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Dimensional Fund Advisors (DFA)

 

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Mutual funds from Dimensional Fund Advisors ("DFA") tend to be attractive for the following reasons:
 
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DFA is owned and operated primarily by academics.  Five of the seven members of the DFA funds' Board of Directors are Finance/Economics professors at major universities.  Four current or former board members (Eugene Fama, Myron Scholes, Merton Miller, and Robert Merton) are winners of the Nobel Memorial Prize in Economics.

DFA's Director of Research is Professor Eugene Fama, of the University of Chicago (he is also on DFA's Board of Directors).  Dr. Fama is generally credited with developing the Efficient Market Hypothesis (in 1965) and co-developing the Three Factor Model for predicting stock returns (in 1992).  For more information on Dr. Fama, see:
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Peter J. Tanous, An interview with Dr. Fama.  The interview originally appeared in Peter J. Tanous, Investment Gurus (New York Institute of Finance, 1997).

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DFA's brief biography.

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Roger Ibbotson, Random Talks with Eugene Fama, An interview from 2000.

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"The Efficient Pioneer," an article in InvestmentAdvisor.com in 2000.

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Dr. Fama's website at the University of Chicago.

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Dr. Fama's Vita (i.e., academic resume).

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Dr. Fama's brief autobiography.
 

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DFA's funds are passively managed. 

They don't try to "pick stocks" which will do better than others.  Instead they design their funds in order to expose investors to key risk factors (which have been shown to be associated with better long-term performance).  Stocks are picked in a mechanical fashion in order to meet the pre-ordained risk factor goals of each fund.

 
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DFA's small cap stock mutual funds invest in extremely small companies, which research shows tends to increase their long-term returns.
 

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DFA's value stock mutual funds invest in extremely "valuey" stocks, which research shows tends to increase their long-term returns.
 

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DFA has several tax-managed value stock funds.
 

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DFA's tax-managed funds minimize both capital gain and dividend distributions.
 

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DFA has several international small and value stock funds.
 

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DFA funds have relatively low expense ratios.
 

For more information on DFA, see
 
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"How the REALLY smart money INVESTS: Nobel Prize winners entrust their nest eggs to DFA, where investing is a science, not a spectator sport," an excellent article from Fortune magazine in 1998.
 

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"Investment Porn' Panned by DFA Funds Preaching Fama's Gospel," an article from Bloomberg.com in 2007.

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"The Dimensions of a Pioneering Strategy," an article from The Wall Street Journal in 2006.
 

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"The Index Insurgents," an article from Forbes in 2006.
 

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"Ditching the Monkey," an article from Barron's in 2006.
 

bullet"Dimensional's 'Passive' Course Pays Off," an article from the Los Angeles Times in 2005.
 
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"Going their own way," an article from Financial Advisor magazine in 2001.
 

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"Taking a Market's Measure," an article from Mutual Funds magazine in 2001.
 

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"The Best Fund Family You've Never Heard of and Why It Doesn't Want Your Money," an article from TheStreet.com in 2002.
 

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"Brain Trust: With a host of noted academics minding the store, Dimensional Fund Advisors has attracted a loyal following among fee-only advisors", an article from Bloomberg Wealth Manager in 2002.
 

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"DFA funds hard to buy, easy to own," an article in CNBC Money Central in 2002.
 

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"Dear Dagen: What's a Good Substitute for the Exclusive DFA Funds," an article from TheStreet.com in 1999.
 

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DFA vs. Vanguard: A Comparison, which compares DFA funds to Vanguard funds in each of several asset classes and lists our preferences.
 

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DFA's brochure for individual investors (takes a while to load).
 

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"Dimensions of Stock Returns: 2002 Update," an article which summarizes DFA's equity investing strategies.
 

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DFA's website.

 

DFA primarily offers its mutual funds to large institutional investors (e.g., the pension funds of large corporations).  Unfortunately, DFA does not presently make its funds available to individual investors except through selected fee-only financial advisors like Altruist. 

 

In order to invest in DFA mutual funds, Altruist clients must enroll in the ALTRUIST Portfolio Management Service.  Altruist receives no commissions on DFA funds or any other funds purchased through its services.  Altruist receives no compensation from DFA and is not under any contractual agreement with DFA.

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This web page contains the current opinions of Eric E. Haas at the time it is written and such opinions are subject to change without notice.  This web page is intended to serve two purposes:

bulletTo educate the public; and
bulletTo provide disclosure of Mr. Haas' opinions to prospective clients.  We believe that prospective clients are well-served by being made aware of what they are buying and what they are buying is advice that is based on these opinions.

We believe the information provided here to be useful and accurate at the time it is written.  Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. 

No investor should invest solely on the basis of information listed here.  Before investing, it is important to consult each prospective investment's prospectus and consider both its risk/return characteristics and its effect on your overall portfolio.

This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice.  Where specific advice is necessary or appropriate, Altruist recommends consultation with a qualified tax adviser, CPA, financial planner, or investment adviser.  If you would like to discuss the rationale or support for any particular idea expressed on this web page, feel free to contact us.

 

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