Why DFA vs. Vanguard

Low Cost DFA Approved Advisors

Why Dimensional Funds (DFA) vs. Vanguard Funds.

Integrity Investment Advisors has direct access to DFA funds (many Advisors get access through another firm).  This allows us to cut out the middlemen and keep our fees low so you keep more of your money.  Our fees are 0.6% on the first $1 million and our fees decline after $1 million.  You don’t have to pay 1% or more to get access to DFA funds.  We build each client a custom portfolio based on their goals, objectives and risk tolerance.  Give us a call or email us for a free 2nd opinion about your portfolio and goals.

DFA funds are only available to institutional clients (pensions, 401(k), etc.) and through select Fee-Only Advisors. Integrity Investment Advisors, LLC is one of a handful of advisors to be approved to offer clients direct access to DFA funds to our clients. See our recent press release regarding our partnership with Dimensional Funds (DFA).

DFA funds are no-load (commission-free), low cost, very diversified, and tax-efficient. They provide a much broader and deeper coverage of the global markets than other mutual funds. DFA currently manages about $400+ Billion in assets. DFA funds focus on “factor investing”. They have enhanced the 3 factor model into the 4 factor model (market factor (beta), small cap factor, value factor and direct profitability factor). DFA also uses momentum as a trading strategy.  Click here to subscribe to my blog

For the 17 years ending 12/31/16 (net of mutual fund operating expenses and gross of advisor fee).

Name (data from Morningstar 1/2000 to 12/2016)Ticker% Total Return (Gross of Advisor Fees)
NASDAQ CompositeIndex52.3%
S&P 500 IndexIndex111.67%
Vanguard Total Stock Market IdxVTSMX126.33%
Vanguard Value Index AdmVVIAX 160.94%
DFA Tax-Managed US Marketwide ValueDTMMX240.7%
DFA US Large Cap Value IDFLVX286.96%
DFA US Small Cap Value IDFSVX514.69%
Vanguard 60/40VSMGX117.72%
Agg Bondindex137.05%

* Most investors don’t realize that for the last 17 years, the Agg. Bond index has outperformed the SP500 index.  Please keep in mind that past performance does not guarantee future success of any strategy.
Why Dimensional Funds - DFA - Pensions and Investments

Why Dimensional Funds – DFA – Pensions and Investments http://www.pionline.com/article/20161114/INTERACTIVE/161119964/graphic-dissecting-dimensional/W

Vanguard Funds

Vanguard offers index mutual funds and exchange-traded funds that track commercial benchmarks (indexes).

  • The primary objective of each Vanguard fund is to replicate the performance of a specific benchmark, such as the S&P 500 Index or the MSCI US Broad Market Index.
  • Low cost and low tracking error are important factors determining their success. Vanguard adds and subtracts companies as the indexes change.
  • For investors looking to replicate commercial benchmark returns at a very low cost, Vanguard offers a great solution. Their funds are available on a direct basis – no advisor required for access.
  • We use Vanguard for some asset classes.

Dimensional Funds (DFA)

Like conventional index funds offered by Vanguard, Dimensional Fund Advisors (DFA) seeks to capture market rates of return through broad diversification and low cost. But instead of tracking commercial benchmarks, DFA looks to target systematic risk factors (Value investing, Small cap investing, high profitability, high investment and momentum) with greater precision than Vanguard. Read the great summary below regarding the evolution of Dimensional Funds (DFA).  If you would like future updates regarding how Dimensional Funds (DFA) / factor investing may help your portfolio, Click here to subscribe to my blog

  • Avoiding a low tracking error mandate may provide Dimensional (DFA) with a trading advantage. By not having the same urgency to trade as index funds and actively-managed funds, DFA is positioned to be a provider of liquidity to those funds. This position of strength can result in paying lower average prices for securities.
  • DFA portfolios typically have more of a tilt toward Value and Small cap companies than the Vanguard alternative mutual fund.
  • Dimensional (DFA) also tends to be a more aggressive lender of securities, producing income that can drive costs lower than what the stated fund expense ratio implies.
  • Dimensional (DFA) offers funds on a direct basis to institutional investors or to clients of approved investment advisors
  • If you want to tilt your portfolio toward value and small cap, Dimensional (DFA) may be the better choice for you. Over longer periods of time, 10 years and more, DFA’s slight advantage may offset a portion of Advisor fees. Keep in mind that past performance is no guarantee of future results. Here is a link to DFA vs. Vanguard analysis by Equius Partners.
  • Here is the recent letter [PDF] from David Booth, Co-CEO of DFA. “Evolution of Dimensional 2013 – DFA Matrix book” highlights the major advances in portfolio management over the last 60 years. 1981 – company size, 1992 – Value Strategies, 2004 – Core Equity Strategies and 2012 – Direct Profitability.
  • Why Dimensional Funds (DFA) vs. Vanguard Funds, Why DFA vs. Vangaurd.

For the do-it-yourselfer, we believe Vanguard is a very good low cost option. However, if you want more portfolio structure along the dimensions of expected returns, we believe that Dimensional (DFA) is a superior choice. If you want effective global diversification with tilts in your portfolio toward value, small cap and direct profitability, this is how Dimensional Funds (DFA) builds portfolios and trading strategies.  Most investors also need a coach to help them be objective about their money.  We hope this page provides some details regarding why Dimensional (DFA) vs. Vanguard Funds.

Here is the data from DFA over the last 37 years regarding the premium expected return for 1) Market (beta) 2) small company 3) value companies and 4) companies with direct profitability.  These four factors typically account for 97% of a portfolios return in a given year.

If you have over $500k in a portfolio and want us to analyze your specific portfolio, we can give you a free second opinion, give us a call at 855-863-3332.  We will help you identify the “red flags”.

Dimensions of Expected Returns

Dimensions of Expected Returns – Factor Investing – DFA – smart beta- small cap – value – direct profitability – Todd Moerman – Integrity Investment Advisors – www.integrityia.com

Dimensional Stories (DFA funds) – Why DFA vs. Vanguard

Please see the videos below for more details about Dimensional (DFA) and how they add value to portfolio returns. At Integrity Investment Advisors, we are proud to be an approved DFA Advisor. We are low cost and a fee only fiduciary for our clients.  Let us help you do a free comparison for your current financial strategy.

Dimensional Origins

1) Modern Finance

2) Birth of indexing

3) Why DFA

4) Value of DFA Implementation

5) Dimensions of Returns

6) A Changing World

7) Firm Foundations

8) Fundamental Beliefs

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