We have used Dimensional Funds (DFA) in our client’s portfolios since I started managing investments for clients. We continue to recommend DFA funds due to our research. With the recent turmoil in the markets the last week, I would like to share our investment approach. I feel our approach puts clients on a path to achieve their most important financial goals. http://www.aurochsfinancial.com/investment-approach
With my engineering background, I was drawn to their research based approach to investing and trading. DFA recently came out with the following short videos that gives a sense of the firm’s history, philosophy, and unique approach to investing.
In Getting to the Right Answer, Not Defending the Wrong One, Eugene Fama and Kenneth French describe how the academic model has shaped Dimensional’s ideas, culture, and investment process.
“Academics are averse to snake oil, misleading stuff, flimsy research.” ?Eugene Fama
“People [at Dimensional] care much more about getting the right answer than defending their answer.” ?Kenneth French
“You don’t want to defend the wrong answer because what it reveals is you don’t understand that you have the wrong answer.” ?Kenneth French
In The Holy Grail, Eugene Fama characterizes Dimensional’s view of risk and return and the robust nature of research supporting the drivers of expected returns.
“The Holy Grail is understanding what determines expected returns.”
“[I’ve been at this for 55 years,] during that period we have come up with five different factors that seem to be pretty robust. That’s one a decade versus, if you look at the industry, they come up with one a week.”
In Know the Animal, David Booth and Eugene Fama discuss how Dimensional’s approach encourages investors to have a well-grounded perspective of markets.
“You can relax in the sense that you know the animal you are riding and it could turn out well. It could turn out badly over short periods of time. But it is the animal that you know.”
“The kinds of products that we deliver aren’t really based on a black box of some sort.”
“If you were picking stocks from among the value group then there’s some unease about whether the picking is really any good. We take that right out of the game and say, ‘Now we’re going to deliver the whole area, the whole thing.’” ?Eugene Fama
Are you ready to create a plan for living the life you’ve always dreamed about? Contact us today to schedule your complimentary discovery meeting.
Your Guide to Financial Independence
Rick Epple, CFP(r)