Dimensional Fund Advisors and Your Investment Goals

Dimensional Fund Advisors is a pioneer in the investment industry, and their approach to investing is centered around helping investors achieve their long-term goals. They offer a range of investment solutions that cater to different needs and risk tolerances.

Their investment philosophy is built around the idea that financial markets are informationally efficient, meaning that prices reflect all available information. This philosophy guides their investment decisions and helps them to identify opportunities for long-term growth.

At Dimensional, they believe that investors should focus on the things they can control, such as their asset allocation and time horizon, rather than trying to time the market or pick individual stocks. This approach allows them to create a diversified portfolio that can help investors achieve their goals.

By investing in a globally diversified portfolio, investors can potentially reduce their risk and increase their returns over the long term.

At Dimensional Fund Advisors, two guiding principles drive their investment approach: follow the academic science of investing and manage all costs. They firmly believe in the efficient market theory, where investors' returns are determined by asset allocation decisions, not market timing or stock picking.

Dimensional's approach is rooted in rigorous academic research, often conducted by leading financial economists with which they maintain a relationship. This research helps identify separate dimensions of worldwide returns accompanied by independent sources of risk.

To minimize trading costs, Dimensional employs a sophisticated equity block trading strategy that allows for slight variations in day-to-day portfolio balance versus a market index. This approach achieves substantial cost reductions and hence improved total return.

By placing client trades through firms like Schwab Institutional, Dimensional can purchase fund shares in amounts as small as $2,500, rather than their published minimum of $2,000,000. This is a significant advantage for investors with smaller portfolios.

Dimensional Fund Advisors offers a range of mutual funds, including Dimensional Mutual Funds, which are "no-load", meaning you don't pay a sales charge to buy them. However, certain international equity portfolios charge a reimbursement fee of 0.50% to 1.00% on purchases, which is payable to the portfolio.

These fees are designed to spread the burden of transaction costs in illiquid markets, and without them, long-term shareholders would suffer diminished returns due to trading activity. This is a crucial consideration for investors who plan to hold onto their investments for the long haul.

DFA's expense ratios are low by most standards, but higher than Vanguard's. For example, the DFA U.S. Core Equity 1 Portfolio has an expense ratio of 0.19%, while the Vanguard Total Stock Market Index has an expense ratio of 0.05%.

Here's a comparison of DFA and Vanguard's asset allocation and expense ratios:

Keep in mind that DFA's fees are generally higher than Vanguard's, and the need to purchase through an advisor adds another layer of fees.

Dimensional Fund Advisors (DFA) takes a unique approach to investment strategy. They believe markets are efficient, and investors' returns are determined by asset allocation decisions, not market timing or stock picking.

DFA employs a passive strategy to capture the return behavior of an entire asset class. They don't have economists forecasting business cycles or interest rates, no investment strategists shifting allocations between stocks and bonds, and no analysts searching out "undiscovered" stocks.

DFA funds are index-y funds, but not index funds. They don't slavishly follow an index, but use various adjustments and modifications. For example, the DFA U.S. Small Cap Value Portfolio uses a market capitalization weighted approach to purchase a broad and diverse group of U.S. small cap companies that the advisor determines to be value stocks.

They also use a transactional technique called "patient trading." This approach allows DFA to achieve long-term capital appreciation while minimizing trading costs. DFA claims to achieve negative trading costs in illiquid market sectors such as U.S. small company stocks.

DFA's investment strategy is designed to capture separate dimensions of worldwide returns, accompanied by independent sources of risk. These dimensions are identified by rigorous academic research, often conducted by leading financial economists with which DFA maintains a relationship.

By using a sophisticated equity block trading strategy, DFA is able to achieve substantial cost reductions and hence improved total return. They require client trades to be placed through firms that maintain an "omnibus" account relationship with Dimensional, which allows for substantial cost savings.