We’re Not the Only Ones Who Think Highly of DFA Mutual Funds

As our clients are aware, we at PFS are not bound by any agreement or incentive to use or recommend particular investment products.  However, given our shared philosophy on investing as well as the strong performance and low cost of their funds, we have been primarily using the mutual funds of Dimensional Fund Advisors (DFA) for the past 15 years. 

Why DFA?  DFA exemplifies the passive investment strategy that we think is optimal for building wealth.  They do not try to pick the winning stocks and drop the losers at just the right time.  Instead, they have created mutual funds that hold all of the available stocks in a given asset class.  And while they do not try to outperform the competition using market timing, they do try to gain an edge by promoting and providing the tools for an academically-based strategy of tilting portfolios toward stocks with higher long-term expected returns, e.g. small cap or value companies.  Their passive investment strategy — as well as their flexible trading strategy, compared to funds whose holdings are tied to an index — also enables DFA to maintain a low cost for their funds, which can make a significant difference in an investor’s returns over time. 

Who Else Thinks They’re Great?  Morningstar, arguably the investment industry’s premier research firm, annually awards gold, silver, and bronze medals to the mutual funds that its manager research group holds in the highest esteem.  This Morningstar Analyst Rating is based on an evaluation of the five P’s:  Process (whether a fund’s strategy is sensible and repeatable), Performance (investment returns over time), People (the caliber of its management), Parent (the stewardship of the fund by its parent firm), and Price (the level of its annual expenses).  For its July 2015 ratings, Morningstar awarded medals to 734 of the approximately 8,000 mutual funds available in the United States, and DFA funds, many of which clients will recognize from their portfolios, earned 20 of those medals, as shown to the left.  This is yet another endorsement from the financial media of what we have long believed to be true–that DFA mutual funds are highly effective products to use in managing and building our clients’ wealth.