Learn How Dimensional Funds Can Benefit Your Portfolio
At Ferguson-Johnson Wealth Management, we employ investment solutions offered by Dimensional Fund Advisors. Access to DFA mutual funds is restricted to a select group of fee-only financial advisory firms who share the same academic, data-driven investment philosophy. The relationship between Dimensional and Ferguson-Johnson Wealth Management reflects our shared views about how capital markets work and how best to provide you with a successful investment experience.
Interested in learning more about how Dimensional funds could help you achieve your financial goals? Contact a fee-only financial advisor at Ferguson-Johnson Wealth Management today!
What Makes DFA Funds Different?
Dimensional structures strategies based on academic research rather than on speculation or commercial indexes. Small cap strategies target smaller stocks more consistently. Value strategies target value returns with greater focus. As a result, investors can achieve more consistent portfolio structure.
Dimensional board members include some of the nation’s most distinguished and recognized academicians, including the Nobel Laureate economists Myron Scholes, Merton Miller, and Eugene Fama. For more than 30 years, Dimensional has helped investors pursue dimensions of higher expected returns through advanced portfolio design, management, and trading.
The Dimensional Fund Philosophy
The strategies implemented by Dimensional echo much of our investment philosophy. DFA funds are built around the following core beliefs:
- Securities are fairly priced in liquid and competitive markets
- Diversification is essential
- Investing involves trading off risks and costs with expected returns
“How is Dimensional different from other money management firms? We trust the markets. Over the long haul, that approach has served us well.”
– Ken French
While at first glance these beliefs may appear similar to a passive or index strategy. However, Dimensional’s management differs in several notable ways.
|Believes that, in liquid markets, prices reflect all available information||Attempts to identify mispricing in securities on a consistent basis||Allows commercial benchmarks to define strategy|
|Focuses strategies on the dimensions of higher expected returns||Often relies on forecasting techniques to pick securities and/or time markets||Tethered to a benchmark, reducing flexibility|
|Seeks to add value through portfolio design and implementation||Generates higher expenses, trading costs, and excess risk||Accepts lower returns and increased trading costs in favor of tracking|
|Believes that, in liquid markets, prices reflect all available information|
|Focuses strategies on the dimensions of higher expected returns|
|Seeks to add value through portfolio design and implementation|
|Attempts to identify mispricing in securities on a consistent basis|
|Often relies on forecasting techniques to pick securities and/or time markets|
|Generates higher expenses, trading costs, and excess risk|
|Allows commercial benchmarks to define strategy|
|Tethered to a benchmark, reducing flexibility|
|Accepts lower returns and increased trading costs in favor of tracking|
How Do Dimensional Funds Perform?
When you look at the numbers, the difference between Dimensional funds and active management or index strategies is measurable. Only 15% of US equity and fixed income funds that were around in 2000 beat an industry benchmark 15 years later, whereas 82% of US equity and fixed income Dimensional funds outperformed their benchmarks.
Additionally, during the financial crisis from 2008-2012, Dimensional’s equity funds had inflows of $34.4 billion, whereas industry US mutual funds as a whole had outflows of roughly $535.7 billion. These inflows for DFA funds suggest that those using the Dimensional philosophy may have been better prepared to weather the financial crisis and pursue long-term investments.
Why Choose Ferguson-Johnson Wealth Management for DFA Funds?
If you live in Maryland, Northern Virginia, the DC area, or Vero Beach, FL, we can help you with your investment strategy. In addition to the use of Dimensional funds, our fiduciary advisors work with you to determine the best overall makeup for your portfolio based on your goals. As fee-only advisors, we give you objective advice aimed to help you succeed in all your financial endeavors—which isn’t something every advisory firm can say.
Interested in DFA mutual funds? Contact us today to schedule your non-cost consultation.