Jul. 2021 – New Opportunities for Investors

For many years we have utilized mutual funds managed by Dimensional Fund Advisors (DFA) in the portfolios of clients enrolled in our Professional Asset Management advisory service. While DFA’s mutual funds remain available only to clients of registered investment advisors such as AIS, the firm recently introduced seven exchange traded funds (ETFs). These are available to “do it yourself” retail investors who choose not to hire an advisor.

DFA’s investment approach provides many of the benefits of index funds while avoiding many of their vulnerabilities. Like index funds, DFA’s strategies are “passive” in the sense that the fund’s managers make no attempt to forecast markets or select “winning” securities. But unlike index funds, DFA is not strictly bound to tracking a commercial index such as the S&P 500. This flexibility allows its research staff and managers to focus instead on optimizing risk adjusted returns.

Successful investing requires discipline, which in turn requires rules. While index funds are certainly constrained by rules, DFA’s approach is more flexible because it follows rules based on its own rigorous internal research. For example, DFA applies trading rules that avoid potential trading costs associated with short term momentum in security prices and index reconstitution. Over time, such costs can become substantial and are not necessarily reflected in a fund’s expense ratio.

DFA benefits from a close affiliation with academic economists, a rarity in the industry. Its research staff includes graduates of the Booth School of Business at the University of Chicago and other institutions whose faculty are thought leaders in financial economics. DFA’s board of directors and research scientists include pioneers such as Roger Ibbotson, Myron Scholes, Kenneth French, and Nobel prize laureates Eugene Fama and Robert Merton.

This month, we describe certain DFA bond mutual funds that offer protection from unexpected inflation. While these particular funds are not yet available as ETFs, we believe it is a sign of things to come.

A detailed description of the DFA ETFs is available at www. us.dimensional.com/etfs. Currently this list includes only equity ETFs, but investors can expect this list to grow. In future months, we will review and update the funds that appear on the back page of this publication, to reflect these developments.

Also In This Issue

Quarterly Review Of Capital Markets
Portfolio Rebalancing: Adjusting Our Thresholds
Inflation Protection In Bond Mutual Funds
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow Jones Industrials Ranked By Yield
Asset Class Investment Vehicles