THE DIMENSIONAL DIFFERENCE
The historical track record and unsurpassed academic rigor of Dimensional Fund Advisors (DFA)'s scientific, evidence-based investment process gives us confidence that, over time, our clients will benefit by the inclusion of DFA funds in their portfolios.
“In late 2019, Anglia Advisors was approved to offer Dimensional Fund Advisors (DFA) investments to our clients on our existing investment platform. To me, this represented a major milestone in the evolution of the firm. I have always been proud of the quality of the many investment resources made available to our clients, but with Anglia Advisors now able to offer DFA investments to clients with managed portfolios on that very same platform, I truly believe that our managed savings, investment and retirement planning service has now moved to a whole new level.” - Simon Brady, CFP®, founder and principal of Anglia Advisors.
DFA’s research has shown that, historically, securities that have shown higher returns share a certain number of characteristics, which they call “dimensions”. To be considered a true dimension, these characteristics must be sensible, persistent over time, pervasive across all markets, and cost-effective to capture. The firm’s funds are structured using extensively diversified portfolios that emphasize these dimensions of higher expected returns through the over-weighting of these securities relative to the standard index and de-emphasizing securities demonstrating qualities and factors that have been historically shown to be a drag on portfolio values by under-weighting them.
These dimensions and the resulting portfolios are monitored and analyzed all day every business day by many of DFA’s 1400 employees worldwide and every day their portfolio managers and traders seek to balance costs against expected returns and diversification. They work for the slightest expected gain, as every incremental improvement adds up over time. When fund portfolios need adjusting because of a change in circumstances, the trading takes place quietly and effectively without the fanfare and therefore price degradation that accompanies changes made to the components of traditional index funds or the subjectivity and complete lack of academic rigor that accompanies the tax-inefficient frequent trading in actively managed mutual funds that simply racks up more costs for the investor. Investors with portfolios in DFA funds have this formidable analytical and human resource behind their investments all day, every day.
In other words, by relaxing and adapting the strict, inflexible standards of adherence that is required for traditional index investing, Dimensional can take a much more cost-effective, tax-optimized and academically rigorous approach of tracking a particular segment of the market while enhancing the overall purpose of the investment strategy.
THE APPROACH WORKS:
Only 17% of all the equity and fixed income mutual funds that were around in 1999 outperformed their respective benchmarks over a 20 year period. And a whopping 59% of them failed to even survive and have closed over the last two decades. I think it is safe to assume that the reason all these funds no longer exist is not because they were highly successful!
For obvious reasons, no traditional index funds are ever able to outperform their respective benchmarks, since they each basically represent their own benchmark minus their fees.