I'd never heard of these folks. Have you?

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Nov 29, 2007 12:40 pm


 
http://www.dfaus.com/library/articles/

Nov 29, 2007 9:25 pm
Borker Boy:





http://www.dfaus.com/library/articles/





Yes. They are really unique. They don't employ analysts and research teams, and all that stuff like traditional money managers. They employ academics, PHd's, etc. They use a strict buy-and-hold, index-type philosphy. But not exactly like Vanguard. You really have to read more about them to understand. They don't even sell directly to individuals. And I don't think Joe RIA can use them. I think they affiliate with large institutions, advisors, TPAs, and such. Do some Googling on them and read some articles. Pretty interesting stuff.

Nov 30, 2007 10:05 am

If you haven't heard of DFA it's probably because you don't work for a firm that does a substantial amount of no-load business.  They will ONLY  work with select (i.e. larger, more established) fee-based firms who believe in their passive, no-load approach. 

As a result, many RIAs use them, so long as they 'qualify.'  Others must go through one of the 'approved' firms, who take their cut.  DFA will NOT sell direct to ordinary individuals - you must go through an approved advisory firm.  DFA will work directly with large institutional clients.  They want nothing to do with managing retail clients, and they expect their partners to be very experienced and in alignment philosophically, which is why they'll only accept retail money through select firms.

They are an impressive pedigree (big name academics) and an enviable track record.  They're kind of like Apple in that most don't use them, but those that do tend to be raving disciples who think they walk on water.

Nov 30, 2007 11:06 am
Morphius:

If you haven't heard of DFA it's probably because you don't work for a firm that does a substantial amount of no-load business. 

 
You're correct. Strictly A shares here.
 
I appreciate the replies, guys. I've always been interested in the philosophy behind the EMT, and I've recently wondered whether low cost index funds might be a good option for most folks.
 
However, when I run a hypo of most of our preferred funds versus the S&P, the managed money wins...and often by a wide margin. Are there expenses that the mutual fund companies aren't disclosing on the hypo? (I realize that sounds like a really naïve question, but I couldn't find anything that said they hadn't been disclosed.) 
 
I read a good article from a firm that uses DFA, and it talked about how financial advisors are not investment managers but instead investor managers. I totally agree.
 
Also, the article on Registered Rep's site about Blaine Lourd was fascinating.
 
Anyway, I'd better get  back to looking for someone who'll give me 5.75% of their money...
 
 
Nov 30, 2007 11:56 am
Borker Boy:
Morphius:

If you haven't heard of DFA it's probably because you don't work for a firm that does a substantial amount of no-load business. 

 
You're correct. Strictly A shares here.
 
I appreciate the replies, guys. I've always been interested in the philosophy behind the EMT, and I've recently wondered whether low cost index funds might be a good option for most folks.
 
However, when I run a hypo of most of our preferred funds versus the S&P, the managed money wins...and often by a wide margin. Are there expenses that the mutual fund companies aren't disclosing on the hypo? (I realize that sounds like a really naïve question, but I couldn't find anything that said they hadn't been disclosed.) 
 
I read a good article from a firm that uses DFA, and it talked about how financial advisors are not investment managers but instead investor managers. I totally agree.
 
Also, the article on Registered Rep's site about Blaine Lourd was fascinating.
 
Anyway, I'd better get  back to looking for someone who'll give me 5.75% of their money...
 
 
 
The problem is, you can't just use one Index fund during one time frame.  You have to have the right mix of index funds over the long term.  And don't just look at returns.  You have to consider risk/volatility.  Over 10 years, I'd rather get 10% return with a std dev of 7 than an 11% return with a std dev of 14.  This is especially true during the withdrawal phase (retirement).  You can actually keep more money with lower average returns if you keep volatility low (during withdrawal).  Check out the "Dividends Matter" brochure for American Mutual. Over 30 years, the S&P outperformed AM by about 30BPs, but you had far more money left with AM than with the S&P500 (like 2.5 time more) because of dividends and lower volatility.  I don't use AM specifically, but the brochure is priceless.  THAT is one of the primary reasons I don't just use indexes.  They don't manage volatility, and they don't manage for higher dividend income.  Look at CAIBX's numbers and volatility over time.  Can't beat it with indexes.  And it's so simple.
Nov 30, 2007 12:41 pm

If the EMT proponents say that it's impossible to determine the best time to buy and sell companies, I'd have to assume they would argue that "managing volatility" is purely luck that will eventually run out.

 
I've seen the numbers, and the sales literature, and it's all very convinicing. However, I'm extremely curious as to why the DFA folks feel so strongly that active management is a waste of time and money.
 
Should we send them the American Mutual brochure and show them what they're missing?
 

 
Nov 30, 2007 3:20 pm

I have been using  DFA for several years.

I use a core satilite portfolio with DFA as the core, and Ivy asset strategy maybe one of several satilites.
One of the great things about being indy is we have excess to so much more then the wire houses.    
Nov 30, 2007 4:51 pm
Greenbacks:

One of the great things about being indy is we have excess to so much more then the wire houses.    



Apparently, thought, that doesn't include access to a dictionary!  That would be well in excess of what one might expect from being indy!!

Sorry, Greenbacks, I know it's just a silly typo, but I couldn't resist having a little bit of fun with it!

Dec 1, 2007 10:56 am

And apparently THOUGHT, neither does yours, Morphius.

I'm sure yours was a typo as well.
No harm or insult intended, just having fun as you are
Dec 1, 2007 12:10 pm
pratoman:

And apparently THOUGHT, neither does yours, Morphius.

I'm sure yours was a typo as well.
No harm or insult intended, just having fun as you are



Touche!  Well played, prato!