For the last ten years Financial Plan, Inc. has incorporated funds from DFA (Dimensional Fund Advisors) into our diversified investment portfolios. Barron’s recent article “Where the Smart Money is Headed” has DFA as the #1 place the “smart money” will invest, and discusses their approach. We use DFA as one of our investment partners because their investment philosophy is very close to our own. We believe in the following:

  • Massive Diversification: DFA definitely fulfills and exceeds this requirement with a large number of holdings and more consistent exposure across the market.
  • Low cost: DFA’s passive approach helps keep costs down while avoiding some of the problems associated with traditional index funds. The no-load mutual fund structure avoids hidden costs and meets our transparency requirements.
  • Pure asset allocation: Our portfolios are carefully crafted to maintain the desired exposure to asset classes and regions for the unique needs of each client. DFA has demonstrated an ability to provide consistent exposure to the desired asset classes within their funds.
  • Low cash drag: If we want to have cash as an investment we will hold it as an asset class. Too often mutual funds have 10-20% cash inside them, so they aren’t fully invested. These cash positions can drag on returns and hurt performance. By only doing business with institutional clients and elite advisors that share their investment philosophies DFA is able to efficiently manage their mutual funds with low cash positions.
  • Three factor model: Consistent with our investment philosophies DFA tilts to small cap and value stocks to enhance long term returns.

We have no financial relationship with DFA and will continue to monitor how their investment philosophy meshes with our own, but for now they remain an excellent investment partner. Devin Wolf, CFP®

W. Devin Wolf, CFP®
Latest posts by W. Devin Wolf, CFP® (see all)