Dimensional Funds

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ppnewbie
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Dimensional Funds

Post by ppnewbie » Mon Apr 05, 2021 10:48 pm

Does anyone have experience with Dimensional funds? There are some extremely big brains behind this company. Trying to understand if there is any advantage over simple Vanguard funds.

https://us.dimensional.com/

https://apple.news/ADHU6-h3QTdah_bHgNq35CA
Kevin K.
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Re: Dimensional Funds

Post by Kevin K. » Tue Apr 06, 2021 9:56 am

I have a fair amount of experience with DFA funds. There are a ton of threads about them on Bogleheads but a good place to start is this review on the White Coat Investor site:

https://www.whitecoatinvestor.com/dfa-vs-vanguard/

Cliff's notes summary: a "cult" fund family based on Nobel-prize winning research that tilts heavily towards small cap and value along with being fully internationally diversified. The Merriman Ultimate Porfolio is a textbook example of the complex, slice-and-dice DFA approach:

https://portfoliocharts.com/portfolio/m ... -ultimate/

Bottom line is you have to believe in the persistence of the small/cap and value premiums and the value of being internationally diversified over a many-decades time frame and willing to ignore the woeful underperformance of these approaches vs. the FAANG-dominated U.S. Total Stock Market over the past two decades in order to be a candidate for DFA funds.

John Greaney, one of the pioneers in the early retirement world, has a great comparison of various portfolios including a William Bernstein DFA-based one and the PP on his site. His comment on the MPT (Modern Portfolio Theory) DFA-based approach kind of says it all:

"While the MPT portfolio value has trailed the simple S&P500/fixed income portfolio (No. 1 above) by 57% as of Dec 31, 2020, advocates of this approach like its reduced volatility and sterling academic recommendations. Which brings us to an important investing truism -- it's OK to under perform as long as you're pleased with the results and proud of what you are doing."

https://retireearlyhomepage.com/reallife21.html
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Re: Dimensional Funds

Post by ppnewbie » Tue Apr 06, 2021 11:57 am

Thanks - that was very helpful.
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vnatale
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Re: Dimensional Funds

Post by vnatale » Tue Apr 06, 2021 7:40 pm

Kevin K. wrote:
Tue Apr 06, 2021 9:56 am

I have a fair amount of experience with DFA funds. There are a ton of threads about them on Bogleheads but a good place to start is this review on the White Coat Investor site:

https://www.whitecoatinvestor.com/dfa-vs-vanguard/

Cliff's notes summary: a "cult" fund family based on Nobel-prize winning research that tilts heavily towards small cap and value along with being fully internationally diversified. The Merriman Ultimate Porfolio is a textbook example of the complex, slice-and-dice DFA approach:

https://portfoliocharts.com/portfolio/m ... -ultimate/

Bottom line is you have to believe in the persistence of the small/cap and value premiums and the value of being internationally diversified over a many-decades time frame and willing to ignore the woeful underperformance of these approaches vs. the FAANG-dominated U.S. Total Stock Market over the past two decades in order to be a candidate for DFA funds.

John Greaney, one of the pioneers in the early retirement world, has a great comparison of various portfolios including a William Bernstein DFA-based one and the PP on his site. His comment on the MPT (Modern Portfolio Theory) DFA-based approach kind of says it all:

"While the MPT portfolio value has trailed the simple S&P500/fixed income portfolio (No. 1 above) by 57% as of Dec 31, 2020, advocates of this approach like its reduced volatility and sterling academic recommendations. Which brings us to an important investing truism -- it's OK to under perform as long as you're pleased with the results and proud of what you are doing."

https://retireearlyhomepage.com/reallife21.html


Is there any other way to interpret this aside from "the portfolio has underperformed, which is okay if it fits your preconceived biases"?

Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
ppnewbie
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Re: Dimensional Funds

Post by ppnewbie » Tue Apr 06, 2021 7:46 pm

vnatale wrote:
Tue Apr 06, 2021 7:40 pm
Kevin K. wrote:
Tue Apr 06, 2021 9:56 am
I have a fair amount of experience with DFA funds. There are a ton of threads about them on Bogleheads but a good place to start is this review on the White Coat Investor site:

https://www.whitecoatinvestor.com/dfa-vs-vanguard/

Cliff's notes summary: a "cult" fund family based on Nobel-prize winning research that tilts heavily towards small cap and value along with being fully internationally diversified. The Merriman Ultimate Porfolio is a textbook example of the complex, slice-and-dice DFA approach:

https://portfoliocharts.com/portfolio/m ... -ultimate/

Bottom line is you have to believe in the persistence of the small/cap and value premiums and the value of being internationally diversified over a many-decades time frame and willing to ignore the woeful underperformance of these approaches vs. the FAANG-dominated U.S. Total Stock Market over the past two decades in order to be a candidate for DFA funds.

John Greaney, one of the pioneers in the early retirement world, has a great comparison of various portfolios including a William Bernstein DFA-based one and the PP on his site. His comment on the MPT (Modern Portfolio Theory) DFA-based approach kind of says it all:

"While the MPT portfolio value has trailed the simple S&P500/fixed income portfolio (No. 1 above) by 57% as of Dec 31, 2020, advocates of this approach like its reduced volatility and sterling academic recommendations. Which brings us to an important investing truism -- it's OK to under perform as long as you're pleased with the results and proud of what you are doing."

https://retireearlyhomepage.com/reallife21.html
Is there any other way to interpret this aside from "the portfolio has underperformed, which is okay if it fits your preconceived biases"?
Basically very very smart people that originally determined you cant outsmart the market trying to outsmart the market.
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Re: Dimensional Funds

Post by Kevin K. » Tue Apr 06, 2021 7:58 pm

John Greaney, author of that article, has an extremely (and to my taste delightfully) irreverent sense of humor that comes through loud and clear many times in his writing. He skewers financial advisors, Wall Street, the government, the insurance industry and too many other targets to name regularly.

If you read through that article you'll see he gets in his digs at the PP too along with a bunch of other highly-touted portfolios that have under-performed during the 25 years since he retired early. Greaney pretty clearly is a fan of keeping things simple with a three-fund portfolio or the like and has no problem riding out market crashes. He's really good at number-crunching and there's a lot of fun stuff to explore on his site. Now that he's finally reached "normal" retirement age he's written a couple of great pieces on Medicare options and how not to get soaked on Medicare advantage and supplements. Fun guy and as far as I know his web site was the first - or at least among the first - to treat early retirement as a legitimate option.
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Re: Dimensional Funds

Post by vnatale » Tue Apr 06, 2021 8:05 pm

Kevin K. wrote:
Tue Apr 06, 2021 7:58 pm

John Greaney, author of that article, has an extremely (and to my taste delightfully) irreverent sense of humor that comes through loud and clear many times in his writing. He skewers financial advisors, Wall Street, the government, the insurance industry and too many other targets to name regularly.

If you read through that article you'll see he gets in his digs at the PP too along with a bunch of other highly-touted portfolios that have under-performed during the 25 years since he retired early. Greaney pretty clearly is a fan of keeping things simple with a three-fund portfolio or the like and has no problem riding out market crashes. He's really good at number-crunching and there's a lot of fun stuff to explore on his site. Now that he's finally reached "normal" retirement age he's written a couple of great pieces on Medicare options and how not to get soaked on Medicare advantage and supplements. Fun guy and as far as I know his web site was the first - or at least among the first - to treat early retirement as a legitimate option.


Thanks. Looks like a highly informative web site, which I hope to explore at some point.

Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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