New investment possibility

DFA logoI’m so pleased to announce that I have been approved by Dimensional Fund Advisors (DFA) to use their funds in managed portfolios. This is really a step up in the quality of funds I can select and offer to you.

DFA only works with advisors (not the general public) because one of their strategies to keep costs low is to prevent the kind of day trading and panic selling that sometimes leaves even no-load passively managed funds awash in capital gains (or losses). When a fund experiences high inflows or outflows, managers are forced to redeem shares to cover costs, and everyone feels the pain in sometimes unexpected tax consequences. In fact, with recent redemptions at the Sequoia fund, managers actually distributed stock to people who wanted large redemptions. Since Sequoia didn’t give shareholders a choice on what stocks they got, it made for some strange tax gyrations. In addition, DFA believes that investing in their funds demands guidance and communication between investor and advisor—they’re not one size fits all.

We’ve discussed so many times (that “we” is me, the press, and probably even the almighty) the difference between active (boo!) and passive (yay!) management, but DFA offers a third way—research driven. Based on research by Nobel Prize economist Eugene Fama, Ken French, and David Booth (all still involved at DFA), certain factors have been identified that, when used to tilt a primarily passive portfolio, have resulted in improved results. I have about a ton of information on the specifics of this and would be super happy to discuss it with you.

DFA has been around for 35 years, and in the economic crisis of 2008-2009 actually saw inflows to their funds, a testament to how much fee-only advisors believe in and communicate a message of faith in the market and faith in their products.

I hasten to add that DFA is still no-load and I’m always going to be a fee-only fiduciary for you—I don’t get any commissions from them. It was quite a vetting process: phone interviews, reviews of my portfolio selections, business approach, and investment philosophy, culminating in a two day trip to Austin, TX, headquarters for an amazing but grueling amount of seminar information-dump. I went in somewhat skeptical that they had a better mousetrap, and left totally convinced that they’re an extremely fined tuned and successful investing machine.

Schedule a meeting and I’ll be excited to tell you about this great offering and what it can mean to your long-term investing picture.

Posted in General Financial Planning, Investment Planning, Retirement Planning.

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