistency trumps uh, sometimes moments of brilliance. Although I dare say he

has had many more moments of brilliance uh, than than I have. We we won't go into my win, but he also had moments

where like what am I doing putting on the ball in the net all the time. So, you know that that's part of the game.

That's part of not investing is not a game, but that's part of the process. It's part of the process. You have to

acknowledge there going to be some brilliant days. The market's going to have some brilliant days and they're

going to have some crappy days. It's fine. That's just part for the course. That's exactly what I would expect to

happen. Nothing unusual. So, patience, stay invested, take a long-term approach. Manage your expectations.

Acknowledge they're going to be days like this. Makes a lot of sense. Like this meaning like not super happy days.

So, we've talked about a lot of different things, asset classes, factors, diversification.

When we think about building our portfolios at at Scythe, we're we're combining all of these to ensure that

our clients are getting a systematic datadriven um investment uh approach. Now, when we think about investing for

the for the longer term, how would you advise clients or what would your your thoughts be for them in terms of when

they should invest? Yeah, I think it's um the the very first and most important

uh part of a successful investment experience in my opinion is to start by understanding what are you trying to

accomplish with your money. That's that's key because if you don't know what you're trying to accomplish with

your money, you you'll never know if you're on track or not. It's like you can have the nicest private jet, amazing

private jet. Oh, I have the private jet. If you fly from Changangi and you don't know where you're going, you're going to

crash somewhere. The first thing you need to plan. You need where am I going? And that's why the role of the adviser

cannot be understated. You need to have an adviser who sits down, identifies your needs, uh when do you need the

money, how much money do you need, what is your risk capacity, whether assets you have, uh what's your do you have a

pension or not? All these things are hugely important. And then he develop a plan. And when he developed that plan,

what's fascinating, Aman, is that I in some cases the plan might call for certain families to have a lot of money

in bonds. And if you have a lot of money in bonds, you know, then stocks are not going to be such a big deal for you. If,

let's say, I don't what I don't know exactly the percentage for the conservative portfolio, but I imagine

it's significantly more in bonds than in stocks. So, if you're in one of those portfolios, you don't really don't have

to worry as much about how the stock market does uh than investor. Uh and furthermore, I think that if you have a

um a global approach, then when do I invest? Okay, here's a second uh layer to it, which is do you mean the US

market, the Singaporean market, the Japanese market, the Australian market, the French market? Because, you know,

they're all different. So to try to gauge when do I put money each one of them it it becomes not really a

productive exercise. So to answer your first question my first point is that it depends you have to have a financial

plan that is the most important element. The second is you have to define what it means to be successful in

investing. And what I found to have happened over the past 1015 years is that in the US uh there is a um

redefining of investment success that it used to be how did I do relative to a yard stick like the US market or the S&P

or NASDAQ. So, you put a yard stick, you compare your portfolio results with that, and you kind of say that was good

or not good. I'm not sure that's the most uh uh uh you know insightful way to um uh to to determine uh what's going on

with your money because over the past 1015 years uh instead of using that how did I do relative to a yard stick

mentality the new one is how am I on track to meet my goals and that's a different metric because uh you know if

you uh have a financial plan that financial plan typically accounts for the fact that there are going to be

times when the market drops and yet you can still be on track. You you know you still can be absolutely on track even if

the market drops. Uh and if you think that way then then even if the market drops it's a good time to be invested as

long as based on that financial plan. Uh so it's but it takes a bit of the mindset um of of looking at investing

differently. It's not about how did I do I have the winning stock and made so much money. That's it. Not it. And the

third one which is crucial crucial one is that over and over I find that decisions that investors make are not

based on deep research. They're not based on data and all that. It is based on emotions. And there are two big

emotions that I see over and over. The first one is fear and anxiety. When the market drops, when something happens, an

announcement is made, something, there's always something going on. And that anxiety can cause people to feel like, I

don't need to be invested right now. It's not the right thing. And I see that that's that's real for a lot of people.

The trouble is that if you have that fear of being invested and you get out of the market, that fear typically gets

replaced uh with another uh type of anxiety, which is when do I get back in? particularly if you had losses. So I

caution folks around emotions because emotions are big and that even more insidious emotion is not fear but rather

fear of missing out. Look at my neighbor. He put 100 bucks in Bitcoin and I was like look how wealth he is.

You know why didn't I have all the money in Nvidia when it was going up so much? And that fear of missing out is real.

It's absolutely real and and and it's an emotion. Uh, and it's, you know, sometimes it's hard to deal with because

it's hard to see your neighbors or your friends making money. It's like, why come I'm missing out. They're telling me

all the money they made. They probably don't tell you all the money they lost. But, uh, but to me, those are the three

uh key ingredients. This is the right time. First of all, have a plan and you might not be invested as much. Uh,

number two is uh um make sure that that you uh uh when you invest, you kind of manage your expectations and and we

define success. And number three, acknowledge emotions. Acknowledge emotions and uh at the same time

disentangle them from investment decisions. And I think that's what advisers uh do so well is coaching folks

through these emotions that could be really detrimental to their money. Thanks. I I think that reframing is is

really important for investors. Yeah. Um thank you Apollo and and and Dimensional for your your broader support and and

being here with us today. Um really enjoyed this conversation. Um, thank you to our clients who've who've joined us

for this video for tuning in. We've covered a lot from the importance of diversification and factor investing to

how Scythe Core portfolios are designed to help you stay disciplined through market ups and downs. At the heart of

it, Scythe Core is built on three things: academic research, global diversification, and disciplined

execution. It's about giving investors a smarter way to invest without having to time the market or manage everything

yourself. The most important thing, choose the portfolio that fits your goals and your comfort with risk and

stick with it. Because time in the market, not timing the market, is what really builds wealth. If you'd like to

learn more about Scythe core portfolios or start investing, head over to scythe.com.

We hope this conversation gives you confidence in an approach that's structured, evidence-based, and built to

last. Thanks again and happy investing. [Music]