Sherrill Wealth Management, (SWM) has access to thousands of investment choices without restriction or financial incentive.
It’s natural to assume our clients would see the “best of the best” fund managers managing each asset class of their portfolio.
SWM like many other advisors attempted exactly that many years ago, but over time, we have found that one manager ‐ Dimensional Fund Advisors (DFA) www.dfaus.com ‐ offers the most consistent solution in almost all categories to anchor the core positions in our portfolios. How could that be?
The concept that one investment manager or group of managers can out‐smart the collective wisdom of all market participants has been de‐bunked over and over again. The list of publicly available studies illustrating the futility of “beating the market” is a long one.
Consequently, indexing is a great place to start for most investors, but there are some important drawbacks to the strategy. Some indexes don’t get adequate exposure to the market factors that produce returns. Others are poorly constructed. Trading costs can reduce performance.
By reducing many of the negatives of indexing and avoiding the pitfalls of traditional investment approaches, DFA has produced a line‐up of options that are focused on market factors that produce returns, avoid risks that don’t add value, and reduce trading costs that can rob investors of returns. The result is a group of institutional class investments that are efficient and powerful components in foundations of our clients’ portfolios.
The founders of DFA, the DFA Board of Directors, and the people who work there are among the brightest in the industry. The Nobel Laureates, the esteemed professors and the researchers in investments and economics are a “who’s who” in modern finance and portfolio theory. Beyond that, our experience is that DFA simply does the right thing. Whether it’s having some of the lowest fees in the industry, passing on 100% of securities lending revenue to their investors, or providing the latest market research, DFA is focused on providing a positive investment experience for its clients.
The best strategy is meaningless if poorly executed. DFA’s strength is in engineering well‐executed portfolios around fundamentally sound portfolio theory. In addition to DFA’s focus on market factors that produce returns, they add value through flexible portfolios designed to reduce trading costs. Some of these strategies include:
- “Soft trading bands” that reduce trading frequency while retaining portfolio integrity.
- Momentum algorithms that help avoid buying declining securities or selling rising ones.
- Patient trading approaches that reduce the bid‐ask costs of trading.
- Securities lending programs that generate additional income and increase returns.
DFA is only available through Fee-Only registered investment advisors and only after they meet DFA’s strict selection criteria. This restriction has the benefit of greatly minimizing market timers and retail performance chasing which helps to keep costs and tax ramifications lower within the funds.
Sound investment philosophies that are well executed by great people should produce good results over time. Download the Introductory Brochure below to learn more about the science behind this approach and how it has compared to appropriate benchmarks.
- Download a copy of DFA’s Introductory Brochure here!
- See: Barron January 2014 Feature
- See: Invest Confidently